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How the Corn Laws and all that may not be all that

The story that I and most people here are familiar with is that in the 1840s Britain abolished the Corn Laws, became the pioneer in free trade and that this was a good thing.

John Nye begs to differ. In this Econtalk podcast (from, ahem, 10 years ago) he makes two points. Firstly, British tariffs were falling throughout the 19th Century and that the abolition of the Corn Laws was not particularly significant in that process. Secondly, French tariffs were by-and-large lower than those in Britain.

But surely Britain was much richer than France at this time? Yes it was, and according to Nye that was mainly due to it having fewer taxes and regulations. France even had internal tariffs as Samizdata’s own Antoine Clarke once pointed out.

So much as I don’t think Trump’s trade war is a good idea it is possible that it may not be as bad as all that.

14 comments to How the Corn Laws and all that may not be all that

  • Paul Marks

    It is true that Huskinson and Robinson pushed for freer trade in the 1820s – with some success, part of a point of view that can be traced back via Tucker (Dean of Gloucester) in the 18th century, all the way back to Sir Dudley North in the 17th century (a century before Adam Smith).

    However, Sir Robert Peel’s move to freer trade in the 1840s still very important – and the most controversial part of the policy of Peel was the repeal of the Corn Laws in 1846. The policy split the Conservative Party and led to the fall of Peel as Prime Minister – and that was a disaster for Ireland. It was a disaster for Ireland NOT (contrary to what people are now taught to believe) because the incoming liberal government of Russell was against aid to Ireland during the dreadful crises of the Irish peasant plot arable farming system (a system created by the Penal Laws back in the 18th century), but because the Russell administration was much less competent than Peel – it is just not true that all governments are equally incompetent, that is a “vulgar libertarian” fallacy (just as it is untrue that all generals are equally incompetent). The incompetence of the Russell Administration cost a lot of lives in Ireland – and many Irish are still taught the lie that the mass death was deliberate.

    Where Peel can be faulted is for his introduction of income tax to “pay for” the end of tariffs – but this was sincerely meant to be a temporary measure. There was a plan to eliminate the income tax in the 1850s – but this was prevented by the Crimean War and then by the economic mess caused by the American Civil War in the early 1860s. However Gladstone (a follower of Sir Robert Peel) reduced income tax to less than 2% in 1874 (and it was only a small number of incomes) and was committed to the end of income tax – but Gladstone lost the election and Disraeli (who had promised to end income tax) was faithless. The chance to end income tax was lost – never to come again.

    France…..

    The French economy was dominated by compulsory guilds from the time of the edict of Henry IV – and became dominated by other state regulations when the system of Louis XIV and Colbert was imposed. Even in the 19th century one thing that all French governments had in common was Protectionism – till the time of Napoleon III who really did seem to favour freer trade. The once famous trade treaty between Britain and France in 1860 springs to mind – and the “Liberal Empire” (a name given to the latter part of his rule) of Napoleon III peaked in 1869 when there was little censorship and so on. However, then came 1870 and such things as the Franco-Prussian war (which the Bad Guys won) and the rise of state education in Britain with the Forster Act and so on. Even the traditional local education system in Scotland (under the control of the local churches) was replaced by a semi state system in (I think) 1872. Scotland had established a nation wide local Poor Rate (locally administered property tax for the poor) in 1845 – England and Wales had had such a thing since the 16th century.

    France soon had a state education system – the new Republic (Jules Ferry) created one, on the Prussian model.

  • Paul Marks

    As for Donald Trump – he is right about the problem, but wrong about the solution.

    People who think that borrowing hundred of billions of Dollars every year to pay for imports is not a terrible problem may think themselves very clever – but they are wrong (“clever fools” who have academic qualifications where their common sense should be) – but taxes on imports (or regulations on imports) is NOT the way to end this bleeding-to-death of the United States. The policies that undermined American industry and encouraged consumption at the expense of WORK and REAL SAVINGS must be reversed.

  • Paul Marks

    A 1930s style trade war? I hope not. After all we already have a 1929 style Credit Bubble economy – a 1931 style trade conflict is something to be avoided.

