French Wine and the Fable of Free-Trade Britain

A new book challenges the economic conventional wisdom and helps explain the rise of big government.

Nick Gillespie | October 9, 2007

(Page 2 of 4)

reason: ...and access to beer! A dangerous combination, as the senators from Massachusetts and Connecticut could tell you. Or more precisely, as waitresses who have served them could tell you.

Nye: If the brewers didn't make sure that the government got their taxes, tariffs on competing drinks could be lowered. At the same time, the government wanted the brewers to be highly concentrated, because it made regulation and bargaining easier, so they worked to destroy competition in brewing.

reason: You posit that this, in some ways, is the beginning of big government. Or if not the beginning, a clear example of how big government and big business (for lack of better terms) conjure one another into existence, right?

Nye: It was the beginning of the growth spurt in the British state. Throughout the 18th century, British revenues grew four to five times faster than the growth of Gross Domestic Product. This was simply unprecedented in Europe and comes as a surprise to those who think of 18th-century Britain solely in terms of Adam Smith and David Hume.

reason: What was happening across the Channel in terms of government growth?

Nye: French officials were trying their best to grow revenues but their hands were mostly tied. Constraints on the way that the drown could raise revenue in France were part of the reason that Louis foolishly called the Estates General at the beginning of the French Revolution.

Studies of French taxation show that average taxes as a share of GDP were roughly constant or even declining prior to the Revolution. In contrast, they were rising steadily in Great Britain.

reason: The conventional story goes something like this: Adam Smith and others argued for free markets in the 18th century and then in 19th century, with the repeal of the Corn Laws especially, England became this free-market Mecca (or something). Your book demonstrates—concisely, though with too much math for this English major—just how wrong that story is. Why did it take your colleagues in economics so long to look at the data?

Nye: That's a difficult question. For one thing, I think that economists don't look at history very much. Economic history is a lively but very small subfield and digging through archives for statistics is not usually rewarded. There is a tendency to confuse the problem of intent with outcomes. Why were the British free traders? Because they told us so. I would also add that Britain did move to liberalize trade quite dramatically; it's just that they didn't do it as smoothly as the conventional wisdom claims.

reason: Politicians espousing free-market ideals while being protectionist? Zut! I've never heard of such a thing!

Nye: Finally, I would note that some people get hung up on the question as to whether British tariffs were "efficient" from the standpoint of fiscal policy. And that is a separate question altogether. It is possible that a [classically] liberal Britain might have had to impose some sorts of taxes, and the ones they chose were probably not too awful. However, this is entirely separate from the question of who was a free trader.

reason: Is part of the slowness in accepting Britain as protectionist that it messes up a very happy ideological picture of England=Good/France=Bad in many free-market circles?

Nye: Maybe. I've thought about this a lot but I don't have good answers. When I completed the first article on this stuff (the basis for the opening chapter in the book) almost two decades ago, I was taken aback by the response I got. Some people just said, "This result is preposterous, case closed." Others said, "Oh, this proves that free trade is a bad thing!" While still others said, "Who cares about wine? What matters are manufactures."

Most simply didn't want to engage me on the central point itself. From a factual/descriptive perspective, was Britain really a free trader, especially in comparison to France? If not, why? If so, what does this tell us about economics, history, politics, and the way in which countries successfully transition to liberal market economies in the real world?

reason: How had things changed by the end of the 19th century?

Comments

Syloson of Samos|10.9.07 @ 1:39PM|#

Given the lack of free trade policy between Britain and its colonies, particularly India, this isn't very surprising.

|10.9.07 @ 1:45PM|#

...the conventional wisdom that Britain was a free-trade nation during the 19th century.

Damn, I'm stupid. I've always though it was a mercantilist nation back then.

Syloson of Samos|10.9.07 @ 1:47PM|#

I mean really, the British (or at least the colonial governments of Britain's colonies) were the ones to introduce the Hut Tax.

GinSlinger|10.9.07 @ 2:16PM|#

SoS,
Yes, that's true. But how, exactly does a tax on occupancy relate to questions of trade. (Hint: you won't find your answer in the Chimney Tax.)

Also, since when are internal economies sed to measure a country's attitude to "free trade"? Remember, colonies are essentially part of a country's internal economy. The assertion was not that the Btitish were practicing laissez faire capitalism, but that it was engaged in free trade.

I recomend that you read some Cobden before you embarass yourself further. Even proponents of liberal free-trade economics allowed for a certain degree of governmental interference in the internal economy.

|10.9.07 @ 2:29PM|#

"Why do the British drink beer and not wine?"

If you think the Brits don't drink wine, offer a British girl some Port.

Also, do this if you like British women.

Syloson of Samos|10.9.07 @ 2:43PM|#

GinSlinger,

Because the Hut Tax was a way to induce laborers to traffic between the various colonies, in particular to certain favored industries. I suppose the issue depends on what one considers "internal," but government efforts to induce laborers to travel hundreds or more miles doesn't sound like an "internal" issue to me.

I recomend that you read up on British colonialism in Africa worked before you embarass yourself further.

|10.9.07 @ 2:44PM|#

I always thought the story was: The French bankrolled the American Revolution. Then having won independence the United States didn't payback the loan because we didn't feel like it. France went belly up. Cue La Revolucion, Storm the Bastille, Liberte Egalite Eraternite, Madam Guillotine, The horror the horror, Napoleon, Empire, War etc etc etc.

or maybe that's a different story.

