2013년 5월 28일 화요일

[발췌] Free Trade Nation: Commerce, Consumption, and Civil Society in Modern Britain

출처: Frank Trentmann, Free Trade Nation: Commerce, Consumption and Civil Society in Modern Britain (Oxford University Press, 2008)자료: 구글도서

※ 발췌(excerpts):

Chapter 7. Final Days
p. 331

When it was done, it was done quickly. On 17 November 1931, Walter Runciman, the Liberal at the helm of the Board of Trade in the new national coalition government, introduced measures to stop the flood of 'abnormal' imports of various manufactures, from cutlery and woollens to tyres, electric lamps, and cotton goods. A month later came stiff duties on fresh fruit, vegetables, and flowers. In February 1932, a general tariff wad added. The tariff started at 10%, but an Import Duties Advisory Committee had the power to raise duties further, and it soon did.[1] In a predictably emotional scene, Neville Chamberlain, the Conservative Chancellor of the Exchequer, told the House of Commons that his fathers work at last was done.[2] Preferential trade agreements with the Dominions, negotiated at Ottawa in the summer of 1932, put the final nail in the coffin of Free Trade. Free Trade for over four generations a defining feature of British policy, was ended.

  How should we interpret the end of Free Trade? Most accounts, now and then, have focused on high political drama, ministerial manoeuvres, and the world depression. For the few surviving Free Traders their defeat was a conspiracy, a betrayal, and a constitutional revolution. A cabal of power-hungry politicians had used a national election to demand an unfettered  'doctor's mandate' to cure the crisis any way they saw fit. Never fairly put to the test of public opinion or economic reason, Free Trade was left defenceless in the face of a Conservative-dominated government and Liberal traitors. For F.W. Hirst, who headed the Free Trade Defence Committee for the shrinking band of Liberals outside parliament, Runiciman was Judas. Instead of defending sound liberal principles, Runciman had engineered a 'Tariff of Abominations, the worst since Waterloo'. The national government, in this view, was a Conservative plot to smuggle in a general tariff behind the back of the people. ( ... ... )

p. 332

( ... ) The world depression hit a British economy that was already under the dark cloud of high unemployment. Britain now had to cope with the collapse of global trade and finance, in addition to her declining industries. In the year after the Wall Street crash in October  1929, unemployment rose from 1.5 to a staggering 2.5 million, over 20% of insured workers.
p. 333

Britain's exports fell by almost half between 1929 and 1931.[5] In the first quarter of 1929, half the British shipbuilders did not have a single order.[6] This fall was not matched by a corresponding fall in imports. In fact, Britain sucked in 23% more food in this period; the collapse of global food prices destroyed what was left of British agriculture. Earnings from foreign investments, too, were down. Britain was heading towards a balance of payment crisis. The collapse of the central European banking system added to the strain. Already by the summer of 1931, the Bank of England was haemorrhaging $2 million of gold a day.
  • By comparison with the rest of Europe, Britain's finances were still relatively strong and, technically, it might have been possible to hang on. 
  • But, politically, the experience of ten years of high unemployment ruled out the harsh deflationary measures that might have defended the gold standard. On 21 September Britain moved off gold.
  With the pound no longer tied to the dollar, the case for a tariff acquired an additional argument. Runciman was opposed to the genuine industrial tariff favoured by many Conservatives, but he supposed a 10% tariff to stop the flight of capital and restore the balance of trade; in fact it was Runciman who pitched this idea to Neville Chamberlain and effectively sealed the fate of Free Trade.[7] Recovery needed confidence. A trade deficit undermined it. In a world depression it is easier to improve the balance of trade by lowering imports than by stimulating exports. The cabinet committee on the balance of trade agreed with Chamberlain that they could not wait for trade to adjust itself automatically unless they were prepared to accept any sterling value, and a steady worsening of Britain's capital position.[8] A tariff now appealed as part of a confidence package, strengthening the balance of trade, sterling, and the economy as a whole.

