When, in 1890, Leo von Caprivi succeeded Bismarck as Chancellor and continued the policy of favouring heavy industry, he went one step further by proposing to lower duties on agricultural goods, thus ditching ‘rye’. If one could find cheaper food elsewhere, Caprivi explained in 1891, one should import it and not force German workers to acquire expensive local food just to keep German farmers happy. Germany, he added, needed to export industrial goods: ‘either we export goods or we export people. With our increasing population, if we do not have a similar increase in industry at the same time, we will not be able to continue to exist.’9 The government, he added, had to think of the majority of the population who, as they earned less than 900 marks a year, needed cheap food.10 He could have added that the Socialists had become the largest party with nearly 20 per cent of the vote in the 1890 elections and that they, along with the trade unions, favoured such trade liberalization since it would lower food prices (bread was more expensive in Germany than in free-trading Britain).
Since domestic agriculture could not entirely meet the country’s grain needs, Germany had to establish good relations with grain-exporting countries by lowering tariffs on rye and wheat; other countries (Austria-Hungary, Italy, Switzerland, Belgium, Serbia, Romania) would reciprocate by lowering their tariffs against German industrial goods, much to the joy of German industrialists and German workers, and to the dismay of landowners.
The landowners fought back. They created lobbies and pressure groups such as the Farmers’ League (Bund der Landwirte), most of whose 200,000 members were small farmers rather than large landowners.11 Caprivi also had to face constant attacks from the embittered Bismarck, from liberals who thought he was too conciliatory towards the Catholics, and from Catholics who thought he was not friendly enough. In 1894, Caprivi was forced to resign. His enlightened social policies on child employment and trade union rights, and his progressive tax policies, were not sufficient to save him. Even with Caprivi gone, farming interests were doomed anyway:12 the economic power of the Junker declined along with agriculture’s share of the German economy.13
In spite of the wave of protectionism elsewhere, Great Britain remained committed to free trade. Frank Trentmann has explained how, though the Long Depression encouraged demands for protectionist policies, free trade was still viewed by much of British public opinion as the keystone of democracy, peace, and prosperity and, perhaps above all, cheap food.14 An electoral Liberal poster of 1905 (the Liberals swept back into power the following year) depicted an anxious woman in poverty, with caricatures of capitalists and aristocrats in the background, and the caption: Will You Go Back? Remember!!! The ‘Hungry Forties’. Tariff ‘Reform’ Means Trusts for the Rich, Crusts for the Poor. A Liberal Party election card pointed out that the average wage of a skilled worker in Britain was almost twice that of a German, bread was cheaper, while the Germans worked longer hours.15 But many Conservatives too tried to present their proposed protectionist measures as a move to help the poor. The social reformer Charles Booth, a Conservative sympathizer, wrote in an article in the National Review in January 1904 that free trade was based on cosmopolitan, laissez-faire individualist principles, and he advocated a tariff of 5 per cent, arguing that it did not really amount to a tax on food (British agriculture as a share of GNP had fallen from 20 per cent in 1860 to 7 per cent in 1914).16 Joseph Chamberlain depicted the free-trading Liberals as anti-working class, declaring in October 1903: ‘What is the good … of prohibiting [sweated labour] in this country, if you allow sweated goods to come in from foreign countries?’17
The controversy between free trade and protectionism, unlike present-day debates, was concentrated on food prices since there were relatively few consumer goods. A policy of cheap food united almost all classes, except the farmers, but by then there were not many of those left in England. Free trade, in Britain, and perhaps in Britain alone, was a national policy that did not involve great sacrifices. This was not the case in Russia, where Ivan Vyshnegradsky, the Finance Minister, introduced a strong protectionist system in 1891, unparalleled in Europe, famously saying, when warned of an impending famine while the country was massively exporting grain to pay for industrial goods: ‘we may not eat enough, but we will export’.18 It is safe to assume that Vyshnegradsky went on eating normally (he was one of the richest men in Russia, of the self-made variety).19 Some 400,000 people died in the famine of 1891, mainly due to a catastrophic harvest