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Classical Liberalism in the 21st Century: Freedom of Trade, Part 1

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BEFORE THE 19TH CENTURY, governments in the major European countries and their colonial empires around the world took it for granted that they had both the right and responsibility to control and direct the economic activities of their subjects. Indeed, the lands and peoples in these countries were considered to be the property of the king or prince, to use and dispose of in any manner that he considered most beneficial to his interests. To the extent that the monarch took an interest in the more immediate well-being of his subjects, it was only as a necessary means to the end of his own betterment.

In 1615, for example, Antoine de Montchretien authored a book entitled A Treatise on Political Economy, addressed to the monarchs of France, in which he warned of the danger of permitting the competition of foreign sellers in the French market:

First of all, I point out to your Majesties that all the implements, the manufacturing of which you are in charge, both in and out of the kingdom, not only in cities but in entire provinces, can be made abundantly and at a very good price in your Lordships country. And further, that allowing in and receiving foreign-made goods here means to take away the life of several thousands of your subjects to whom this industry is an inheritance and the source of their income; it means reducing your own wealth which derives from and increases through the wealth of the people.

Montchretien offered a conclusion to the monarchs: Let us therefore relish in the fruits of our own labor, that is to say, let us rely on ourselves.

Here spelled out quite clearly was the idea that trade with other countries was the source of national disaster, including loss of jobs and falling incomes. It undermined commercial traditions that were considered the inheritance of the people, and it reduced income and wealth for the government by lowering tax revenues.

And here, too, is the concept of national economic independence autarky in which the country sets the goal of producing and manufacturing all that its residents require purely through domestic production. This was the essence of the economic system of that time, known as mercantilism.

But to prevent the kings subjects from trading with the buyers and sellers in other countries required the use of the power of the state, both to prohibit transactions of which the king disapproved and to compel manufacturers to produce what the monarch deemed desirable and to sell them at prices that he considered just and fair.

Mercantilism in France

France was the most determined in imposing and enforcing these economic controls and commands. In the first decade of the 19th century, the French classical liberal Charles Comte described in his book The Passage of Liberty the workings of the French mercantilist system in the 18th century:

The State exercised over manufacturing industry the most unlimited and arbitrary jurisdiction. It disposed without scruple of the resources of manufacturers; it decided who shall be allowed to work, what things it should be permitted to make, what materials should be employed, what processes followed, what forms should be given to production.
It was not enough to do well, to do better; it was necessary to do according to the rules…. Not the tastes of the consumers, but the commands of the law must be attended to. Legions of inspectors, commissioners, controllers, jurymen, guardians were charged with its execution.
Machines were broken, products were burned when not conformable to the rules. There were different sets of rules for goods destined for home consumption and for those intended for exportation. An artisan could neither choose the place in which to establish himself, nor work at all seasons, nor work for all customers.
There exists a decree of March 30, 1700, which limits to eighteen towns the number of places where stockings might be woven. A decree of June 18, 1723, enjoins the manufacturers of Rouen to suspend their works from the 1st of July to the 15th of September, in order to facilitate the harvest.
Louis XIV, when he intended to construct the colonnade of the Louvre, forbade all private persons to employ workmen without his permission, with a penalty of 10,000 livres, and forbade workmen to work for private persons, on pain for the first offense, of imprisonment, and for the second, of the galleys.

There is also the testimony of a Monsieur Roland, who lived in the city of Rouen, about the treatment of businessmen and merchants accused of violating the rules and regulations:

The manufacturers were summoned, tried, and condemned; their goods were confiscated; copies of their judgement of confiscation posted in every public place; fortune, reputation, credit, all lost and destroyed. And for what offense? Because they had made of worsted a kind of cloth called shag, such as the English used to manufacture, and even sell in France, while the French regulations stated that that kind of cloth should be made of mohair.
I have seen other manufacturers treated in the same way, because they had made camlets [the collars on womens blouses] of a particular width, used in England and Germany, for which there was a great demand from Spain, Portugal, and other countries, and from other parts of France, for which the French regulations prescribed other widths….

Black markets

But market demands and profit incentives could not be repressed. And what the government did not allow, black-marketeers delivered illegally. In the 1840s, Jerome-Adophe Blanque pointed out in his book History of Political Economy in Europe,

If we carefully examine the periods when contraband has prospered, we shall be easily convinced that it has always been in the countries and at the times when the Mercantilist system was in vigor.

