Jan 23, 2020
How the Repeal of the Corn Laws Toppled Mercantilism
Despite its incredible potential to boost peace and prosperity, free trade has always had to fight an uphill battle against the seeds of trade protectionism planted by mercantilism in the 17th and 18th centuries.
Since the dawn of civilization, trade has been an essential part of human coexistence. Trade, as the most basic type of exchange, rests on the virtue of self-interest and is inherently a win-win game. It celebrates peace and seeks to build bridges where politics of aggression try to erect walls. Sustainable international cooperation is essential to creating lasting and truly global prosperity. As markets have become more integrated, developing countries have been able to expand their participation in international trade which unleashed their economic growth.
And yet, despite its incredible potential to boost peace and prosperity, free trade has always had to fight an uphill battle against the seeds of trade protectionism planted by mercantilism in the 17th and 18th centuries.
The Corn Laws were initially established as a small duty on the imports of grains at the end of the 17th century in Britain. The laws were originally enacted to support domestic agriculture in an attempt to make it as independent of foreign assistance as possible. In 1815, the Corn Law of 1660 underwent a dramatic change and made it illegal to import wheat when prices were below 82s. 6d. per quarter. The protective nature of the Corn Laws signalled an unfortunate shift towards mercantilism.
British mercantilism didn’t take reins overnight. It is usually tempting to narrow down the scope of complex societal and political phenomenons such as mercantilism to a single factor such governments’ fallacious beliefs about trade, or special interests, or the attitude of society overall. Mercantilism was and remains more than that: it requires us to look at its various components through the prism of their interaction not separately.
Mercantilism’s origins in Britain can be traced back to the Navigation Acts of 1651, which greatly affected the way trade was perceived by the population. The dominant attitude was articulated by Thomas Mun, who in England’s Treasure by Foreign Trade, proclaimed that “the ordinary means to increase our wealth and treasure is by Foreign Trade, wherein we must ever observe this rule; to sell more to strangers yearly than we consume of theirs in value.” In line with the mercantilist tradition, Mun saw trade as a zero-sum game in which imports enrich the exporter at the expense of the importing country. Fewer imports, more exports is the key message of mercantilism.
Mun’s beliefs that rested on the ideas of national capital along with the fashionable terms of the time such as ‘national trade’ and the ‘national trader’ were popularised by pamphleteers writings.
Writing on the mercantile system of 18th century England, Adam Smith famously pointed out that linen yarn could be imported into England duty-free, whereas heavy import duties were levied on finished woven linen. The reason for that, according to Smith, was that the linen yarn group had better access to the government and thus was able to promote its interests more successfully.
By the time of the Corn Laws of 1815, mercantilism had become entrenched in British political and societal life, with special interests exerting their influence on policymakers and the population tolerating it as the only accepted philosophy. In 1846, however, the situation had changed dramatically with the Corn Laws being abolished in favour of free trade.
In Political Economy and Peel’s Repeal of the Corn Laws, Douglas Irwin suggests that there were two possible reasons why Britain shifted to free trade in 1846: ideological change in Peel’s views and the impact of pressure groups.
Robert Peel, who was British Prime Minister between 1834–35 and 1841–46 inherited the Corn Laws from his predecessors and for a time supported them as necessary measures. Initially opposed to the abolition of protection in agriculture, Peel eventually converted to free trade. In one of the speeches he would proclaim, “if I could be induced to believe that an alteration in the Corn-laws would be an effectual remedy for those distresses [of the poor], I would be the first to step forward, and… I would earnestly advise a relaxation, an alteration, - nay, if necessary, a repeal of the corn laws.”
The source of his influences was the prevailing consumer nationalism of the day and imperialist rhetoric in favour of self-reliance. Mercantilism became something like the most popular pop song of the day: it spread like an infection, and many people adopted it by default without questioning the concept. Peel was no different. He fell under the spell of protectionism at an early period in his public life without reflecting much on “the opinions generally prevalent at the time among men of all parties, as to the justice and necessity of protection to domestic agriculture.”
Another reason for Peel’s support of mercantilism were his close ties with the agricultural class which he had been sustaining during the 1820s. Aware of the controversy underlying such a connection, Peel asserted, “if you ask me whether I bind myself on the maintenance of the existing [corn] law in all its details and whether that is the condition on which the landed interest give me their support, I say that, on that condition, I cannot accept their support.”
At a time when mercantilism was topping the charts, free trade was seen as nothing but a theoretical concept. The lack of tangible evidence in favour of free trade principles made Peel very sceptical of the repeal at first. But he was clearly open to experiments. One of such was the reduction of corn duties by more than one half under the Corn Law bill of 1842, and Peel was convinced no further concessions to free traders would occur while still leaving room for change, “I will maintain the law till my opinion undergoes a change.”
When in the summer of 1845, Charles Pelham Villiers raised a motion against the Corn Laws, Peel voted it down. This was probably one of the few turning points in his ideological tacks on trade. In response to the motion, he stressed, “I must say, that I think experience has shown that a high price of corn is not necessarily accompanied by a high rate of wages.” While still rejecting the idea that landowners were the only beneficiaries of high prices, Peel recognised that cutting tariffs on products such as coffee and tea increased the consumption. As Peel was witnessing the proof of his reforms, a dramatic shift took place.