and the lack of adequate government support.20 It was the most disastrous event to befall Russia in the period between the Crimean War and the First World War. The authorities – Ivan Vyshnegradsky in particular – were blamed because they did not immediately ban the export of cereals. The acquisition of foreign currency, crucial for the country’s industrial growth, was a priority and it seemed that Vyshnegradsky delayed the ban as much as possible, though some claim that he did all he could to remedy the situation.21 Eventually, the government, already behaving as a modern state, felt responsible and carried out a massive relief programme to help some 13 million peasants (10 per cent of the total population).22 The prioritizing of exports exacerbating the famine was similar to Stalin’s reaction to the Russian-Ukrainian famine of 1932 to 1933.23
The weather and Vyshnegradsky were not the only culprits. Russian agriculture was backward, its productivity low, and the railway system (essential for food distribution) inadequate. The famine, tremendous as it was, had relatively little impact on export trade. The reason for this is that the Russian economy in the 1880s was largely outside market relations, in other words not capitalist enough.24 It was thus often possible to have famine in one area and abundance in another, as Amartya Sen famously argued in his Poverty and Famines (1981).25 What had happened in Russia was that, as the price of grain shot up, the poor could not buy grain, so they starved while farmers preferred to sell their grain to foreigners. However, as the liberal Paul Milyoukov explained in lectures given in 1903, Russia could not hope to grow through exports. She had to expand her home market.26 To do this she had to borrow from abroad. The architect of this policy was Count Witte. For him protectionism was a temporary measure, to be abolished when a home industry was developed and when Russia had finally caught up with the West. Every nation, he explained, traverses successive stages of development, the highest of which is the commercial industrial phase, and a policy of protectionism was merely a means to achieve this (a view that had been propounded by Friedrich List in 1841 in The National System of Political Economy; see Chapter 5).27
‘My most notable achievement’, as Witte put it with characteristic modesty, ‘was a commercial treaty with Germany’ limiting the import of some German products (1894): ‘Everybody in Europe was surprised at the performance.’ Then, he went on, he proceeded to borrow vast sums from foreign banks (1899) to develop domestic industry, much to the chagrin of the Emperor Nicholas II, who, for nationalistic reasons, opposed importing foreign capital.28 Borrowing from abroad had already begun, but the percentage of foreign capital in industry increased steadily from 16 per cent in 1881 to 42 per cent in 1900.29 Witte, the servant of the autocracy, was in reality a protectionist liberal who profoundly disliked landowners, whom he regarded as useless. He wanted to develop Russian capitalism, and to do so he had to impose tariffs. If foreign capital could not be obtained by export, he argued, then one had to borrow it.
Protectionism, in Russia and elsewhere, was seldom an ideological hallmark of ‘left’ or ‘right’, ‘progress’ or ‘reaction’, or even a position that always divided industrialists from landlords (as had been the case in Britain). In Spain, for instance, industrialists and landlords joined forces to demand state protection against foreign competition.30 And in Latin America and the United States, as in Romania, it was the liberals, not the conservatives, who were the protectionists.31
In Romania, in the parliamentary debates of 1866 and 1867, when the possible avenues for economic developments were discussed, Ion Brătianu, the Liberal opposition leader and later Prime Minister
(1876– 88), took a stand against lowering tariffs, whereas Nicolae Golescu, the Conservative Prime Minister, in a kind of role reversal from the British prototype, was in favour of free trade, just like a classic Manchester liberal.32 Fuller tariffs were introduced in 1886, granting special advantages to Romanian entrepreneurs at the expense of foreigners (i.e. Greeks, Jews, and Armenians), since in the preceding twenty years there had been an inflow of foreign goods, at first mainly luxuries (silks, fine cloth, clothing, glassware), then cheap goods intended for mass consumption.33 But there were too few Romanian entrepreneurs: the native middle class was overwhelmingly made up of civil servants, lawyers, teachers, and academics, and other rather unproductive groups.34 The liberals even opposed the free flow of foreign capital into the country, which they regarded as a threat to national sovereignty, thus erecting another obstacle to industrial growth.
