If economics is often a dry and dusty affair, the new book War, Wine, and Taxes: The Political Economy of Anglo-French Trade, 1689-1900, is a wet and wild ride—and not simply because it's about alcohol.
John V.C. Nye debunks the conventional wisdom that Britain was a free-trade nation during the 19th century. If you look at actual trade policy rather than the self-aggrandizing pronouncements of politicians and ideologues, argues Nye, Britain remained a bastion of protectionism and mercantilism throughout the century. In comparison, France, often derided by contemporary free-marketers, was wide open to trade. In concise and eminently readable prose, he tells a story in which well-connected special interests and government officials joined forces to line their own pockets while reducing the choices available to consumers.
In answering the question, "Why do the British drink beer and not wine?," Nye not only advances our understanding of the past, he shows how economic policy can often have a major effect not just on trade but on national identity.
The 48-year-old Nye was born and raised in the Philippines and educated at Caltech and Northwestern. The married father of two sons, he and his family recently relocated to Northern Virginia, where he teaches at George Mason University and holds the Frederic Bastiat chair in Political Economy at the Mercatus Center.
In late September, he spoke with reason Editor-in-Chief Nick Gillespie via AOL Instant Messenger. What follows is an edited transcript of their interview. Comments can be sent to email@example.com.
reason: You open your book with this line: "The idea that Britain was the leading free trader of the nineteenth century is one of those rare stylized facts in economic history...." Your book is dedicated to proving this wrong. How is that conventional view wrong?
John V.C. Nye: No one had ever bothered to examine in detail what the overall tariff burden of British policy was in the 19th century. When you used standard measures to compare average tariffs in Britain with those of France—supposedly Britain's opposite number in trade—what you find is that the French were clearly much closer to being free traders than were the British for most of the 19th century. Most of the different ways we can slice the data make clear that the British had higher average tariffs than the French even after their supposed move to abolish all protection from the 1840s on. Britain had tariffs on fewer items than did France, but British tariffs were on items that were such a substantial part of British trade that the impact was more serious.
reason: Speaking of specific tariffs, explain the significance of the one part of your title everyone can get behind: Wine. You ask the question, "Why do the British drink beer and not wine?" Give the short version of your answer (hiccup) with regard to tariffs.
Nye: The core of British tariffs was directed against the French and specifically against French wine. This policy dated back to the late 1600s, when the two countries were at war for a quarter century. Tariffs designed to exclude all but the best French wine—and to a large extent depress imports from most other wine-exporting nations—were matched with policies targeted to assist brewers and domestic producers of spirits. Over time, the exclusion of cheaper French wine—especially during the Industrial Revolution—meant that lower- and middle-class drinkers had to settle almost exclusively for beer, gin, whiskey, and rum.
reason: My god! The horror!
Nye: We probably have no idea how bad some of that stuff actually was!
reason: That's speaking as someone who has obviously never drank anti-freeze. Your book is in many ways a primer on public choice economics and how officials respond to the demands of the very people they are supposed to be regulating in the name of the public good. Talk about the brewers in England as a special interest group and their relationship to the state.
Nye: During the quarter century (from 1689 to 1715) when French wine was excluded from the British market, the beer industry experienced what historian Peter Mathias refers to as the Brewing Industrial Revolution. Technology made it possible to produce beer (initially porter) in quantity. At the same time, protection meant these guys were earning money hand over fist.
When war ended, domestic beverage interests successfully lobbied to have very high tariffs placed on wine, and extra high tariffs on French wine. But a cynical public choice scholar would argue that the government would not be content with handing out goodies to the brewers. Now the state had the brewers over a barrel (so to speak). They were able to impose excise taxes on the industry and expect to collect them. The latter point is very important. In previous times, high excise taxes were not always accompanied by high revenues because of evasion.
Now the government had both a carrot and a stick...