Free Trade vs. Protectionism

What were the Corn Laws?

Corn Laws were UK laws that were raising prices of grain. They were a hindrance to international trade which was to become known as free trade. The Corn Laws impeded trade to political economists and certain government ministers. This was due to manufacturing stress on export industries such as cotton-manufacturers. Mounting pressure began in the mid 1820’s as theories against free trade were suppressed from being published.

Leaders of the Anti-Corn Law League optimistically evangelized that free trade/globalization would benefit everyone eventually. The idea was that all countries would benefit and all classes of people would benefit as well. The Anti-Corn Law movement promised a “big loaf” and a ten hour work day for the worker to gain momentum. More food and less work appealed to the workers. UK Manufacturers who purchased their materials from other countries wanted those countries to purchase their finished goods. The manufacturers promoted a better quality of life for the worker so they could get their support against the landed interests (Protectionists) who wanted to insure their income by keeping grain prices high.

Since hunger was the basis of the French Revolution that had just ended, the Anti-Corn Law League promoted the idea that if all the countries traded peacefully via free trade there would be no hunger. This would result in no revolution and no war and utopian world peace. The following video is a contemporary example of what the message would probably have been like back in the day:

Greece just experienced total economic collapse with violent political uprisings resulting in economic inequality. Greece is the IMF’s biggest customer. Greece participated in free trade, became dependent with low international economic competitiveness, accrued a trade deficit and then couldn’t pay their debt.

Due to wartime instability, the IMF was established in 1944, post World War II. This was after Roosevelt had removed America from the gold standard and confiscated all gold.

Who were the Protectionists?

The Protectionists favored the Corn Laws and wanted to eventually have Britain become self-sufficient for it’s food. Free trade made Britain dependent on foreign countries for it’s food. Protectionists were trying to keep wheat prices high and stable by passing the Corn Laws assuring their remuneration from rents from tenant farmers. West Midlands manufacturers who traded domestically didn’t care about the Corn Laws. They wanted to go off the gold standard and reinflate the UK economy. Patriotic land owners had continued domestic food supply during war and paid huge taxes to fund the war. The Corn Laws assured that there would be a national industry of agriculture by setting the price of wheat. Most of parliament were landowners and they were just ensuring their agricultural interests.

Why Establish Corn Laws?

What instilled so much fear and anxiety? The problem was wartime instability. The Napoleonic Wars had just ended. The first of a series of Corn Laws in 1815 resolved some fear because it ensured a native industry for the landowners/lawmakers known as the Import Act. This kept wheat prices high and stable due to the fear of cheaper imports and with the hope of Britain becoming completely self-sufficient for it’s own food supply.

Representation of Manufacturing Interests in Parliament

To gain support, the Anti-Corn Law League traveled tirelessly to various counties to gain support from the farmers and farm laborers, this grass-roots movement was successful despite the insults and accusations from the current ministry. The Anti-Corn Law League was comprised of manufacturers that wanted to open free trade with continental Europe. They actually cared about their “factory slaves” as was one of the insults from the ministry. ¹This was a direct insult to James Wilson since he was a manufacturer of hats and his large family was comprised of textile manufacturers.

The Anti-Corn Law political movement represented industrial interests which overrode protectionist agricultural interests. With James Wilson’s zeal manufacturers had representation in Parliament. It was no longer just the landed aristocracy’s agricultural interests. Wheat prices stabilized initially. This was as hoped. Usually when free trade is agreed to there are initial gains that turn into diminishing returns. At the same time James had begun The Economist. The Anti-Corn Law League later dissolved into the Liberal Party which had the goal of establishing a fully free trade economy. Their voice was so loud, Parliament had to let them in but the majority of nobles still remained in control. Even if there was a surge in wages and a reduction of wheat prices, the nobles could raise rents on their properties and take the extra disposable income of the worker/tenant farmer which was meant for the workers to purchase the big loaf. Applying this to Brexit, the working class doesn’t profit either way the political tide turns and they are just political pawns. As a result of backing out of the EU, Britain’s crops will cost more and their currency will rise.

Why did Queen Victoria have anxiety?

To the Duke of Wellington, Irishman and Tory Party member Robert Peel who established The Bank Act of 1844 wrote to the Duke of Wellington on October 10, 1843 that the interference of the Anti-Corn Law League was a problem and he asked the Duke of Wellington to have a talk with Mrs. Lionel Rothschild to make sure that the Jewish vote does not elect the candidate of the Anti-Corn Law League. The Duke of Wellington wrote back and said that Mr. Baring’s defeat caused anxiety to the Queen. ²

The 1689 Bill of Rights put the power of taxation solely in the hands of Parliament. This political shift must have given Queen Victoria anxiety about her own income as it all came from Parliament which had just added manufacturing interests as new members and her man, Baring was defeated. Parliament decided the distribution of the money collected and that included the Queen’s income. Queen Victoria’s assets included jewels, works of art and government bonds purchased with her private income. It was only later she purchased private estates which may have generated independent income in addition to income that she depended on from taxation. Queen Victoria had already taken a pay cut and had told Robert Peel she would pay taxes on her income to “set an example”. At the end of her reign, she was very angry and regretted obliging Mr. Peel.

James Wilson was a strong supporter of the monarchy as was his elder brother who was a Justice of the Peace and as was his Son-in-Law who wrote the English Constitution. After the UK took all the silver, gold and jewels from India, Queen Victoria commissioned James to institute a system of taxation and to institute a new currency for her in India. He had wanted to make a new currency in the UK but she sent him to India instead. Whatever loss Queen Victoria sustained through lower gross and net income in the UK, she gained from James’ tireless efforts in India. James died in India at age 55.