  • Runcie Balspune

    As for Donald Trump – he is right about the problem, but wrong about the solution.

    It’s the wrong economic solution, but it may be the right political solution.

    The EU was willing to remove most US import tariffs as part of TTIP a few years back, so what happened? Trump trashed that deal because of the lack of advancement on the “public procurement” terms, but there was already talk of a near tariff-free deal. Did the EU get all uppity with the new president and refuse to negotiate further? Isn’t it about right for a bit of tough talking to bring about negotiation? Could Trump’s declaration actually push the deal back on the table?

    After all the not-very-clever policy of “let’s nuke North Korea” has suddenly emerged as “peace talks” – whodathunkit ?

    That nice Mr Reagan didn’t cause the downfall of communism by being warm and cosy with the open and friendly Mr Gorbachev, he said he was going to put his nukes on orbital platforms and there’d be screw all the Soviets could do about it.

    “Pace and lead” is what Scott Adams would say, it might work, but then, leaving it up to the faceless gravy train drivers of the EU, it wont work as it stands.

  • Appianglorius

    France still has internal tariffs for overseas territories under the old-fashioned name of “octroi de mer”. Most imported goods are taxed in order to favor local production.

  • John B

    ‘British tariffs were falling throughout the 19th Century and that the abolition of the Corn Laws was not particularly significant in that process. ’

    Misses its actual significance. Look at the whole picture.

    Bread was the dietary staple for most of the population with no substitutions. Eating is not optional. As corn and thus bread prices rose, people spent a greater proportion of their income on bread leaving them less for other things.

    The Corn Laws therefore kept a significant amount of spending out of the economy. Their repeal which brought the price of corn and so bread way down, meant the whole population had more money to spend on other things causing rapid expansion of the economy.

    That was the significance. Removal of tariffs on a single essential item had a much greater positive effect than low or no tariffs elsewhere on items of optional purchase. If people do not have the money to spend, it does not matter how much free trade there is and how cheap goods are, they don’t get bought.

    The economy is there to meet wishes and desires not needs. Food is a need. If our resources go entirely on needs, there is none for our wishes and desires, thus no economy…. see poor Countries.

  • Paul Marks

    The repeal of the Corn Laws did not mean more or cheaper bread in 1846 – because there had been bad harvests in most of Europe. But eventually it did.

    The trouble was that “eventually” was not good enough for Ireland – hence the emergency short term relief efforts that Sir Robert Peel set up. The Russell government had its own emergency relief efforts in Ireland (the idea that it followed a laissez faire policy is actually a myth – as the “roads to nowhere” and so on show), but it messed up the relief efforts. Horribly messed them up.

    Competence matters – for example I was just rereading some of the accounts (by several different writers) of the Gallipoli Campaign of 1915, and the incompetence of both the British army and the navy is staggering. Not just at Suvla Bay, but in all the operations – no one in command seems to have any basic idea of what they were doing (men would be landed in the wrong place and be slaughtered, or in the right place but not given the right orders and just hang about till going back on their ships).

    There seems to have been a basic lack of what Americans call a “Marine Corps” (although the British do have a Royal Marines regiment – which is part of the Navy) – i.e. people trained in the laws of landings from the sea, how (for example) one must pre identity targets and take them (at all costs) the moment one lands – pushing in-land at once to take the objectives assigned (and the need for THE MEN THEMSELVES to understand the objectives of the operation and to work out THEIR OWN TACTICS for taking the objectives – what the Germans called “Mission Command”).

    Both the British army and the British navy (the Royal Navy) appear to have been utterly unprofessional and useless when it came to maritime landings. It just is not true that “all governments are equally useless” – Peel was much better at organising relief works in Ireland than the people Russell put in charge, and the American Marine Corps (even in 1915) would have understood what to do in the Gallipoli Campaign. The British do not even seem to have understood the old motto “slow equals DEAD” – that one must take the objectives as soon as one hits the beach, before the enemy has a chance to reinforce.

