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 3 of 4)

Nye: By the end of the 19th century, Britain was the most genuinely free trade nation in Europe and France had begun to revert to some protectionist policies. But all told, France's policies were still quite liberal and a fair reading would say that most of Europe was extremely open to trade and commerce of all sorts. If one takes labor and capital mobility into account, Europe was more liberal around 1900 than at any point since then.

Tariffs were low. Capital moved freely and labor moved much more easily than today. Moreover, it was much harder to enforce restrictions on commerce and on the free movement of goods and labor than today as well. While no one has done a rigorous study of this, I am pretty certain that Europe today is far less open than it was from about 1870 to 1910.

reason: What's the relevance of your book to contemporary politics and economics?

Nye: The first and most obvious point is: Don't rely on what is politically significant to gauge what is economically significant. The debates on the front pages of newspapers are not reliable evidence of the thrust of policy or the relative importance of issues.

Second, small policy changes can have large unanticipated consequences. The British-French trade war began in the late 17th century out of very local conflicts. No one had any clue that it would have such far-reaching repercussions.

Third, I think it's very interesting how much of what we think of as tastes or culture are really manifestations of the prices and constraints that we and our parents have faced for awhile. I certainly think that economists have paid insufficient attention to culture, but those studying culture have paid insufficient attention to how relative prices shape what we think of as luxurious or beautiful or normal.

reason: I should ask, do you prefer wine or beer?

Nye: I guess I'm mostly a wine drinker, but I like beer on hot days and I like beer in preference to very low quality wine. I remember that the first time I traveled to France in the early 1980s, almost everyone seemed to drink wine all the time. By the 1990s, that seemed to have changed. Beer was much more common in the summer than the winter. On more than a few occasions, all the visiting American academics would drinking wine and all the French guys would be drinking beer.

reason: Where did your interest in this project come from? Who are your intellectual heroes in economics?

Nye: The project arose out of my research on the economic history of France in the mid-19th century. In the course of studying French trade I put out this graph of British and French average tariffs and was stunned to see the difference, a difference that no one had ever talked about. Fortunately for me, one of my colleagues was [Nobel Prize winner] Douglass North and I turned to Doug and said "Have you ever seen this before?" We got into a long discussion about this, I contacted several more people and as they say, the rest is my peculiar history.

As for intellectual heroes, I was strongly influenced by my advisors at Northwestern, Joel Mokyr and Jonathan Hughes, and by Doug North. They made me feel that economic history was perhaps the most undervalued and intellectually exciting area of economics. Because the payoff in econ was to do very abstruse and advanced mathematical theory in the 1980s and 1990s, we were also aware that you paid a price in terms of career prospects by doing history. That gave it a certain unconventional, risk-taking flavor.

reason: You recently moved from Washington University to George Mason University and the Mercatus Center. What prompted the move and how is it working out so far?

Nye: Well, as you say, I've just gotten here. But GMU has been doing very exciting and different sorts of things for quite some time. They have put together a group of scholars with a strong interest in political economy and development, very broadly speaking. More important is they have done something extremely rare—perhaps unprecedented in economics. At one shot they hired three senior-level economic historians. Aside from me, there are Werner Troesken and Gary Richardson, and we have the potential to make GMU one of the best places in the world to do economic history. Moreover, there are plans afoot to expand further in related areas.

I also get a kick out of talking to the non-historians here, especially Tyler Cowen, Pete Boettke, Bryan Caplan, Robin Hanson, Russell Roberts, and Alex Tabarrok. Lunch can be more interesting than the best seminars in the world when we get going on the right topics.

reason: How did you come to be a professional economist?

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)?