The Rise of Free Trade in Western Europe, 1820–1875

Abstract

Almost 25 years ago, I wrote a paper on the varied responses of five European countries -Britain, France, Germany, Italy and Denmark -tjo the fall in the price of vheat at the end of the nineteenth century [Kindleberger, 1951J . The present investigation is antecedent to that in time and concerns the spread of free trade in Europe after the Napoleonic Wars.While the movements are in opposite directions, the method is the same! to test an ordinary economic model for generality by the use of secondary materials on a number of broadly similar cases. The problems chosen are limited, and do not relate to general-equilibrium problems such as businesscycle or growth, which tend to be underdetermined. The method may be called I "comparative economic history in the small." It is helpful, in my judgement, for tdsting models for generality, and suggests the need to go outside the *, 1 confines of economic forces to wider social and political considerations. 1.The view is sometimes expressed that it is useful for economic historians to exhaust economic explanations, before calling on social and political factors [Crouzet, 1972, p. 120n; Pincus, 1972, p. 1]. This makes some sen:se in terms of professional formation, but the scientific principle ; \ thap the simpler explanation the more powerful it is surely does not , *-require that all the elements of an explanation be drawn fron tae same discipline. 0721607The testbook theory of tariffs, and of their converse, the movement to freer trade, has more elements than we need for the nineteenth century, but also lacks some.In the usual conqjarative statics, a tariff may be said to have ten effects: on price, trade, production (the protective effect), consumption, revenue, terms of trade, internal income distribution, monopoly, ecplojrment and the balance of payments. For present purposes we can dispense with the eigp loymettt effect -despite the "Notes on Mercantilism"of The General Theory [Keynes, 1936, Chapter 23], and balance-of-payments 2 effects, except in the case of Italy.2.British political economists believed in Hume's law -an international version of Say's law -that imports create exports, and relied on it in the debate over whether tariff reductions should be unilateral or reciprocal. Nor w^ere they wrong in the case of Com Law repeal.The terms-of-trade effect arises only in connection with export taxes;and the monopoly effect must be converted to dynamic form, that increased imports stirnilate growth by forcing competition and responsive innovation, as claimed in the twentieth century for the European Economic Community.We may illustrate the buli of the needed effects with the simplest of partial-equilibrium diagraics of a familiar sort. In Figure 1, an import tariff, t^, raises the domestic price P above the world price P (assumed ments. An export tax in Figure 2 reduces price and trade, cuts down on producers' rent, increases consvtmption, reduces production and earns governmental revenue. Conversely, removal of an export tax raises price, production and producers'...

Endogenous trade policy: Political struggle in the growth process

“…As shown by Minchinton (1973, 100) Kindleberger (1975) suggests that economic ideas convinced the voters of the e¢ ciency of free trade. By contrast, Irwin (1989) argues that a gradual loss of faith in Malthusian and Ricardian theories prompted the prime minister Robert Peel to convert to liberalism.…”

A theory of trade policy under dictatorship and democratization

“…The Prussian elite had a corresponding incentive to set tari¤s on manufactures relatively low. The Prussian tari¤ of 1818 was regarded when it was enacted as the lowest in Europe, but was raised steadily over the period until 1846 (Kindleberger 1975). …”

“…Although Kindleberger (1975) documents a gradual increase in protectionism in Prussia over the …rst half of the 19th Century, the most interesting period concerns the events that occurred after 1846. Europe's 'last subsistence crisis'hit in 1847.…”

“…But as transport costs fell and world prices of grain rose, bene…tting exporters but putting import-competing industries under pressure, the Prussian ruling elite came under pressure to raise protectionism and did so steadily between 1815 and 1846 (Kindleberger 1975). The most dramatic rise in protectionism came in 1847 when harvests failed throughout Europe and grain prices rose sharply.…”

Reciprocated Unilateralism in Trade Policy: An Interest-Group Approach

“…Having pointed to a particular channel which we believe to be theoretically interesting and empirically plausible, we leave its empirical validity in particular historical contexts as a topic for future research. See Coates and Ludema (1997) and Kindleberger (1975Kindleberger ( , 1977 for excellent discussions of the explanations provided by economic historians on this issue. 10 We should note here that the relevance of interest groups in trade policy determination in developing countries, as assumed in the theoretical framework we use in this paper, has been established in a number of recent empirical papers, including deMelo, Grether and Olarreaga (2001) and Mitra, Thomakos and Ulubasoglu (2002).…”