How Free Trade Developed

Since over 150 years have passed since free trade was established we’re at “Eventually”. Did free trade benefit provide the utopia James Wilson promoted and did it benefit everyone eventually? Ideally we would have world peace as a result, unfortunately the answer is no. James wanted to have reciprocity in trade which is not what we see around us today. The stores are filled with low quality goods at an inexpensive price and people are not financially equal as the price equalization theory would suggest. Instead the world is more unequal and is polarizing. The purpose of protectionism was to have increasing returns instead of diminishing returns. Protectionism seeks to acquire capital and free trade seeks to make deficit.

Free Trade Sold as Economic Stimulation to the People

James Wilson believed that if people didn’t have to pay high prices for food, they would stimulate the economy. The result would enable people to buy more clothing and local goods. Initial gains are the result of establishing free trade but over the long term there are no gains.

He also forgot to calculate in his zeal for economic idealism the behind-the-scenes factors that motivate wars. However, most of the knitwear companies in Hawick, Scotland went out of business due to global free trade. His elder brother was a manufacturer like James. He was also a landowner and farmer of 270 acres. Surely, he couldn’t have predicted the future at the time and known that others would not choose to reciprocate fairly. Hawick-born James’ theory was an abstract distraction from exogeny.

Historically, no country ever adopted free trade because it was going to improve the world. Now, one hundred and seventy years later there is the movement for Brexit which would make England self-sufficient again. Perhaps Brexiters don’t want to suffer Greece’s fate.

Benefits of Domestic Manufacturing

Free trade can’t secure the benefits of domestic manufacturing. Benefits include independence, employment , crime reduction, high-quality products made with high-standards and ultimately, nationalism. Everyone didn’t benefit from free trade, only the people who manufacture ,landowners and the people who give loans benefit. An example of this is when England exported their manufactures to Portugal and Portugal fared the worse out of that exchange. For the most part, it is the Chinese who manufacture who benefit. There is not the idealistic reciprocity that James Wilson expected from his fellow man and his fellow manufacturer. The common man can buy more low-priced, low-quality goods due to increased competition from globalization. The economy for the foreign manufacturers couldn’t be better. James Wilson was looking for reciprocity in international trade without huge import tax. After all these years the scales are uneven, not reciprocal, and far from James’ ideal of “everyone benefiting eventually”. To his benefit James Wilson did try to stop wars by envisioning a reciprocal method of free trade but it was completely unrealistic. It was a theory. When implemented in the real world, it gets extremely complicated very quickly. The idea of reciprocity darkens.

Global Domination

The Corn Laws of 1846 were to make a deal. The idea was to get the US and other countries to not protect their industry and to export grain. This would make the US dependent on the UK for manufactures. This would crush the US and build up the UK’s industrial power. Bear in mind this was just after the war of 1812 when the British burnt down the White House. They could not conquer the US militarily for a second time so they tried to conquer a third time using economics instead of brute force. Prior to the independence of America in 1776, England protected it’s manufacturing industries. Under British rule, manufacturing in the US colonies was not allowed in the US. The plan was that other countries such as Germany and Japan were to follow the US and continue supplying raw materials to Britain and then end up dependent on the UK.

Countries become an industrial and world power by protectionism. The UK wanted to dominate other countries under the guise of free trade benefiting all. Essentially, England was acting in a protectionist manner against all other countries. This was not reciprocal free trade as previously promoted by James Wilson and his team. The UK wanted other countries to run a deficit and have their currency and wages plummet.

The US was protectionist after the Civil War and took off as a super power. As per Aristotle and Plato, self-sufficiency has been the guiding policy in the US regarding essentials including agriculture and oil. Japan and Germany also became powerful countries due to their protectionist policies.

The UK’s plan didn’t work with the US although it did work with Portugal in the 1950’s. Protectionist England made a deal to export their manufactures to free trade Portugal. As a result, Portugal’s currency went down. This made the wage earned low creating economic polarization and a lack of surplus for the country overall to protect itself militarily and otherwise.

Scottish Economist, David Hume admitted that countries that follow free trade become poorer. India was mainly self-sufficient prior to the UK takeover.

John Hickenlooper, Democratic Candidate for the US Presidential race in 2020 states that he supports regional minimum wage increases and free trade. Currently, President Trump is revamping free trade agreements that were not reciprocal and/or were severely unequal for the US. If Hickenlooper becomes President, what kind of free trade deals will he make? Will he reverse all the nationalist work President Trump is doing and send the US into a greater trade deficit? No matter which way the political pendulum swings between free trade and protectionism, the manufacturers (if they are located in a low wage state and if Hickenlooper makes pro-domestic business free trade deals), the landlords (from unearned income from workers no matter what their wage is) and the bankers profit (the resources of countries being collateral to get them out of a trade deficit).

The growth that the UK and James wanted, global domination, came at the expense of the people who were living within the home economy. Factors such as taxation, politics and other outside influences were not taken into account after James had based his theory on previous economic models of barter that excluded capital. The nobility could just charge higher rents which were not earned income so they were essentially unaffected.

James Wilson was a strong supporter of all classes, his interests were getting the “big loaf” for the “factory slaves”, collecting the taxes for the monarchy and being a good neighbour to the Rothschilds in Mayfair. The landed aristocracy may have lost on the price of grain but they gained in rental income. Whatever disposable income that was to go to the worker for their “big loaf”, went to the landlords. What Queen Victoria didn’t collect in the UK, she collected in India. The UK profited from their free trade deals with Portugal. Through free trade deficits the bankers benefit when they offer assistance but the wage and the currency goes down for the people of the effected country. Manufacturers in James’ hometown went out of business due to free trade which meant unemployment for the worker. Was James Wilson truly concerned about world peace and benefiting everyone eventually?