    Of course even in World War II it was noted that American Marine Corps tactics and practices were rather different from U.S. Army tactics and practices – even when they were both fighting on the same island in the pacific. With the Marines dedicated to speed, and the U.S. Army (although very fast compared to the British Army – in either World War the British tended to be generally slow) slower and more interested in consolidation. And consolidation is actually very important for a very large scale offensive – although not for the sort of operation a Marine Corps is used for.

    Certainly the sort of language and behaviour considered normal for a Marine Corps man such as “Chesty” Puller would have got someone court marshalled and shot in the British Army (and perhaps in the American Army as well).

    The “vulgar” (simplified) libertarian position that all governments, and all government forces, must be the same is not true.

    Compare how libraries (government libraries) are run by different local governments.

  • Paul Marks

    Of course the Royal Marines did play a role in the landings of 1915 – but very much under the thumb of the army and navy (no real independence). Their finest moment possibly being the “collapsing bag” at the end of the operation – when the army was withdrawn without the Turks understanding that they were going (of course if the Turks had understood that the army was pulling out – they would have launched an attack) the Royal Marines gave the impression that there was far more British than there actually were (that no real evacuation was taking place), and then themselves slipped away.

  • Mr Ed

    The spirit of incompetence lived on in the British Armed Forces into the Falklands War. At Bluff Cove, the Welsh Guards were left on the landing ships to be bombed, around 52 died, AFAIK, no one was court-martialled despite a RM Officer Lt-Col Southby-Taylor, IIRC telling those in charge of the peril they faced and nothing being done about it.

    Also, at the main landing area in San Carlos Water, there were no ‘flak ships’ (which might have been improvised) but plenty of individuals with .303 machine guns, a bit like stopping cats with mice. Nor were there barrage balloons, despite the RAF having some in storage in England. There were plenty of Balloon Command veterans around then who could have given some tips.

    But coming back to OT:

    So much as I don’t think Trump’s trade war is a good idea it is possible that it may not be as bad as all that.

    I find it hard to discern what his plans are, is it:

    a) Setting tariffs to match those US firms face in a foreign market? (e.g. if its 5% on Chinese Steel to the US, and 25% on US Steel to China, he says ‘Level it up’)

    b) Setting tariffs to wall off US markets?

    c) A mix of a) and b)

    d) Something else?

  • Alisa

    I find it hard to discern what his plans are

    I find it hard as well, but I am fairly certain that he does not like tariffs as such. So ideally it would be gradually eliminating all tariffs by everyone, but realistically it would be d), with b) as the last-resort option.

    I find it curious that everyone is talking about a ‘trade war’, and yet nobody seems to actually stop and think of it in terms of an actual “hot” war – i.e. something one might not like at all, but realizes that sometimes there is simply no way to avoid it.

  • bobby b

    “I find it hard to discern what his plans are . . . “

    Go back to what Runcie Balspune said earlier (which I think was correct):

    “It’s the wrong economic solution, but it may be the right political solution.”

    You’re trying to figure out how these tariffs work as an economic equation. I think it’s far more elemental than that. I think this is Trump saying “Don’t MESS with me, boy!”

  • Nicholas (Unlicenced Joker) Gray

    I’ve read a few contrarian economists who think that tariffs and trade barriers can do a country some good. One of them pointed out that when Britain opened up its’ trade to the world, it then started to decline as other countries took advantage of it, and kept their own economies closed. (“25 Things they don’t teach you about Capitalism”). One of the books.

  • Patrick Crozier

    My assumption has always been that other countries simply caught up and there was precious little Britain could have done about it, trade barriers or not.

    It is worth noting that catching up is one thing but overtaking quite another. In the 1980s Japan caught up with the US. We all assumed that it would then overtake the US. At that very moment its economy nose-dived and is yet to recover a quarter of a century later. I can’t help but think that these two facts are related.

  • Nicholas (Unlicenced Joker) Gray

    I think that Japan also had another problem- face. Establishing Silicon valley took a lot of bravado, to do something new. The Japanese still have no equivalent. Could they be worrying too much about face, and the family name? I wonder if China will suffer the same fate?

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