Among the champions of protectionism in Romania were intellectuals such as Dionisie Pop Marţian and Alexandru Xenopol. Xenopol, an influential nationalist liberal historian, doubted that private enterprise could muster enough resources to industrialize the country.35 Far from being in favour of a smaller state, Xenopol, Marţian, and other nationalist liberals believed that, because the country was a ‘laggard’ state, there was no alternative to industrialization from above with the state protecting domestic industry.36 Further protectionist measures were introduced in 1904 by the Liberals, much to the distress of the Conservatives, because they did not sufficiently protect farm-based industries.37 On the eve of the First World War, Conservatives pointed out, with considerable evidence, that protectionism had failed to industrialize the country and that it had harmed consumers.38 Agriculture still continued to dominate the Romanian economy.
In a sense Romanian Liberals were in a trap. They were nationalists whose proud slogan was prin noi înşine (by ourselves).39 But the protectionist principle of ‘sheltered industrialization’ was part of a wider nationalist package: nation-building, xenophobia, patriotism, anti-cosmopolitanism and anti-Semitism. The ‘liberal’ nationalist Xenopol himself became, in the 1930s, a close ally of Alexandru Cuza, leader of the fascistic Iron Guards.40 The Conservatives were not particularly anti-Semitic, not any more so than the Liberals. And all defended the Orthodox Church against the Catholic Church. So the Romanian Liberals, unlike their counterparts in the West, were not even very secular.
If one worked in an industry that suffered from foreign competition, then it was rational to be in favour of protectionism; if one consumed cheaper imported goods then free trade made sense. And when the terms of trade changed, one’s views would change. ‘When events change, I change my mind’, Keynes is supposed to have said (there is no evidence he ever did). Take French wine-growers: until the 1870s they were free traders; then, in the 1880s, as competition grew, they became protectionists.41 At first, the best-organized wine-growers, those of Burgundy, wanted the state off their backs; then, alarmed at the competition from cheaper Italian, Spanish, and Algerian wines (as well as those from the Languedoc-Roussillon), they asked the state to intervene to regulate the quality of wines. Consequently, the Loi Griffe (14 August 1889) forbade the sale of products called wine not made exclusively with fermented grapes.42 This was part of a process of the ‘nationalization’ of capital whereby capitalists defined their interests as being one with the nation state within which they operated.
Politicians tagged along, knowing only too well that part of their business was to help business. This was particularly true in France, under the Third Republic, where the main party, the Radical Party, was unmistakably pro-business while their opponents on the monarchist right had no economic programme.43 The republicans had been in a minority at the start of the Third Republic (the National Assembly had a monarchist majority). Thirty years later, by 1902, the outright monarchists had virtually disappeared. The majority was, by then, solidly in the hands of the republicans of the Radical Party, which was at the time an essentially inchoate, unstable, and deeply divided coalition of centrists of various hues. They were held together, however, by an abiding identification of the destiny of France with that of French business, large and small. This had been clear for a long time even to the most radical among them, politicians such as Léon Gambetta, who, even before the birth of the Third Republic, had invoked the ‘solidarity which now holds together politics and business and which, from now on, must keep us close for our common salvation’.44
The symbiosis between business and politics was well established in France, where there was a powerful tradition of state interventionism (it is common to refer to Louis XIV and his great dirigiste Minister of Finance, Jean-Baptiste Colbert). This tradition enabled politicians to make an uninhibited appeal to business interests. The career of Jules Ferry, one of the leading Third Republic politicians (and Prime Minister in the 1880s), was emblematic of opportunistic realism (not for nothing was his faction inside the republican group known as les opportunistes). Under Napoleon III, Ferry, then a young opposition politician, was an admirer of English liberalism, believing that the ‘industrial spirit’ could not thrive under the shadow of the state (under the Second Empire the state and business had been very close).45 Then Napoleon III fell (1871) and Ferry was elected to Parliament as a deputy from the Vosges. Once elected he was expected to defend local textile interests from foreign competition (after all, they had bankrolled his campaign). And he did, becoming an enthusiastic protectionist.46