As Blanque explained,

It is in the nature of bad institutions never to be respected, and to give birth to protests which end in bringing about reform; smuggling was to the exclusive system [mercantilism] the constant and the most expressive of these protests….
It is as exact in its deliveries as the most scrupulous merchant; it braves the seasons and defies the best guarded lines of custom-houses, to such a degree that assurance companies, which protect it, count upon fewer losses than any other.
Smuggling is, in fact, the only means which remains to the various industries to procure for themselves the prohibited products whose use is indispensable for them….
It is owing to smuggling that commerce did not perish under the prohibitory regime…. While savants discuss and commerce entreats, contrabandage acts and decides on the frontier; it presents itself with the irresistible power of actual facts, and freedom of trade has never won a victory for which smuggling has not prepared the way.

This French economist was not alone in his sympathy for black-market activities. The 19th-century English economist Nassau Senior said the same in 1827 and in equally clear terms. The smuggler is a radical and judicious reformer, he said. The smuggler is essential to the well-being of the whole nation. All external commerce depends on him.

But for all the good that the black-marketeer provided, Senior considered it little compensation for the burden and cost that the government controls imposed on the society. I am far from thinking that the direct effect of his [the smugglers] exertions in giving us a free trade in those commodities which, from their bulk and value, fall within his province, are any compensation for the crime, misery and the public expense of the mercantilist system.

Mercantilism and the welfare state

The system pressed down on the people like a great and giant weight. As one final set of examples of its awesome burden and pervasiveness, we have the observations of Alexis de Tocqueville in his book The Old Regime and the Revolution. He helps us to see that in France under mercantilist policies, the regime took on the characteristics of both economic planning and the welfare state:

The government had a hand in the management of all the cities in the kingdom, great and small. It was consulted on all subjects, and gave decided opinions on all; it even regulated festivals. It was the government which gave orders for public rejoicing, fireworks, and illuminations….
You have neither Parliament, nor estates, nor governors; nothing but thirty masters of requests [i.e., the heads of the bureaucratic planning agencies in Paris], on whom, so far as the provinces are concerned, welfare, misery, plenty or want entirely depend….
Under the old regime, as in our own day, neither city, nor borough, nor village, nor hamlet, however small, nor hospital, nor church, nor convent, nor college could exercise a free will in its private affairs, or administer its property, as it thought best. Then, as now, the administration was the guardian of the whole French people….
A very extensive machinery was requisite before the government could know everything and manage everything in Paris. The amounts of documents filed were enormous, and the slowness with which public business was transacted was such that I have been unable to discover any case in which a village obtained permission to raise its church steeple or repair its presbytery in less than a year. Generally speaking, two or three years lapsed before such petitions were granted….
Ministers are overloaded with business details. Everything is done by them or through them, and if their information be not coextensive with their power, they are forced to let their clerks act as they please, and become the real masters of the country [i.e., authority was delegated to a permanent bureaucracy]….
A marked characteristic of the French government, even in those days, was the hatred it bore to everyone, whether noble or not, who presumed to meddle with public affairs without its knowledge. It took fright at the organization of the least public body that ventured to exist without permission. It was disturbed by the formation of free society. It could brook no association but such as it had arbitrarily formed, and over which it presided. In a word, it objected to people looking over their own concerns, and preferred general inertia to rivalry….
Government having assumed the place of Providence, people naturally invoked its aid for their private wants. Heaps of petitions were received from persons who wanted their petty private ends served, always for the public good….
Nobody expected to succeed in any enterprise unless the state helped them. Farmers, who, as a class, are generally stubborn and indocile, were led to believe that the backwardness of agriculture was due to the lack of advice and aid from government….
Sad reading, this: Farmers begging to be reimbursed the value of lost cattle or horses; men in easy circumstances begging for a loan to enable them to work their land to more advantage; manufacturers begging for monopolies to crush out competition; businessmen confiding their pecuniary embarrassments to the intendent [the local bureaucrat], and begging for assistance or a loan. It would appear that the public funds were liable to be used in this way….
France is nothing but Paris and a few distant provinces which Paris has not yet had time to swallow up.

This was the world that mercantilism had created. Perhaps not as intrusive and comprehensive in all countries as in royal France, but nonetheless present and pervasive everywhere.

But finally voices were raised against the mercantilist system, beginning in the second half of the 18th century. And from these voices came the logic and the arguments that would bring the triumph of the principle of freedom of trade in the 19th century and the vision of the free society that now beckons us again at the dawn of the 21st century.

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    Richard M. Ebeling is a professor of economics at Northwood University. He was formerly president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).