Mercantilism, Royal Navy, Napoleon, Pax Britannica, Corn Laws, David Ricardo, Comparative Advantage, European Union and NAFTA

Posted by PITHOCRATES - May 22nd, 2012

History 101

Mercantilism gave Britain the Royal Navy which Ushered in the Pax Britannica

Great Britain had a rough go of it at the end of the 18th century.  They lost their American colonies in the American Revolutionary War.  A war that started over the issue of taxation to pay for the previous Seven Years’ War.  So instead of securing new revenue to pay down old debt they incurred new debt.  The French Revolution closed out the century.  Causing concern for some in Britain that their monarchy may be the next to fall.  It didn’t.  For the constitutional monarchy and representative government in Britain was a long cry from the absolute monarchy that they had in France.  So revolution did not come to Britain.  But war did.  As the French expanded their revolution into a European war.  Pulling the British back into war with their old enemy.

With a large conscripted French Army and the concept of total war France made total war.  Napoleon Bonaparte won a lot of battles.  Conquered much of Europe.  Even marched back and conquered Paris.  Proclaimed himself emperor of France.  And continued waging war.  Including an ill-conceived invasion of Russia.  Which marked the beginning of the end for Napoleon.  And the French Empire.  Weakened from war France saw her old nemesis, Great Britain, rise as the first superpower since the Roman Empire.  And like the Romans’ Pax Romana Britain entered a century of peace.  Pax Britannica.

The reason the British could do this was because of their mercantile past.  They set up colonies and international trade networks.  And they used the proceeds from that lucrative trade to finance the greatest naval power then in the world.  The Royal Navy.  And the Royal Navy would help keep the peace in the Pax Britannica.  She became the world’s policeman.  Making the world safe for trade.  Especially on the high seas.  But then something interesting happened.  She broke from her mercantile past.  Because they saw the shortcomings of mercantilism.  One of which produced wealthy landowners at the expense of a hungry population.

When the British repealed the Corn Laws in 1846 Food Prices fell and the Standard of Living Rose 

The British Corn Laws were a series of laws protecting those who grew cereal crops.  The stuff we grow that has edible grains.  Corn, rice, wheat, barley, etc.  What we call staple crops as they form the basic sustenance of humans everywhere.  We grow these in greater abundance than all other foods.  And when you look at the grain size you come to one realization.  It takes a lot of land to grow these crops.  And who owns large tracts of land?  The landowning aristocracy.  A small group of people with a lot of wealth.  And a lot of political influence.  Hence the Corn Laws. 

The Corn Laws were legislation with one goal.  To prevent the British people from buying less expensive food.  By either forbidding any importation of cheaper grains until the domestic price had reached a certain price level.  Or adding tariffs to the less expensive imports so the landowners could still sell their grains at higher prices.  Thus preserving their wealth.  And they made specious arguments about how lower-priced food was actually bad for the people.  For it was just a way for manufacturers to maximize their profits.  For if food was cheaper they could pay their workers less.  Being the greedy bastards that they were.  So the only fair thing to do was to keep food prices high.  To keep the living wage high.  To force manufacturers to pay their workers more.  You see, the only way to help the poor and middle class was to let the wealthy landowners become even wealthier.  By keeping the price of the food they sold high.

Opposition grew to the Corn Laws.  People studied the works of their fellow countrymen.  Adam Smith and David Hume (both Scottish).  And the Englishman David Ricardo.  All great economists and thinkers.  Who were all proponents of free trade.  Ricardo’s Comparative Advantage basically proved the case of free trade over the protectionism of mercantilism.  Eventually the political power of the landowners could not overcome the economic arguments.  Or a famine in Ireland.  And, in 1846, they repealed the Corn Laws and adopted free trade.  Food prices fell.  Leaving people with more disposable income.  To purchase the goods the Industrial Revolution was making.  Increasing their standard of living.  While small famers had to leave their farms being unable to farm efficiently enough to pay their bills at the prevailing prices.

The Success of NAFTA proves David Ricardo’s Comparative Advantage

Mercantilists and other opponents to free trade like to point at the human costs.  Small farmers losing their farm.  Just so they can preserve some semblance of privilege to protect the high prices in their industry.  But it was becoming more and more difficult to make the argument that the masses were better off paying higher prices.  Because they’re not.  Lower consumer prices increase the standard of living for everyone.  Higher living standards create healthier living conditions.  And reduces child mortality.   For the greatest killer of children in the world is poverty.

The British were both a military and an economic superpower during the 19th century.  But someone was chasing her.  The Untied States.  Who was feeling her economic oats.  Her economy would catch up and surpass the British.  Making it the mightiest economic power of all time.  How did this happen?  Two words.  Free trade.  The United States was the largest free trade zone in the world.  The economic advantages of all those states trading with each other freely across their state borders made Europe stand up and take notice.  And in response created treaties that ultimately led to the European Union and the Eurozone.  To replicate the large free trade zone of the United States.

Back across the Atlantic the Americans, Canadians and the Mexicans took it up a notch.  And created the North American Free Trade Agreement.  NAFTA.  Extending the free trade that existed in each of their countries across their international borders.  The mercantilist fought against this.  Because protectionism, restrictions and tariffs helped the privileged few protect the high prices in their industry.  In America they talked about a great sucking sound as all American jobs went to low-wage Mexico.  Some manufacturers did move to Mexico.  Primarily because like the small farmers in Britain after the repeal of the Corn Laws they could no longer sell at prices to meet all of their costs.  But it was not as the mercantilists predicted.  Yes, imports increased.  In 2010 they were up 235% from pre-NAFTA 1993.  But exports were up, too.  Some 190% for the same period.  Proving Ricardo’s Comparative Advantage.  By focusing on what we do best and trading for everything else all countries do better.

