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Free Trade, Peace, and Goodwill Among Nations: The Sesquicentennial of the Triumph of Free Trade

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Adam Smith’s Wealth of Nations is justly considered one of the intellectual fountainheads of economic liberty. With a brilliant combination of logic and historical example, Smith demonstrated, like few others had up to his day, that governmental controls, regulations, and restrictions on economic freedom were the fundamental causes of extensive poverty, misuse of resources, and pervasive political corruption. He declared that what England — and indeed any country — needed, if it desired increased prosperity for all, wise use of its resources, and greater justice in human relationships, was a “system of natural liberty.”

Under such a system, Smith argued,

every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men. . . . The sovereign is completely discharged from a duty . . . of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards employments most suitable to the interest of society.

In this system of natural liberty, the government, in Adam Smith’s view, would be limited to three functions: protection of the citizenry from foreign aggression; the protection of the citizenry from domestic robbery and murder, along with a judicial system to administer justice; and the provision of a number of limited public works that Smith believed might not be profitable for private citizens to provide but which might have a wider usefulness for the society.

In spite of the eloquence and rigor with which Adam Smith demonstrated the harm and futility of the mercantilist forms of planning and regulation in his day, he despaired that economic freedom would never be triumphant. “To expect, indeed, that the freedom of trade should ever be entirely restored to Great Britain,” he said, “is as absurd as to expect that an Oceana or Utopia should ever be established in it. Not only the prejudices of the public, but what is much more unconquerable, the private interests of many individuals irresistibly oppose it.”

The several decades following Adam Smith’s death in 1790 seemed to bear out his pessimism. While under the prime ministership of William Pitt in the 1780s, Great Britain moved in directions that were consistent with the types of trade policies advocated by Smith; they were reversed in the 1790s with the advent of the wars fought between Great Britain and France. New protectionist trade barriers were imposed in the name of the war effort. Britain and France both tried to enforce naval blockades against each other. Only a pervasive network of smuggling throughout Europe prevented many from going without food or clothing. As Francis Hirst explained in his book From Adam Smith to Philip Snowden: A History of Free Trade (1925), “When peace came in 1815 it found Great Britain exhausted by twenty-two years of war and Protection.”

However, instead of reversing the controls and regulations, the British Parliament passed the Corn Laws of 1815, which were meant to assure a protected market for British agricultural interests. No foreign wheat could be imported into the British Isles unless the domestic price reached an exorbitantly high level. This condemned the low-income industrial workers of British towns and cities to a meager and expensive diet. The trade barriers also acted as restraints on the development of the emerging British manufacturing industries.

In 1820, a group of British industrialists issued a Merchant’s Petition declaring that they were “against every restrictive regulation of trade, not essential to the revenue, against all duties merely protective from foreign competition.” In 1830, Sir Henry Parnell, a longtime chairman of the finance committee of the House of Commons, published a book entitled On Financial Reform . In it, he declared:

“If once men were allowed to take their own way, they would very soon, to the great advantage of society, undeceive the world of the error of restricting trade, and show that the passage of merchandise from one state to another ought to be as free as air and water. Every country should be as a general and common fair for the sale of goods, and the individual and nation which makes the best commodity should find the greatest advantage.”

In 1836, the Anti-Corn Law Association was formed in London, which in 1839 was renamed the Anti-Corn Law League in Manchester. For the next seven years, under the masterful and powerful leadership of Richard Cobden and John Bright, the league fought unstintingly for the repeal of the Corn Laws and for the establishment of total free trade in the British Empire.

Throughout the cities, towns, and villages of Great Britain, Anti-Corn Law League chapters were opened. Hundreds of thousands of dollars in voluntary donations were collected to fund rallies, meetings, public lectures, and debates. The league organized a vast publishing campaign of books, monographs, and pamphlets advocating the repeal of all protectionist restrictions and the freeing of all trade and commerce from government control.

From the beginning, in making his case for free trade, Richard Cobden saw the breaking down of trade barriers as a powerful avenue for depoliticizing human relationships. By privatizing all market transactions between individuals of different countries, he said, free trade would assist in removing many of the causes of war. “As little intercourse as possible between Governments,” Cobden declared, “as much connection as possible between the nations of the world.” To emphasize this, the slogan of the Anti-Corn Law League became “Free Trade, Peace and Good-Will Among Nations.”

