Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism

Economic History, vol. 51. no. 1.

18

Brisco (1907) neatly sums up this aspect of Walpole’s policy: ‘By commercial and industrial regulations attempts were made to restrict the colonies to the production of raw materials which England was to work up, to discourage any manufactures that would any way compete with the mother country, and to confine their markets to the English trader and manufacturer’ (p. 165).

19

Willy de Clercq, the European commissioner for external economic relations during the late 1980s, intones that ‘[o]nly as a result of the theoretical legitimacy of free trade when measured against widespread mercantilism provided by David Ricardo, John Stuart Mill and David Hume, Adam Smith and others from the Scottish Enlightenment, and as a consequence of the relative stability provided by the UK as the only and relatively benevolent superpower or hegemon during the second half of the nineteenth century, was free trade able to flourish for the first time’. W. de Clercq (1996), ‘The End of History for Free Trade?’ in J.Bhagwati & M.Hirsch (eds.), The Uruguay Round and Beyond – Essays in Honour of Arthur Dunkel (The University of Michigan Press, Ann Arbor), p. 196.

20

J. Bhagwati (1985), Protectionism (The MIT Press, Cambridge, Massachusetts), p. 18. Bhagwati, together with other free-trade economists of today, attaches so much importance to this episode that he uses as the cover of the book a 1845 cartoon from the political satire magazine, Punch, depicting the prime minister, Robert Peel, as a befuddled boy being firmly led to the righteous path of free trade by the stern, upright figure of Richard Cobden, the leading anti-Corn-Law campaigner.

21

C. Kindleberger (1978), ‘Germany’s Overtaking of England, 1806 to 1914’ (chapter 7) in Economic Response: Comparative Studies in Trade, Finance, and Growth (Harvard University Press, Cambridge, Massachusetts), p. 196.

22

The passage is from The Political Writings of Richard Cobden, 1868, William Ridgeway, London, vol. 1, p. 150; as cited in E. Reinert (1998), ‘Raw Materials in the History of Economic Policy – Or why List (the protectionist) and Cobden (the free trader) both agreed on free trade in corn’ in G. Cook (ed.), The Economics and Politics of International Trade – Freedom and Trade, Volume 2 (Routledge, London), p. 292.

23

See D. Landes (1998), The Wealth and Poverty of Nations (W.W. Norton & Company, New York), p. 521.

24

Bairoch (1993), p. 46. One French Commission of Inquiry in the early 19th century also argued that ‘England has only arrived at the summit of prosperity by persisting for centuries in the system of protection and prohibition’. Cited in W. Ashworth (2003), Customs and Excise – Trade, Production, and Consumption in England, 1640–1845 (Oxford University Press, Oxford) p. 379.

25

As cited in List (1841), p. 95. Pitt is cited as the Earl of Chatham, which he was at the time.

26

The full quotation is: ‘Were the Americans, either by combination or by any other sort of violence, to stop the importation of European manufactures, and, by thus giving a monopoly to such of their own countrymen as could manufacture the like goods, divert any considerable part of their capital into this employment, they would retard instead of accelerating the further increase in the value of their annual produce, and would obstruct instead of promoting the progress of their country towards real wealth and greatness.’ Adam Smith (1776), The Wealth of Nations, the 1937 Random House edition, pp. 347–8. Smith’s view was later echoed by the respected 19th-century French economist Jean-Baptise Say, who is reported to have said that, ‘like Poland’, the US should rely on agriculture and forget about manufacturing. Reported in List (1841), p. 99.

27

Hamilton divided these measures into eleven groups. They are: (i) ‘protecting duties’ (tariffs, if translated into modern terminology); (ii) ‘prohibition of rival articles or duties equivalent to prohibitions’ (import bans or prohibitive tariffs); (iii) ‘prohibition of the exportation of the materials of manufactures’ (export bans on industrial inputs); (iv) ‘pecuniary bounties’ (subsidies); (v) ‘premiums’ (special subsidies for key innovation); (vi) ‘the exemption of the materials of manufactures from duty’ (import liberalization of inputs); (vii) ‘drawbacks of the duties which are imposed on the materials of manufactures’ (tariff rebate on imported industrial inputs); (viii) ‘the encouragement of new inventions and discoveries, at home, and of the introduction into the United States of such as may have been made in other countries; particularly those, which relate to machinery’ (prizes and patents for inventions); (ix) ‘judicious regulations for the inspection of manufactured commodities’ (regulation of product standards); (x) ‘the facilitating of pecuniary remittances from place to place’ (financial development); and (xi) ‘the facilitating of the transportation of commodities’ (transport development). Alexander Hamilton (1789), Report on the Subject of Manufactures, as reprinted in Hamilton – Writings (The Library of the America, New York, 2001), pp. 679–708.

28

Burr and Hamilton were friends in their younger days. However, in 1789, Burr shifted his allegiance and accepted the office of attorney general of the state of New York from Governor George Clinton, despite having campaigned for Hamilton’s candidate. In 1791, Burr defeated Philip Schuyler, Hamilton’s father-in-law, to become a senator, and then used the office to oppose Hamilton’s policies.Hamilton, in turn, opposed Burr’s candidacy for the vice presidency in 1792 and his nomination as the minister (ambassador) to France in 1794. To top it all, Hamilton snatched the presidency away from Burr’s hands and forced him to become the vice president in the 1800 election. In that election, four candidates ran – John Adams and Charles Pinckney from the Federalist Party and Thomas Jefferson and Aaron Burr from the opposing Democratic Republican Party. In the electoral-college vote, the two Democratic Republican candidates came out ahead, with Burr unexpectedly tying with Jefferson. When the House of Representatives had to choose between the two candidates, Hamilton swung the Federalists towards Jefferson. This was done despite the fact that Hamilton opposed Jefferson almost as much, because he thought Burr was an