Until the Wealth of Nations was published, most believed that wealth was fixed. Wealth was measured by how much land, gold or silver that a nation possessed. This understanding of wealth meant that in order for a nation to become more wealthier, they had to invade another nation and steal the land, gold and the silver. Hence, there are many stories through modern history of nations plundering other nations and/or gaining a colony; imagining that it was the only way to secure wealth for a nation. This economic system was called "mercantilism". The British Empire and all colonial empires were built on the idea of "mercantilism".
Mercantilism arose in the 16th Century as Britain and other European nations were becoming colonial powers. Mercantilism was the dominant economic policy of the British Empire. The policy was fundamentally about bolstering the state power of the colonial empire at the expense of their competitors through trade and founding colonies. This meant that the colonial empires were constantly at war with each other in order to gain the upper hand and acquire as much land, gold and silver as possible to secure their survival and the standard of living of the wealthy. As Britain's colonial expansion grew, so did the idea of mercantilism. Mercantilism sought to protect the national economy of Britain by putting up high trade barriers or banning the imports of goods from other empires or nations. It was a form of economic warfare to gain monopolies on trade. Mercantilism policies authorised, that the colonies of the British Empire could not trade with other nations and that the colonies had to buy the finished goods produced in Britain, rather than finished goods from the colonies. The colonies were made to sell all of their surplus agricultural products to chartered British companies at the lowest prices and were taxed heavily. The colonies were essentially dumping grounds for British products and factories for the raw materials needed to create the finished consumer goods that would be sold back to the inhabitants of the colonies and the British Empire.
Mercantilism, is the economic environment that produced the slave trade and colonialism. Chartered companies were created to run the colonies in the name of the British Empire. The companies became a way for the State to bestow favours upon powerful individuals in return for patronage. These companies became increasingly powerful, having their own armies and coats of arms and managed the colonies as if they were a government. A corporate government. They would govern the colonies in the name of the British Empire and share the profits of the colonies with the State through taxation.
The colonies were heavily taxed and difficult to run. Those that ran the chartered companies wanted to create wealth through trade but the heavy taxation and difficulties in finding cheap labour to produce raw materials made it difficult to make as much profit as they wanted. In order for the companies to run they had to seek the cheapest labour they could find in order to make a profit. They were not profitable in the way that productive companies are today and could not afford to pay good wages, so they enlisted slaves or serfs to do the labour. Those few who led the chartered companies got rich, but the companies themselves were not as profitable as they could have been. The chartered companies backed by the state were always at war with other nations that were seeking to trade with the colony, other colonial empires, the indigenous or the slaves of the colony.
It is the trading policies of mercantilism, amongst other things that could be said to have led to the American Revolution and the birth of the United States. America was once one of Britain's colonies. When chartered companies were in financial difficulties and becoming more difficult to maintain, the British government stepped in to bail out one of its chartered companies, the East India Company. It gave the company exclusive access to America's team market at a tax rate lower than the tax rate of local tea produced in the America's. This was fundamentally a way to "dump" the tea grown by the Chartered companies, onto the America's and to monopolise the trade, impoverishing the people of the colony, whose locally produced tea now was struggling to sell in the colony because it had to include a bigger tax rate that made it more expensive. When the chartered company of the British Empire docked to unload the tea on the colony, the American traders responded with anger and threw the empire tea into the sea so that it could not be sold in America and the colony would maintain the dominance in the colonial market.
Adam Smith's big idea was that, the wealth of a nation was not fixed and that nations had the capacity to grow in wealth to an unlimited capacity. He argued that it was not gold, silver or land where wealth came from but from the productivity of the people. The productivity of the people was not simply about production but about trade. Trade created value, trade therefore creates wealth. For Adam Smith the way to acquire wealth was not through looting the gold, silver and land of other nations or creating colonies where empires can "dump" products on the settlers or the indigenous inhabitants. The way to increase wealth was to increase trade. Increasing trade would lead to increased production and this would bring better quality and a wider variety of goods to society on the whole and increase the wealth of nations.
Adam Smith thought that Britain should have kept on friendly terms with America, prior to the revolution, by introducing a system of free trade and free movement. He argued that there were serious issues with mercantilism and that wealth was being extracted from the colonies but no wealth was going back to the colonies from the State. Adam Smith thought that taking control of colonies by monopolising trade through chartered companies such as the East India Company was a recipe for disaster. Mercantilism sought to enrich one nation at the expense of another and bought about a constant environment of tension and warfare between the British Empire, other colonial powers, the colonised and the settlers. Smith argued that the way to peace and prosperity was to have free and open trade between all nations. He did not believe that nations should protect their trade. He did not believe nations should put up trade barriers against goods from other nations or the colonies but believed that nations should limit the barriers to trade in order for global wealth to increase and thus provide a better standard of living for the world's citizens.
