century, till Pitt’s financial reforms[1] were brought into operation,
the English customs duties on wine and brandy were excessive;
and those who carried on a remunerative business by evading
these duties were known as Fair Traders or Free Traders.[2]
Since 1846 the term free trade has been popularly used; in
England, to designate the policy of Cobden (q.v.) and others who
advocated the abolition of the tax on imported corn (see Corn Laws); this is the only one of the specialized senses of the term
which is at all likely to be confused with the economic doctrine.
The Anti-Corn Law movement was, as a matter of fact, a special
application of the economic principle; but serious mistakes have
arisen from the blunder of confusing the part with the whole,
and treating the remission of one particular duty as if it were the
essential element of a policy in which it was only an incident.
W. E. Gladstone, in discussing the effect of improvements in
locomotion on British trade, showed what a large proportion of
the stimulus to commerce during the 19th century was to be
credited to what he called the “liberalizing legislation” of the
free-trade movement in the wide sense in which he used the term.
“I rank the introduction of cheap postage for letters, documents,
patterns and printed matter, and the abolition of all taxes
on printed matter, in the category of Free Trade Legislation.
Not only thought in general, but every communication, and every
publication, relating to matters of business, was thus set free.
These great measures, then, may well take their place beside the
abolition of prohibitions and protective duties, the simplifying
of revenue laws, and the repeal of the Navigation Act, as forming
together the great code of industrial emancipation. Under this
code, our race, restored to freedom in mind and hand, and braced
by the powerful stimulus of open competition with the world, has
upon the whole surpassed itself and every other, and has won for
itself a commercial primacy more evident, more comprehensive,
and more solid than it had at any previous time possessed.”[3]
In this large sense free trade may be almost interpreted as the
combination of the doctrines of the division of labour and of
laissez-faire in regard to the world as a whole. The division of
labour between different countries of the world—so that each
concentrates its energies in supplying that for the production
of which it is best fitted—appears to offer the greatest possibility
of production; but this result cannot be secured unless
trade and industry are treated as the primary elements in the
welfare of each community, and political considerations are not
allowed to hamper them.
Stated in its simplest form, the principle which underlies the doctrine of free trade is almost a truism; it is directly deducible from the very notion of exchange (q.v.). Adam Smith and his successors have demonstrated that in every case of voluntary exchange each party gains something that is of greater value-in-use to him than that with which he parts, and that consequently in every exchange, either between individuals or between nations, both parties are the gainers. Hence it necessarily follows that, since both parties gain through exchanging, the more facilities there are for exchange the greater will be the advantage to every individual all round.[4] There is no difficulty in translating this principle into the terms of actual life, and stating the conditions in which it holds good absolutely. If, at any given moment, the mass of goods in the world were distributed among the consumers with the minimum of restriction on interchange, each competitor would obtain the largest possible share of the things he procures in the world’s market. But the argument is less conclusive when the element of time is taken into account; what is true of each moment separately is not necessarily true of any period in which the conditions of production, or the requirements of communities, may possibly change. Each individual is likely to act with reference to his own future, but it may often be wise for the statesman to look far ahead, beyond the existing generation.[5] Owing to the neglect of this element of time, and the allowance which must be made for it, the reasoning as to the advantages of free trade, which is perfectly sound in regard to the distribution of goods already in existence, may become sophistical,[6] if it is put forward as affording a complete demonstration of the benefits of free trade as a regular policy. After all, human society is very complex, and any attempt to deal with its problems off-hand by appealing to a simple principle raises the suspicion that some important factor may have been left out of account. When there is such mistaken simplification, the reasoning may seem to have complete certainty, and yet it fails to produce conviction, because it does not profess to deal with the problem in all its aspects. When we concentrate attention on the phenomena of exchange, we are viewing society as a mechanism in which each acts under known laws and is impelled by one particular force—that of self-interest; now, society is, no doubt, in this sense a mechanism, but it is also an organism,[7] and it is only for very short periods, and in a very limited way, that we can venture to neglect its organic character without running the risk of falling into serious mistakes.
The doctrine of free trade maintains that in order to secure the greatest possible mass of goods in the world as a whole, and the greatest possibility of immediate comfort for the consumer, it is expedient that there should be no restriction on the exchange of goods and services either between individuals or communities. The controversies in regard to this doctrine have not turned on its certainty as a hypothetical principle, but on the legitimacy of the arguments based upon it. It certainly supplies a principle in the light of which all proposed trade regulations should be criticized. It gives us a basis for examining and estimating the expense at which any particular piece of trade restriction is carried out; but thus used, the principle does not necessarily condemn the expenditure; the game may be worth the candle or it may not, but at least it is well that we should know how fast the candle is being burnt. It was in this critical spirit that Adam Smith examined the various restrictions and encouragements to trade which were in vogue in his day; he proved of each in turn that it was expensive, but he showed that he was conscious that the final decision could not be taken from this standpoint, since he recognized in regard to the Navigation Acts that “defence is more than opulence.”[8] In more recent times, the same sort of attitude was taken by Henry Sidgwick,[9] who criticizes various protective expedients in turn, in the light of free trade, but does not treat it as conveying an authoritative decision on their merits.
But other exponents of the doctrine have not been content to employ it in this fashion. They urge it in a more positive manner, and insist that free trade pure and simple is the foundation on which the economic life of the community ought to be based. By men who advocate it in this way, free trade is set forward as an ideal which it is a duty to realize, and those who hold aloof from it or oppose it have been held up to scorn as if they were almost guilty of a crime.[10] The development of the material resources of the world is undoubtedly an important element in the welfare of mankind; it is an aim which is common to the whole race, and may be looked upon as contributing to the greatest happiness of the greatest number. Competition in the open market seems to secure that each consumer shall obtain the best possible terms; and again, since all men are consumers whether they produce or not, or whatever they produce, the greatest measure of comforts for each seems likely to be attainable on these lines. For those who are frankly cosmopolitan, and who regard material prosperity as at all events the prime object at which public policy should aim, the free-trade doctrine is readily
- ↑ (1787), 27 Geo. III. c. 13.
- ↑ Sir Walter Scott, Guy Mannering, chapter v.
- ↑ Gladstone, “Free Trade, Railways and Commerce,” in Nineteenth Century (Feb. 1880), vol. vii. p. 370.
- ↑ Parker states a similar argument in the form in which it suited the special problem of his day. “If merchandise be good for the commonweal, then the more common it is made, the more open it is laid, the more good it will convey to us.” Op. cit. 20.
- ↑ Schmoller, Grundriss der allgemeinen Volkswirtschaftslehre (1904), ii. 607.
- ↑ Byles, Sophisms of Free Trade; L. S. Amery, Fundamental Fallacies of Free Trade, 13.
- ↑ W. Cunningham, Rise and Decline of the Free Trade Movement, pp. 5-11.
- ↑ Wealth of Nations, book iv. chap. ii.
- ↑ Principles of Political Economy, 485.
- ↑ J. Morley, Life of Cobden, i. 230.
