One of the most inexcusable things about America’s ongoing economic decline by means of free trade is how clear the historical portents are. For example, we are today treading the same path trodden by a nation that Americans know reasonably well: Great Britain. It is easy to forget that until about 1850 Britain, not the U.S., was the world’s leading economic power. But then, of course, they blew it. Though there were many causes of Britain’s decline, free trade was undeniably a major one.
Britain, like the U.S. and every other developed nation, initially rose from agricultural backwardness by way of mercantilism, the opposite of free trade. As late as the beginning of the 19th century, Britain’s average tariff on manufactured goods was roughly 50 percent, the highest of any major nation in Europe. And even after Britain embraced free trade in most goods, it continued to tightly regulate trade in strategic capital goods, such as the machinery for the mass production of textiles, in order to forestall its rivals. Even the famed Adam Smith—who made his living as a customs collector!—was only in favor of free trade after Britain had consolidated its industrial power through protectionism.
Free trade in Britain began in earnest with the repeal of the Corn Laws in 1846, which amounted to free trade in food, Britain’s major import at the time. (“Corn,” in the usage of the day, meant all grains.) The general election of 1852 was taken for a plebiscite on the question, and free trade began inexorably to restructure the British economy from without. Repealing the Corn Laws was a momentous step because this removed the last major constraint on Britain’s transformation, along the lines of its then-comparative advantage in manufacturing, into the world’s first industrial society, where most workers would be factory workers, not farmers: how to feed so many factory workers?
To some extent, the objective of the Corn Laws was simply to feed a bulge in population (almost a tripling in the previous 100 years) on a small island with limited agricultural potential. Competition with the prairies of North America eventually devastated Britain’s old rural economy and the aristocracy that had lived off its agricultural rents, but so committed was Britain to free trade that this price was accepted as in no other nation. Britain’s rulers expected that free trade would result in their country dominating the emerging global industrial economy due to its head start, sidelining its trading partners into agriculture and raw materials. They expected their lead in shipping, technology, scale economies, and financial infrastructure to be self-reinforcing and thus last indefinitely.
If the rest of the world had been content to be played for fools, this strategy might have worked. Instead, it enjoyed a brief window of plausibility in the 1850s and 1860s, which were the zenith of classical liberalism (of which free trade was a part) in Europe generally. Then things started to sour. For one thing, this zenith of free trade coincided with a prolonged Europe-wide depression, which started to lift as protectionism began to take hold. More fundamentally, the British plan for universal free trade stumbled as the United States and the rest of Europe declined to accept their inferior allotted roles in the global trading system.