In Victorian England, where politics liked to parade in the clothes of ethical rhetoric, protectionism was never politically fashionable, at least not from 1850 onwards. While free trade seemed the natural way, the right way, and the British would add, the British way, the country had been at least until the first half of the nineteenth century a mercantilist country, a state of affairs that the fathers of economic liberalism, Adam Smith and David Ricardo, had never ceased to deplore. The considerable regulation and protectionist measures established during the period of British industrialization were abolished but only once British supremacy had become entrenched. The most important of such measures were the Navigation Acts of the seventeenth and eighteenth centuries, which established that all trade between England (or Great Britain after 1707) and the colonies should be conducted in English/British ships, operated by English/British sailors sailing between English/British ports. In other words British shipping, backed by massive government funding, had a virtual monopoly of trade, seeing off its main rivals: first the Dutch and then the French. Shipping costs were further reduced by the successful British suppression of piracy in the eighteenth century, since this cut the insurance premium and rendered it unnecessary to operate heavily armed ships.47 Total supremacy, including colonial dominance, was achieved at the end of the Napoleonic Wars when Britain had achieved control, in addition to India, of key colonies in the West Indies.48 Then, when everything was settled, in 1849, the Navigation Acts were repealed, bringing to an end two centuries of legislative protection for British commercial shipping.49 Britain, as the first industrial nation, no longer needed to protect its industries, but it needed others not to protect theirs. The others, to catch up with Britain, needed to follow their own path and develop their own rules. And they did, adopting protectionism when it suited them.
In France the protectionists dressed up their economic arguments in nationalist clothing: it was necessary, they claimed, to defend the Nation, a nation of small producers united against the invasion of foreign products. French protectionists, unlike their British counterparts, were liberals not conservatives.50 Yet by comparing trade figures it emerges that France’s trade was less protectionist than that of Britain (contrary to prevailing assumptions) even in the decades 1840 to 1860.51 It was only as a consequence of the ‘Long Depression’ of 1873 to 1896 and of the rapid growth of imports of wheat and other agricultural produce from the United States that France followed the general European drift towards protectionism.
In 1892, under the influence of Jules Méline, Minister for Agr
iculture from 1883 to 1885 and Prime Minister from 1896 to 1898, the French government imposed duties on agricultural products (the so-called ‘Méline tariffs’) to protect local produce, thus ending the Franco-British Trade agreement of 1860 (the Cobden-Chevalier agreement). This was seen as ‘serious’ turn towards protectionism, even though there had been tariffs for much of the nineteenth century.52 France did not return to the high tariffs of the pre-1860 period.53 Méline’s main preoccupation was to placate both industrialists and landed interests alarmed by the continuing depression, but what he really wanted was for France to remain a country of small farmers and artisans. In a book published in 1905 he went further, looking forward to a return to the land, once workers and capitalists had recognized how unhealthy life in cities was and what a historical mistake the enormous increase in industrial development had been.54 His rather utopian views remained confined to agrarian circles. The vast majority of the French moderates espoused the politique d’affaire unquestioningly, which underscored the power of the political and economic elites, to the detriment of the working classes.55
The problem with France was that, while its powerful and successful banks invested heavily abroad, it did not export much. There were regular complaints from official sources lamenting that French entrepreneurs were too narrow-minded, provincial, and self-satisfied, seldom adapting to the taste of foreigners in the belief that foreigners would always recognize the superiority of French taste (champagne, cognac, perfumes, and jewellery). Yet a modern industrial country could not base its export drive on such specialized luxuries.56 Between 1880 and 1914 French external investments increased fourfold. Those who defended this movement claimed that in France there were insufficient opportunities for investment, but critics said it was the export of capital that starved France of capital.57 Yet an encomium of the ability of banks to enmesh the world into an interconnected whole came from an unexpected source: Jean Jaurès, leader of the Socialist Party. In a famous speech in the Chamber of Deputies (20 December 1911, see Chapter 7) he explained that capital, ‘like great migrating birds’, has the freedom to fly ‘over the barriers of race and custom walls’, thus creating a network of interests so enmeshed that a single link broken in Paris has effects in Hamburg and New York. This, he continued, among cries of approval from the left-wing benches, is the ‘beginning of a capitalist solidarity’ (un commencement de solidarité capitaliste), to be feared when in the hands of base interests, but which, if inspired by the popular will, could guarantee peace.58
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