Smith was against protecting national industries or national production, where there were other nations that were able to produce the goods with better quality, at a cheaper rate because of specialisation in a particular area or some other productive advantage. Adam Smith was not interested in economic nationalism like the sought that we hear today in immigration debates and Labour politics. Smith did not seek to protect British industry but to allow British industries to be replaced by the industry of other nations if they were able to produce better quality or more quantity at a cheaper rate. Smith was fundamentally defending not those who controlled the means of production but the consumer, the people and the consumers rights to have good quality, reasonably priced consumer goods from anywhere in the world.
Today, the principles of free-trade have been adopted in part by Western and non Western nations but only in part. Although, it is the common belief that we live in a free-market economy, it is not the truth. The world is still run for the most part on the economics of mercantilism and not free-trade. There are still forms of economic nationalism at work in the world today. There is an organised movement that fights to keep industries in the nation alive, even if the industry has to be heavily subsidised by the state to compete. There are demands for "British jobs for British workers" and the narrative is generally that jobs in the Western world have gone abroad.
The EU and the US put up protective barriers through tariffs to discourage business from importing produce and goods from other nations where it may be produced more cheaply and at better quality. The farmers in the EU and the US are heavily subsidised and given unfair advantages over the developing nations in order to keep the developing nations less competitive. This comes at the expense of the tax-payer and the consumer who contributes to both the subsidising of national business and the purchasing of overpriced goods. The common populist story is that free-trade damages developed nations but the non-populist reality is that free-trade increases peace and prosperity in the world. Although free-trade agreements are considered by many on the left to be the epitome of evil and the cause of all the ills of the world, it is not free-trade that is causing the issues of the poor or those in developing nations but the fact that the alleged free-trade deals that exist are not absolutely free but are buffered by economic nationalism or mercantilism that creates beggar my neighbour and colonial policies, that further the trade of developed nations by subsidising the producers of developed nations to create produce and goods in order to export into developing economies, in order to gain domination of their markets and impoverish the citizens. In turn developed nations raise trade barriers through tariffs that make it more difficult for developing nations to export to the developed nation. Instead of sharing knowledge many of the alleged free-trade agreements are not free-trade and restrict the production of say cheaper pharmaceutical drugs in developed countries.
It is not free-trade but the lack of free-trade that is the problem. The idea of opening markets in part to global trade has seen the growth of the global economy and the human population like never before. A fully fledged free-trade zone in the Commonwealth could bring more prosperity to us and our friends. Many of my fellow black academics are inspired by Marx. I believe that a well-read Marxist should know that the ideal that they champion also depends on the expansion of free-trade across the globe.
The Commonwealth Free Trade Zone seeks to bring the former colonies of the British Empire, that are now free participants in the Commonwealth into a new union of free-trade that will bring peace and prosperity to all. The Commonwealth Free Trade Zone is inspired by the noble ideals of a British icon, Adam Smith. It is both a patriotic, internationalist and humanistic vision of society. Led by British ideals of the free-market and rooted in relationships that form a big part of British history and the history of the nations that share our Head of State Queen Elizabeth II.
The Commonwealth Free Trade Zone rejects the immature nationalism of many that voted brexit and seeks to engender a more mature patriotism, a patriotism of ideas. The Commonwealth Free Trade Zone is deeply connected to the ideals of Queen Elizabeth II, the quintessential symbol of "Britishness" and Adam Smith, one of Britain's greatest intellectual icons. It is to seeking to connect the Commonwealth Realms that share our Head of State and our friends across the wider Commonwealth in a partnership of prosperity in the spirit of HRH with Smith's economic ideals. It is seeking to build on relationships with people across the world, that were considered British citizens until 1962 and to be our kith and kin by many up until Britain's entrance into the European Economic Community (EEC) in 1973.
Unlike those that spout the philosophy of Hayek and Marx, both who are not British. And unlike those that are secretly French revolutionaries and want to discredit the Monarchy, the Commonwealth Free Trade Zone is thoroughly British in its philosophical roots and heritage but also thoroughly internationalist and humanitarian in its goals. The Commonwealth Free Trade Zone is the best of what Britain can be. Now is the time for a new patriotism, a patriotism of ideas.
God Save the Queen! God Save Britannia! God Save the Commonwealth!
No comments:
Post a Comment