How free trade made Europe great (Part 3)

Continued from Part 2.


Sir Robert Peel and the End to the Corn Laws

In 1841, Sir Robert Peel (1788-1850) became prime minister for the Tory Party, 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 defence 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.  But 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, a leading Irish member of Parliament, 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 Sir Robert Peel to resign from the position of prime minister 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 Sir Robert Peel 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.”

The cultivation and spreading of the ideas of economic liberty and free trade over many years meant that when a crisis came in the form of the torrential rains and the ruining of the British crops, the intellectual and policy environment had been sufficiently prepared to persuade even many in the ruling protectionist Tory party that only freedom of trade and unhindered commerce could both alleviate the hardships of the poor and starving, and show the way to rising prosperity for all after the crisis had passed. It highlights that it is often the particular and unique convergence of ideas and circumstances that bring about significant change – for both good and bad.

Within three years — by 1849 — not only were the Corn Laws gone, but also were the remaining Navigation Acts carried over from the eighteenth 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.

The Free Movement of Men, Money, and Goods

Great Britain became the first country in the world to institute a unilateral policy of free trade. For the rest of the nineteenth century — indeed, until the dark forces of collectivism enveloped Europe during World War I — the British Empire was open to the entire 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.

British free trade policy helped to usher in the age of nineteenth-century free trade, and fostered what has been called the classical liberal era of “the three freedoms” which only came to an end with the First World War in 1914. The German free market economist Gustav Stolper explained these three freedoms in his book, This Age of Fable (1942), written while in exile in America during the Second World War:

“They were: freedom of movement for men, for goods and for money. Everyone could leave his country when he wanted and travel or migrate wherever he pleased without a passport. The only European country that demanded passports (not even visas!) was Russia, looked at askance for her backwardness with an almost contemptuous smile. Who wanted to travel to Russia anyway? …

There were still customs barriers on the European continent, it is true. But the vast British Empire was free-trade territory open to all in free competition, and several other European countries, such as the Netherlands, Belgium, Scandinavia, came close to free trade.

For a time the Great Powers on the European continent seemed to veer in the same direction. In the sixties of the nineteenth century the conviction was general that international free trade was the future. The subsequent decades did not quite fulfill that promise. In the late seventies reactionary trends set in. But looking back at the methods and the degree of protectionism built up at that time we are seized with nostalgic envy. Whether a bit higher or a bit lower, tariffs never checked the free flow of goods. All they affected was some minor price changes, presumably mirroring some vested interest.

And the most natural of all was the free movement of money. Year in, year out, billions were invested by the great industrial European Powers in foreign countries, European and non-European … These billions were regarded as safe investments with attractive yields, desirable for creditors as well as debtors, with no doubts about the eventual return of both interest and principal.”

The nineteenth-century victory of free trade over Mercantilism and Protectionism represented one of the great triumphs in the history of classical liberalism. It was the achievement of the Scottish Moral Philosophers and those that are now referred to as the “Classical Economists” in demonstrating the spontaneous order and coordination arising from a free, competitive market system – Adam Smith’s “system of natural liberty” and the cooperative gains for all through a system of division of labour.

The momentous importance in human history of this triumph is not always appreciated for what it was: a crucial institutional transformation that heralded the beginning of the material and cultural improvement of mankind through the private and peaceful associations of humanity for the mutual betterment of the mass of mankind. This transformation continues today, even in the face of the reactionary return to paternalistic government and political interference with human life over the last century.


This article was first published by the Foundation for Economic Education (FEE).

1 thought on “How free trade made Europe great (Part 3)”

  1. Posted 06/02/2017 at 22:46 | Permalink

    Brilliant by Ebeling. I liked the quotes from Robert Peel, and the lesson that even protectionists can change their view ( admittedly after hundreds of thousands of deaths ).

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