  Yet Free Trade's problems were not simply a function of the slump. It had easily weathered the great depression (1873-96), [or ;] and successfully seen off the imperial tariff reform crusade in the Edwardian period. What was different in 1931 from 1910, 1906, or the 1880s was not only the size of the attack but the absence of a public defence. Free Trade was disappearing as a central feature of political language, belief, and behaviour. The year 1931 was not just a change in policy but a change in political culture. The decline of Free Trade as a secular religion was well under way when the depression hit Britain, and recovery, after 1932, did not bring it back.

( ... p. 334 not available ... )
p. 337 begins:

(... ...) In Liberal circles, individualists and progressives alike warmed to the idea of a revenue tariff. At a meeting organized by the National Campaign for Economy in March 1931, at the Free Trade Hall in Manchester of all places, John Simon urged all Liberals to put aside ‘inherited free-trade traditions’ and ‘to ponder on the fiscal methods’ necessary to tackle the budget deficit.[20] The Rubicon had been crossed. From here it was a small step to Simon's formation of a separate National Liberal group and their absorption into the national government.

  The contractionist road was not the only one that brought Liberals to a tariff. Others, with Keynes in the lead, took a more social democratic, expansionist route.
  • Theoretically, an expansionist policy of public works and public credit might increase purchasing power, boost the economy, and generate jobs. This was the cumulative effect that Keynes and his fellow economist Hubert Henderson had aimed for in their plans to cure unemployment in 1929. 
  • In a world slump, however, confronted with a growing deficit, rising unemployment, and lack of confidence all round, such a programme stood little political chance, as Keynes came to appreciate in the course of 1930. 
Free Traders typically denounced a tariff as an attack on real wages. It drove up prices. The world depression turned this problem upside down. The problem was not that prices were too high but that they are too low. A tariff was a good way to raise them. It was 'both a more expedient and a more just way' of lowering real wages than by reducing nominal wages. 'In so far as it raised the spirits of business men it would increase the readiness to invest in Great Britain... and thus raise the equilibrium terms of trade.' To simply stand by and do nothing threatened a 'social catastrophe'.[21]
  Without a tariff, the downward spiral would be unstoppable, Keynes elaborated to the Economic Advisory Council in the autumn of 1930.
  • Advancing poverty would diminish saving. 
  • Wages would decline.  
  • Britain would have to do with fewer imports and be forced to be more self-sufficient: ‘a point may come... if we stick to laissez-faire long enough, when we shall grow our own vines.’ The country would end up being richer with a tariff than without. It would save capital goods and foreign investments from destruction.
  Keynes had hit on a crucial weakness in the Free Trade position. [:]
  • In normal conditions, the free flow of goods might lead to the most efficient use of a nation's resources. ‘The trouble today is that we are violently out of equilibrium, and we cannot wait long enough for laissez-faire remedies to bring their reward.’ Jobs and savings would be sacrificed while the economy again found its equilibrium. 
  • In any case, as Keynes highlighted again and again, it was unclear how Free Trade would work its magic of adjustment, since, in reality, wages and workers were not as mobile as the theory presumed. 
  • Free Trade ‘assumes that if you throw men out of work in one direction you re-employ them in another. As soon as that link in the chain is broken the whole of the free trade argument breaks down.’[22]
  Free Trade's problems, however, were not limited to temporary adjustment in an emergency. Keynes also pointed to a fundamental historical shift.[:]
  • The classic Free Trade case was that, by letting goods and services flow freely, it encouraged each country to specialize in what it did best. In the 19th century, Keynes agreed, this view ‘in favour of specialization as against stability may have been right, at any rate for Great Britain’. As more and more countries had industrialized, the gains from specialization had diminished. ‘Any manufacturing country is probably just about as well fitted as any other to manufacture the great majority of articles.’ 
  • Keynes was no longer worried that a tariff would lead Britain to produce the 'wrong things': ‘I do not think that there are any wrong things, or at any rate not many.’ Stability was becoming more important, and ‘the price we should have to pay for it as a result of diminished specialisation a far smaller price.’[23] The 1920s had seen a range of arguments in favour of stability and coordination against cheapness and fluctuations. Here was another that went to the heart of Free Trade's general case about the benefits of international exchange.
  At first these were arguments tested only in government committees, in an atmosphere of growing distrust between Keynes and Lionel Robbins, a fundamentalist Free Trader. In March 1931 Keynes went public. In an explosive piece, and to the delight of protectionists, he tied his colours to a general tariff. Britain, Keynes emphasized, faced an international crisis, no longer just a domestic one. Capital was edgy. ‘It would not be wise to frighten the penguins and arouse these frigid creatures to flap away from our shores with their golden eggs inside them.’ Keynes proposed all-round tariff of 15% on manufactured goods and 5% on all foodstuffs and certain raw materials, low enough not to be genuinely protectionist and discriminatory, but widespread enough to boost revenue and confidence. He somewhat optimistically imagined at first £50, even £75 million revenue, later scaling down to a more modest £40 million.