Furthermore, Cobden and the Anti-Corn Law League made the case for unilateral free trade. “We came to the conclusion that the less we attempted to persuade foreigners to adopt our trade principles, the better,” Cobden explained in later years, “for we discovered so much suspicion of the motives of England, that it was lending an argument to the protectionists abroad to incite the popular feeling against the free-traders. . . . To take away this pretense, we avowed our total indifference whether other nations became free-traders or not; but we should abolish Protection for our own selves, and leave other countries to take whatever course they liked best.”

In 1841, Sir Robert Peel became prime minister, determined to maintain the Corn Laws as a cornerstone of British foreign economic policy. But through one of those ironies of history, the man appointed to lead the defense of protectionism ended up advocating and overseeing the abolition of protectionism in Great Britain.

Over the next several years, Peel’s government lowered and, in some cases, eliminated many of the trade restrictions on manufacturing and industrial goods, but he would not reduce the trade barriers on agriculture. Under the unrelenting arguments of the free traders, Peel finally admitted, in 1843, during a debate in the House of Commons, “I am bound to say that it is our interest to buy cheap, whether other countries will buy cheap or no.” In 1845, of the 813 commodities on the import tariff restriction list, 430 were placed on the free-trade list. But, still, Peel was unwilling to give way on the Corn Laws.

In the fall of 1845, the worst rains in living memory hit the British Isles, and the domestic food crops were devastated. Food supplies declined, bread prices rose dramatically, and the potato harvest was destroyed in Ireland, threatening mass starvation. Young boys could be heard in the cities saying, “I be protected and I be starving.” Daniel O’Connell led demonstrations in Ireland, in which a cannon would be dragged through the streets to which was attached a sign saying, “Free trade or this.”

In November 1845, the leaders of both the Tory and Whig parties came out for repeal of the Corn Laws. In January 1846, Robert Peel told the House of Commons that the Corn Laws would be abolished. On February 27, the resolution was approved, and the Corn Importation Bill left the House of Commons on May 16, after passing on the third reading. The Duke of Wellington speedily ushered the bill through the House of Lords, and free trade became the law of the land in Great Britain on June 25, 1846.

Angered by his surrender to the free traders, the protectionist Tories forced Robert Peel to resign from the prime ministership the very same day free trade was triumphant in Britain. In his final speech before stepping down, Peel declared that he hoped that whatever government was now formed, it would continue the “application of those principles which tend to establish a freer intercourse with other nations.” And he went on to say:

“If other countries choose to buy in the dearest market, such an option on their part constitutes no reason why we should not be permitted to buy in the cheapest. I trust the Government . . . will not resume the policy which they and we have felt most inconvenient, namely, the haggling with foreign countries about reciprocal concessions, instead of taking the independent course which we believe conducive to our own interests. Let us trust to the influence of public opinion in other countries — let us trust that our example, with the proof of practical benefit we derive from it, will at no remote period insure the adoption of the principles on which we have acted, rather than defer indefinitely by delay equivalent concessions from other countries.”

Within three years — by 1849 — not only were the Corn Laws gone, but so were the remaining Navigation Acts carried over from the 18th century that had required goods being imported into Britain to be carried on British ships. From then on, both goods and merchant vessels from any land could arrive in Great Britain “as free as air and water,” as Henry Parnell had wished it to be in 1830.

One hundred and fifty years ago — on June 25, 1846 — Great Britain became the first country in the world to institute a unilateral policy of free trade. For the rest of the 19th century — indeed, until the dark forces of collectivism enveloped Europe during World War I — the British Empire was open to all the world for the free movement of men, money, and goods. Its economic success served as a bright, principled example to the rest of the globe, many of whose member countries followed the British lead in establishing, if not complete free trade, at least regimes of much greater freedom of trade and commerce.

The triumph of free trade in 1846 in Great Britain was one of the shining jewels in the crowning achievements of 19th-century classical liberalism. It represented more than just the opening of the door to material prosperity among an expanding group of nations of the world. It also heralded an epoch of greatly depoliticized relationships that, in fact, made international trade the private affairs of individuals and not concerns of the state.

The emergence of socialism and neo-mercantilism towards the end of the 19th century eventually brought about the end of the classical-liberal era and its epoch of free trade. Nevertheless, the victory of 1846 demonstrates that an uncompromising, principled belief in the freedom of man can triumph and change the course of human events.

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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).