“During that interval [between the passing of the Corn Bill in 1842 and the close of the Session of 1845] the opinions I had previously entertained on the subject of protection to agriculture had undergone a great change,” wrote Peel in his memoirs. Additionally, in 1841, Peel discovered that the prices of agricultural products across the continent that could be imported were not low enough to substantially hurt domestic farmers.
Peel was not the only person toying with the idea of free trade and the repeal. A lobby group, the Anti-Corn Law League, also known as Free-Trade League led by Richard Cobden and John Bright, was essential to the abolition of the Laws.
The League was not part of any political party and acted independently. Dissociating ourselves from all political parties,” said the resolution, “We hereby declare that we will use every exertion to obtain the return of those members to Parliament alone who will support a repeal of the Corn Laws.”
It was also privately funded. Every manufacturer in the country employing over five hundred had contributed to the coffers of the Anti-Corn Law League. In order to create a public opinion that would become the leading voice in Parliament, various tools at all levels of society were deployed.
Along with sustaining and expanding its access to policymakers, the League hired lecturers and hosted public meetings to educate the public. Extensive production and dissemination of pamphlets and brochures was undertaken to shape the public opinion.
The success of the League would not have been possible without Richard Cobden, who became a passionate voice for free trade. Cobden was a cotton manufacturer and a member of British Parliament between 1804–1865. He is best remembered as a passionate advocate for the adoption of “the general principles of non-intervention and arbitration in foreign policy, publicity in all the transactions of diplomacy, and the renunciation of all ideas of national preponderance and supremacy.” As a follower of Frederic Bastiat, Cobden saw a strong link between free trade and peace.
Cobden was also a contributor to Tait’s Edinburgh Magazine and established a paper called the Manchester Examiner to advance his free trade ideas. A newspaper, the Anti-Corn Law was edited and circulated on a weekly basis.
Everyone involved in the Repeal of the Corn Laws was driven more by their personal interest than public interest. This, however, in no way undermines the value of their actions to the society overall. As a premier lobbying group of the time, the League popularised free trade by educating policymakers and masses about its benefits.
Though Cobden played a significant role in bringing about the repeal, his name and his contribution was suppressed in order not to create a perception that Peel surrendered to special interests which would, of course, have affected his political integrity.
Speaking of intellectual influences of the time, Peel was referring to David Ricardo (1172–1820) and Adam Smith in many of his speeches about trade. David Ricardo, known for his labour, or one-factor theory of trade, was not only an economist but also a businessman. He started his career as a speculator and broker which allowed him to accumulate wealth. Later in life, he went on to become an economist. Ricardo was not a radical free trader. He suggested phasing out tariffs over some time (3–4 years) to ensure that potential damage to farmers, or other groups protected by protectionist regimes, is minimised and that they are able to adjust. His fame and free trade advocacy spread across England and in the 1820s he was asked by Lord Castlereagh to teach the agriculturalists some economics.
Developing a comprehensive framework for free trade and educating the population about it was a significant contribution in itself. Committed to entrenching his findings in British political tradition, between 1819–1823, Ricardo served as a Member of Parliament for Portarlington. The Globe and Traveller newspaper described his behaviour in Parliament as follows: “Mr Ricardo was generally regarded as a moderate oppositionist. He was, however, the most decided and thorough Reformer within the walls of Parliament.”
David Ricardo and his multi-sided impact show that ideas matter and fighting for them even more so. As a political economist, as a capitalist, and as a member of the Parliament, Ricardo had been living his free-trade convictions to the utmost.
The repeal of the Corn Laws was brought about by many factors, among which were the shifts in Peel’s views, the lobbying efforts of the Anti-Corn Law League, the promotion of Ricardo and Smith’s ideas, and of the interests of MPs, which comprised not only their self-interests, but also the economic activity of their constituencies, the party agenda, and the threat of rebellion.
Mercantilism is poisonous because it shatters the roots of what we ought to value the most: freedom, peace, and prosperity. The repeal of the Corn Laws shows that the entrenched interests that lie at the heart of mercantilist systems are complex, not easy to identify, and above all, are often intertwined with each other. Defining mercantilism only through its economic inefficiency is to turn a blind eye to the components through which it has been sustained for centuries now. Now that global prosperity has hit its highest level ever, there is a momentous opportunity to amplify that growth over the next couple of years if we embrace free trade.
The generation of Peel and Ricardo didn’t have the privilege of going to supermarkets to get lost in a variety of choices or to buy a mobile phone assembled in one country and manufactured in another. The world has become smaller thanks to free trade, and we can do more. We can increase the number of trade agreements, integrate more developing countries and replace the existing anti-foreign bias with a tolerant, cooperative attitude. If we want more freedom, peace, more prosperity, we should ensure mercantilism becomes nothing more but a tale from history books. For that, the repeal of the Corn Laws will come in handy. A significant and timely example of how a passion for free trade combined with a coordinated effort can take the reins, the repeal shows that protectionism in all its forms can and should be defeated.