Syloson of Samos|10.9.07 @ 2:50PM|#

Warren,

Well, one could lay it at the feet of the personal rule imposed by the Bourbons, particularly from Louis XIV onward. It helped to create a quite fragile political order.

|10.9.07 @ 2:52PM|#

Me so dumb...

FMAFM?
Frequency-Modulation Atomic Force Microscopy

|10.9.07 @ 2:54PM|#

Ken Shultz - Happy Birthday. I figured of all the articles listed here on this "site" today, this may be one you'd be interested in and run across my congratulations on making it to the big one. Brits, wine and economics... it already sounds like your kind of party.

GinSlinger|10.9.07 @ 2:54PM|#

SoS,

You're right, my studies on Africa have a decidedly 17th and 18th century flair, you know the factory system and all. My point is that the coloies represent an internal economy. You are familiar with the last fifty plus years of Atlantic Studies, right? The Chimnet Tax, which you failed to address, also served to relocate labor within the realm, as did tithes, as did the various Parish taxes, and let's not forget what the Elizabethan Poor Laws did for the rise of industry. As Cobden points out, it's the trade between empires/nations that must be relaxed, not internal regulations, which he allowed to be within the power of the state (grudgingly).

Read the Acts of Trade and Navigation, even in the seventeenth century, England clearly defined her colonies as part of the internal economy.

GinSlinger|10.9.07 @ 2:56PM|#

SoS,

Failed to mention this, but the forced removal of convicts to Georgia, North Carolina, and Australia were all felt to be "internal" movements at the time.

Syloson of Samos|10.9.07 @ 2:56PM|#

GinSlinger,

In point of fact the British government (particularly after the abolition of slavery) created a number of schemes to control, foster, etc. the labor markets between their colonies. Probably the most prominent example of this is that of Indian indentures - labelled a "New System of Slavery" by some.

GinSlinger|10.9.07 @ 2:57PM|#

To all: Sorry about the typos, poor quality keyboard + failure to preview = makes me look ignorant

Syloson of Samos|10.9.07 @ 3:02PM|#

GinSlinger,

So basically your chief beef with my statement is that I don't necessarily agree with the way you view, "internal trade," correct?

Syloson of Samos|10.9.07 @ 3:06PM|#

Anyway, given that controlling the economic resources, trade, etc. of a now subject nation was a primary factor in the generally haphazard creation of the various European empires framing it as at least partly a "free trade" issue seems appropriate. Others can of course disagree.

Syloson of Samos|10.9.07 @ 3:19PM|#

BTW, I should state more explicitly what a hut tax was:

They were a means in part to induce (force?) African laborers to become part of what one might call the "settler" or "colonial economy." That is to work on farms, in mines, etc. These African peoples had of course their own economies pre-dating conquest, but they weren't as snugly tied into the settler economy as the colonists would have liked. So a tax was levied as a means to compel these people to earn money on the farms, etc. to pay the tax. As far as I know the taxes provided little to no benefit to those paying them and very few asked why these people didn't want to work on the farms, mines, etc. in the first place.

Syloson of Samos|10.9.07 @ 3:40PM|#

The more I think about it the more I wonder why issues like consent, etc. don't play into the definition as well. So did Cobden address that GinSlinger?

|10.9.07 @ 4:17PM|#

What does this due to Mr. Nice Guy's "we got all of our important institutions from the English" premise?

Assuming, of course, that we consider a Free-trade orientation to be central to the American creed (a highly dubious assumption).

Syloson of Samos|10.9.07 @ 4:22PM|#

Neu Mejican,

I don't know how popular it is any more, but if I recall correctly there used to be group of American historians who argued that most American government institutions, etc. were basically home grown.

However, I can say without a doubt that the most oft quoted man during the Revolution and particularly during the period prior to the Constitutional Convention was a Frenchman - namely Montesquieu. Which has always prompted me to ask if Locke's influence was overrated. Then of course there are other influential writers like Harrington, Algernon Sidney, etc.

|10.9.07 @ 4:33PM|#

I really enjoyed reading this article. It was especially interesting hearing about his background in college and how he navigated the unsure waters.

Keep up these good interviews of late.

|10.9.07 @ 6:00PM|#

S of S,

You would have been a nice addition to the overflowing Friday Political Thread on the topic of American institutions.

http://www.reason.com/blog/show/122860.html#802361

MNG was in the "WASP" institutions are the core of America camp...some others (me) argued that our institutions have grown out of the unique American experience.

|10.10.07 @ 5:07AM|#

肺癌 肝癌 胃癌

|10.10.07 @ 12:54PM|#

Sounds to me like Britain accidentally figured out how to generate that "hidden wealth" that economists and the World Bank keep talking about that is arguably created by stable and equitable institutions, and proceeded to tax the holy hell out of it. That's very relevant to Nye's experiences with the corruption of the Philippines (and the fear of the horrible responses to it). That also allows me to keep a firm hold on my Francophobia.

By the way, what's up with Nick's gonzo journalism on this one? It read like this interview partly about wine began with a chugging contest? Just how high off the ground was he during this interview, even disregarding the (hiccup)?