  Such a tariff would [:]
  • relieve the pressure on the budget 
  • and restore the confidence necessary for Britain to lead the world out of the slump. 
  • It would also increase employment: Britain would make goods previously imported. 
  • Britain was not turning her back on the world, however. Rather, under the ‘cover of the breathing space and the margin of financial strength’, Britain would march ‘to the assault against the spirit of contractionism and fear’. 
By reducing the pressure on the balance of trade, Keynes argued, tariffs would allow Britain both to pay for the additional imports which expansion would suck in and to finance loans to foreign debtor countries. In Keynes's hands, a tariff and a policy of expansion became a possible progressive combination. He even gave it internationalist credentials. Only 'fanatical free traders' were unable to see these benefits. Britain had reached a crossroads. Come with me on a progressive tariff road to international recovery, Keynes was saying to fellow liberals: the only other path was full-blown economic nationalism.[24] (... ...)

  The attention which the press accorded Keynes's volte-face reflected the changing balance between professional knowledge and popular knowledge in the debate about tariffs. In the Edwardian period, many economists had chipped in both sides of the fiscal controversy, but the campaigns were carried by popular ideas(and prejudices), not academic arguments. With the popular culture of Free Trade fading away, what economists thought and said became relatively more important. A group of Free Trade economists, around Beveridge and Robbins, took up Keynes's challenge and subjected the case for a tariff to detailed cross-examination in August 1931. Tariffs: the Case Examined restated many classic objections. A tariff either kept out goods or it brought in revenue: it could not do both. It was a wasteful and not very flexible or predictable way of raising revenue.[25] Pure logic, however, could not make up for public apathy. The book was a failure; the publisher insisted on a hefty subsidy of £275 to cover its losses.[26]

  Whatever the respective merits of these rival argument, there was little doubts which side created the bigger splash. Since the days of Adam Smith, David Ricardo, and John Stuart Mill, Free Trade had been able to rely on the authority of liberal economists. Free trade had the brains. It was the Conservatives who were ridiculed as the 'stupid party'. Now, the leading economist of his generation had come out in favour of a tariff. The cartoonist David Low captured the significance of the moment with characteristic brilliance. Low showed Keynes and E.D. Simon, who had previously floated a revenue tariff at the Liberal Summer School, hard at work in 'Spring renovations' outside the National Liberal Club, chipping away at the statute of Cobden the Clown (see Figure 17).[27]

( ... ... )

* * *

CF. A related comment which quotes J. M. Keynes (source: FT blog) :

Looking through some old stuff I found this from Keynes, on the return to the Gold Standard in 1925 [this is not true. The following comment by Keynes was done in September 1930 ]:
“I suspect, therefore, that the correct answer along austere lines is as follows: A reduction in money wages by 10 percent will ease unemployment in five years time, but in the meanwhile you must grin and bear it
But if you can’t grin and bear it, and are prepared to have some abandonment of laissez-faire by tariffs, import prohibitions, subsidies, government investment, and deterrents to foreign lending, you can get straight sooner. You will also be richer in the sense of owning more capital goods and foreign investments five years hence. You may, moreover, have avoided a social catastrophe. But you may also have got into bad habits and ten years off you may be a trifle worse off than if you had been able to grin and bear it.
The worst of all, however, will be an attempt to grin and bear it that fails to last through. The risk of this is perhaps the best argument against the ’grin and bear it’ policy…”

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