Why Did Britain Abandon Free Trade?
Roy Douglas
[A paper delivered at the 1979 Joint Georgist
Conference, San Francisco, California]
A few years ago, I spoke to an International Conference about the way
in which the United Kingdom came to adopt Free Trade in the middle of
last century. Yet we all know that Britain is no longer a Free Trade
country. What happened? Did Free Trade prove itself in some way deeply
unsatisfactory? < br>
After the notorious Corn Laws were abandoned in the period 1846-49,
remaining restrictions on trade were rapidly removed. The thirty years
which followed 1849 were a period of rising prosperity in all social
classes. Then, suddenly, everything seemed to go wrong. In 1879 there
was an appalling harvest. Grain from the United States and elsewhere
was imported in great quantities to assuage the danger of famine; but
during the 1880's cheap food from abroad continued to pour in, and
improvements in refrigeration technology brought meat as well as
grain. Thus agriculture faced a flood of foreign competition. About
the same time, British industry met a new challenge, though this was
not immediately recognised. Coal was the primary source of power, and
iron the chief component of machines. Britain had long been the main
source of both. Production continued to rise; but in the last two
decades of the century Britain was being overhauled by Germany and the
United States. By the turn of the century, the general standard of
living was stagnant.
As prosperity faltered, so did political thinking burgeon. The 1880's
and 1890's saw an immense turmoil of ideas - often mutually
inconsistent, but all radical: Georgism and peasant-proprietorship;
socialism of both Marxist and Fabian varieties; a new and more
militant Trade Unionism; imperialism and protectionism.
War -- the South African War of 1899-1902 - brought further
instability. Once the conflict was over, Colonial Secretary Joseph
Chamberlain launched the idea of "Tariff Reform", in the
wake of the new imperialism. Britain and her Empire should constitute
a sort of Common Market-with internal Free Trade, but tariffs towards
the rest of the world. The self-governing parts of the Empire proved
reluctant to participate, and the campaign moved towards a demand for
protection in Britain. The Free Traders were on strong ground in
opposing this, for "Tariff Reform" would demonstrably
produce a rise in food prices, and the population was overwhelmingly
urban. Even rural folk foresaw more harm than good from Protection --
however disguised, and the Liberals, the Free Trade Party, won a,
great victory in the 1906 election.
A great battle had been won; but the struggle was not over. Not only
did vast and visible poverty and squalor remain, but they were not
perceptibly abating. The Liberals tackled that problem in a variety of
ways. There was "Welfare State" legislation: Old Age
Pensions and National Insurance. There was a complex struggle about
the land question, which got itself tied up with a constitutional
battle over the House of Lords. The public at large was excited over
questions like Women's Suffrage and Irish Home Rule. These issues were
unrelate or only tenuously related, to each other; but most of them
were still unresolved when war came in 1914.
After the war, a Coalition Government was in office. The Prime
Minister, Lloyd George, was a Liberal; most of his supporters were
Conservatives. Some relatively minor encroachments were made on Free
Trade, but the main question was still not settled when the Coalition
broke in 1922. The Protection issue was suddenly raised again by
Conservative Prime Minister Stanley Baldwin in the following year; but
the lines of battle were rather similar to those of 1903-06, and the
result was the same: victory for the Free Traders.
The struggle over Free Trade after the First World War must be set
against a new background: mass-unemployment. In the pre-1914 period,
unemployment usually ranged between 2 and 6%; from 1921 onwards it was
never below 9%, and often far higher than that. Baldwin's campaign of
1923 had been specially angled to unemployment; but people still saw
it as a temporary phenomenon. As time went on, it became more and more
the central issue of politics.
The Conservatives ruled Britain from 1924-29, and most Conservatives
were Protectionists; but they were in no mood to launch a frontal
attack on Free Trade. The lessons of 1903-06 and of 1923 suggested
that Protection was a certain vote loser. The Labour Party took office
in 1929; but in the autumn of that year there came the Wall Street
crash, and thereafter the chronic unemployment of the previous decade
rapidly became acute. By the summer of 1931 it was around the 20%
mark, and showed no signs of abating. At that moment a short and sharp
political crisis pitched out the Government, replacing it by a
National Government supported by Conservatives, Liberals and a small
but important group 'from the Labour Party. Later in the year the
National Government went to the polls, and won the most sweeping
majority any British government has ever had. Of the M.P.s returned,
the vast majority were Conservatives; but the facade of a National
Government was retained.
In this atmosphere, the Protection issue acquired new urgency. The
Government itself was deeply split; but pressure from Conservatives
became intense, and early in 1932 the National Government decided in
favour of a general policy of tariffs. There was trouble within the
Cabinet; but the overall result was inevitably the abandonment of Free
Trade.
Why, we may ask, was the upshot so different from that of 1906 or
1923? The argument for Protection was no stronger than it had been at
any point in the previous 86 years; but desperate people were prepared
to adopt any remedy which was offered with enough insistence. Glancing
over our shoulder, we note that other countries were suddenly
accepting new and drastic ideas in response to the upswing in
unemployment which they also were experiencing. The United States was
turning to Roosevelt; Germany to Hitler.
The real strength of the Protectionist argument did not lie in any
power to convince people that it would operate for the general good,
or even for the selfish good of particular individuals, but rather in
the fact that a society exhibiting great disparities of wealth and
poverty is necessarily unstable. In times of rising general prosperity
people will tolerate it; but when there is a serious downswing in
conditions of life they often turn to "remedies" which are
strongly pressed, even though these not merely cannot improve matters,
but tend to make them worse. That is why Britain went Protectionist in
1932; it is also essentially the reason why many countries have turned
to the even more pernicious "remedy' of communism. People who
appreciate the fundamental wrongness of the quack "remedies"
are often unwilling to tackle the real disease. As this audience will
appreciate, we are back to Henry George and the land question.
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