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Applying the lessons of George’s Protection or Free Trade, pt 1

After the signing of the Bretton Woods agreement and the creation of the General Agreement on Tariffs and Trade after World War II, global free trade began a decades long period of expansion, dramatically increasing the role of international trade in the global economy by systematically removing barriers. The economic gains were immense, and while critics pointed out failures in fairly distributing those gains, few thought this would pose a serious challenge to the free trade system. But in 2016, after decades of policy dominance, free trade suddenly found itself faced with major setbacks – the Brexit election in the UK and victory of Donald Trump in the US – with his promises to withdraw from the Trans-Pacific Partnership and re-negotiate NAFTA – demonstrated free trade’s weakening popularity.

The situation is hardly unprecedented in US history, however. The question of tariffs in the early 19th century sparked a constitutional crisis when the state of South Carolina refused to collect a duty they labeled ‘the tariff of abominations’, and discussions of trade policy became one of the defining areas of disagreement between the Democratic and Republican parties after the Civil War. 

 It was with this backdrop, during a debate about tariffs on woolen goods in 1892, that Representative Tom Johnson of Ohio requested that the entirety of Henry George’s book Protectionism or Free Trade be read into to the Congressional record. The late 19th century movement for free trade would surmount the steepest hurdle for US political reform, managing to pass a constitutional amendment allowing for an income tax largely with the purpose of replacing revenue tariffs. By the outbreak of World War I, these reformers had brought the tariff to rates comparable to those seen today – victories for free trade that would be expanded upon after World War II to create the current, nearly-global liberal system. 

While economic circumstances evolve over time, George’s formula for taking free trade from a textbook technocratic policy to a vital and popular ideal is still a useful guide for free traders looking to do the same thing. In shifting the emphasis towards the well-being of workers, in both tone and argument, paths are opened to broader cooperation. Even those who may not agree entirely with George’s ultimate diagnosis can learn a great deal from the way he describes the malaise infecting many free trade arguments. Effective argument in favor of free trade must center the conditions of the working class, rather than being caught up in abstract discussions of efficiency and must be part of a broad program that has as its goal not just a richer global system but also a freer and more equal one.

In the opening of the book, George discusses the obstacles confronting the free trade argument shortly after the end of the Civil War. He sees free trade as suffering from both partisan obstacles and rhetorical ones. In terms of the party system, free trade was embraced primarily by the Democratic Party, while Republicans supported protective tariffs. The whole concept of free trade was sullied by its association with the Confederacy . One might add that beyond the still strong memories of the Civil War, the political situation was such that two groups most subject to oppression under the economic system – Black Americans, and those workers recently immigrated to the United States – were largely relegated to separate parties, stymying any effective efforts at creating a truly working-class party.

Rhetorically and ideologically, the problem George describes is familiar. Many of the most ardent free traders embraced laissez faire principles throughout the economy, and their distaste for tariffs was matched by a broad opposition to any government – or organized labor – interference in the economy.  George lays out this problem quite clearly:

“The opponents of protection have, for the most part, not only professed no special interest in the well-being of the working-classes and no desire to raise wages, but have denied the justice of attempting to use the powers of government for this purpose. The doctrines of free trade have been intertwined with teachings that throw upon the laws of nature responsibility for the poverty of the laboring-class, and foster a callous indifference to their sufferings… While protesting against restrictions upon the production of wealth they have ignored the monstrous injustice of its distribution.”

This is, sadly, a deep problem within Liberal thought. Classist beliefs about the poor and a Malthusian perspective on demographics guided many early economic liberals to assume that the cause of poverty was rooted in the behavior of poor people themselves, either their anti-social tendencies or simply their reproduction. 

Here, 20th century free traders in many ways followed in the disastrous footsteps of their 19th century forbears.  Internationally, organizations such as the IMF that are dedicated to maintaining the global economic system, including advocating for freer trade, also too frequently stand by an orthodoxy that demanded countries receiving aid conform to their strictures on privatization and austerity.

George’s approach is different – from the beginning, he sets out the goal of his exploration as determining the impact of free trade on wages, particularly the wages of workers who do not have the protection of unions or the advantage of hard to hire skills. This focus, coupled with George’s accessible text – sprinkled with folksy metaphors (“Protection creates work like rain on his hay creates work for the farmer”) – and ‘man on the street’ anecdotes – make a sharp contrast with the technocratic, statistics heavy style of many free trade advocates. Most importantly, George provides an explanation for the continued poverty in free trading countries (Britain especially) that does not hinge on blaming the victims of that poverty.

In George’s telling, the British working class continued to suffer from poverty and periodic unemployment despite the increased wealth brought about by free trade because they lacked a viable ‘fall back’ position from paid employment. Because agricultural land was owned primarily by a small upper class, with most common land that had helped sustain independent farmers in previous generations firmly enclosed, workers were forced to seek industrial employment. There, land ownership and the growth of monopolies in manufacturing, shipping, and railroads conspired to keep wages barely above rents, even as expanded trade and exports enriched a few beneficiaries. In this narrative, poverty is not caused by poor habits and ‘anti-social’ behavior but rather the reverse: a lack of prospects and the struggle for survival give rise to those behaviors. American workers manage to earn higher wages than British ones, then, because they have greater access to an independent living on free or cheap land – but this circumstance, George warns, is rapidly changing. He also specifically addresses accusations that the Irish in particular suffer from poverty because of their Catholicism, a narrative popular both in England and among American nativists – a point which, beyond appealing to his Irish Catholic wife, had relevance for George’s political activism, which hinged on support from the politically well-organized Irish-American community.

Free traders today do not face precisely the same partisan challenges, but the ideological and rhetorical ones are just as acute. In the US, free trade has found advocates (and some opponents) in both parties. However, much like the 19th century Democrats, free trade proponents – and particularly the organizations that look to expand their agenda, like the WTO – have found themselves under attack from a wide range of activist groups, running the gamut from right wing conspiracy theorists to environmentalists and racial justice activists.  Blunting this opposition requires that free traders explain the contribution of government privileges to the persistence of inequality, and to endorse policies that will actively reduce poverty rather than expecting the rising tide of free trade to float all boats. They must, in other words, take a “special interest in the well-being of the working-classes”.

This dedication to making free trade work for the working class is crucial because elite opinion cannot sustain free trading policies forever in the face of opposing public opinion. And shifting the course of public opinion will require a change to actual conditions as well as rhetorical re-orientation. Too often, as George alleges, “All [free trade advocates] can promise the laborer is that production shall be increased and many commodities cheapened…And when confronted by the failure of revenue reform to eradicate pauperism, the free trader of this type can make no answer that will satisfy the questioner.” George devoted his career to finding answers to that question and rallying people – especially in the working class – to reform what he saw as the root problems. For George, the answer to the question of continuing poverty in the face of advancing wealth is multi-faceted: he describes a series of robbers who steal from the wages of the working class, starting with tariffs and including monopolies and corruption, but finally ending with land rents, which will take whatever is left over from the other robbers.

George’s argument is compelling – and on at least a local level, readily observable. So-called ‘superstar’ cities in the US, including San Francisco and New York City, have experienced tremendous growth, much of it related to globalization and the expansion of the digital and ‘knowledge’ economies. But the higher productivity has led to skyrocketing land values and rents, while leaving levels of poverty, especially adjusted for taxes, transfers, and cost of living, still at high levels. 

George’s solution – replacing taxes on productive activities and built property with taxes on land values – is an avenue free traders and other economic liberals would do well to explore. Even for those who find that answer insufficient or unsatisfactory, however, there is much to learn from George’s defense of free trade.  

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