THE FAILURE OF THE CLASSICAL THEORY OF COMMERCIAL POLICY

Let us try to sort out in appropriate groups the various influences which have been responsible for these developments.

If we are to preserve a proper sense of proportion, I have no doubt whatever that right at the top of the list we must put the direct impact and influence of war. This is a matter which is so obvious that we are very apt to forget it. Yet whatever may be the importance of the political and ideological tendencies which I shall shortly proceed to discuss, we get the perspective wrong if we regard them as more important than the brute disruptive effects of the military convulsions of our age. It was these convulsions which, by bursting the cake of custom and compelling the supersession of the normal institutions of peace, created the states of mind in which restrictive and disintegrating policies seemed legitimate. It may be said that if adequate measures had been taken, the difficulties of disequilibrium would have been less; and that if fundamental attitudes had not been disturbed by illiberal ideologies, the chances of applying appropriate measures would have been greater. Doubtless there is truth in this. But we are not dealing with communities of angels whose errors are always deliberate sins against the light. We must not expect too much of the human spirit under strain; and we simplify history unduly if, in the explanation of the policies of our time, we do not allot to the shock of war something like autonomous status.

For somewhat similar reasons I am disposed to list separately the influence of mass unemployment or imminent financial crisis. Of course, unemployment and financial crises are not to be regarded as acts of God: there are often occasions when they are to be attributed to wrong economic policies, in some cases perhaps springing from the same ideologies as the overt resistance to liberal commercial policies. But here again, I think we oversimplify if we make our history monistic. In the explanation of how this or that community came to adopt policies of commercial restriction, we do well to treat unemployment and financial crisis as at least semi-independent causes. After all, we know that, in such circumstances, commercial restrictions may actually have a favourable influence for a time: unemployment may be diminished, a drain of gold or dollars arrested. And experience shows that it is just at such times that liberal commercial policies are most in danger. Take, for instance, the final abandonment of free trade by Great Britain in the early thirties. No one who lived through the crisis of those days will be disposed to deny the influence of ideological factors. The advocacy of tariff protection by Keynes, hitherto an outstanding free trader, had an impact which should not be underestimated. But perhaps Keynes himself would not have gone that way had there not been a depression. And certainly his influence would have been less if people had not felt themselves to be in a sort of earthquake in which all the old guide posts and landmarks were irrelevant.

Having thus recognized the catastrophic elements in the evolution of policy, we may now go on to examine the more persistent and slow-moving forces. And since we are proceeding all the time from the simpler to the more complex, we may put next on our list the influence of producer interest. This is an influence which I am sure should be disentangled from those which we have already examined. I know that it is sometimes argued that it is only because of under-employment or financial dislocation that the pressure groups are effective; and I willingly concede that in such situations they have, so to speak, very powerful allies. But I am not willing to admit that it is only in such situations that they are successful. Producer interest is ceaselessly active, seeking to protect itself against competition and the incidence of disagreeable change. The influence of the agrarian interest in Europe which, while tending to keep down the real incomes of European consumers, has wrought such havoc among agricultural producers overseas, has certainly not been confined to times of general unemployment. Nor - to allot blame evenly all round - have the many abuses of the infant industry argument on the part of manufacturing interests. Much attention nowadays is given to the alleged influence on history of the struggles between different classes, conceived on a social basis. In my judgment, a more realistic view would pay more attention to the struggles of different groups organized on a producer basis. These were the first foes of Classical liberalism and they may very well be the last.

(From The Economist in the Twentieth Century, by Lionel Robbins)