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Greece, Rome, Western Civilization, Alexandria, Londinium, Enlightenment, Adam Smith, Free Market Capitalism and Gender Equality

Posted by PITHOCRATES - April 17th, 2012

History 101

Greece gave Western Civilization Math, Science, Engineering and Philosophy

History has been a political struggle over power.  Kings and emperors and priests and nobles had it.  While other kings and emperors and priests and nobles wanted it.  They fought wars.  They oppressed their people.  They’ve committed acts of genocide on their enemies.  And on their people.  To get that power.  To keep that power.  And that’s the way it was for a long time.  The ruling class at the top battling it out.  While the people suffer abject poverty, famine and genocide at the bottom.  Until something came along to change that.  An advanced civilization.  That could produce a food surplus.  Freeing up people to become artisans.  Specialists.  Who could invent and make things.  To make life better.  Especially for a large group of people called the middle class.

The Greeks and Romans took civilization to new heights.  When Edgar Allen Poe wrote To Helen (1845) he chose Greece and Rome to describe his most beautiful Helen.  Because Greece and Rome were that beautiful.

On desperate seas long wont to roam,
Thy hyacinth hair, thy classic face,
Thy Naiad airs have brought me home
To the glory that was Greece,
And the grandeur that was Rome.

Western Civilization began in Greece.  Food surpluses freed the great thinkers.  Math, science, engineering and philosophy took roots in Athens and spread through the Greek world.  The Hellenistic civilization.  That Alexander the Great spread east all the way to Iran and the Indus Valley.  And south into Egypt.  Where he founded the great city of Alexandria.  Repository of some of the greatest Greek books of knowledge.  When Rome conquered Greece they spread that great Hellenistic civilization east to Spain.  North to France and Germany.  Even to England.  London itself was once a Roman city.  Londinium.  And everywhere the Romans went they brought with them Greek math, science, engineering and philosophy.  Building engineering marvels.  And creating a very high standard of living.

Where the Romans went they also built roads.  Primarily to move their legions throughout their empire.  But they also used them for trade.  Where they traded the goods made by that rising middle class of artisans.  Economic activity was bustling.  Until the government grew.  To pay for an ever larger government bureaucracy and military they started taxing that economic activity.  And regulating it.  Rather harshly.  Restricting freedoms.  Eventually tying farm workers to the land.  Even their children.  Turning that once bustling economy into feudalism.  Serfdom.  Until the growth of government expenditures made the Western Empire so weak that the Germanic barbarians sacked Rome.

Enlightened Thinking and Adam Smith’s Wealth of Nations helped make Great Britain the Leading European Power

While Europe went through the Dark Ages the Eastern Roman Empire continued on.  Centered on Constantinople (modern day Istanbul) on the Bosporus, she was smack-dab in the middle of the trade crossroads between Europe and Asia.  And continued to prosper economically.  Until the Arabs began attacking her.  And the Christian Crusaders.  Who came down to reclaim the holy land for the Catholic Church.  Where they fought Muslim Arabs.  As well as Orthodox Christians.  While in the area they visited the sights.  Including that great repository of books in Alexandria.  Which they packed up and brought back to Europe.  And changed the world.

As the Christian monks translated these books all of Europe read them.  Math, science, engineering and philosophy.  Kicking off the Enlightenment.  Advanced economies appeared in the Italian city-states as they controlled trade in the Mediterranean.  But with all that Greek knowledge Portugal, Spain and the Netherlands built bigger ships and learned to navigate across the oceans.  Moving the center of trade from the Mediterranean to northern Europe.  The Europeans established colonies in the Old World.  And the New World.  France and England soon followed.  Trade exploded.  And fortunes were made.  But something really special was happening in England. 

Thanks to all that enlightened thinking the English took the lead in Europe.  And the world.  Modern farming practices improved yields and created great food surpluses.  She had representative government in her Parliament.  The rule of law.  Banking institutions.  Joint-stock companies to raise large amounts of capital.  An insurance industry to manage the great risks of transoceanic trade.  And an economist up in Scotland who wrote a book about new ideas in economic thought.  Adam Smith.  Who wrote The Wealth of Nations.  Championing something he called the Invisible Hand in free market capitalism.  Taking away the economic decisions making from the kings and emperors and priests and nobles.  And giving it to the people.  Which Great Britain embraced.  Kicking off the Industrial Revolution.  Other European nations followed her lead.  As did one young upstart nation.  The United States.

Famine has been Rare in Western Civilization since the 18th Century

Western Civilization dominated the world in every measurable way.  Economic output.  Living standards.  Public health standards.  Gender equality.  You name it and the free market capitalism of Western Civilization made it better.  The general path of emigration of great minds traveled in one general direction.  From eastern/southern Europe to Germany, France and Great Britain.  Then on to the United States.  Or directly to the United States.  Where free market capitalism was the freest.  Making the Untied States the new world superpower.  Following the Industrial Revolution with even greater innovation.  Providing ever greater living standards.  And individual liberty.  For everyone.

The freedom in free market capitalism brought women into the workforce.  Take the automobile.  When Henry Ford first mass produced the car it was not people-friendly.  Men started our first cars by turning a hand crank.  Sometimes losing a finger or breaking a wrist in the process.  Once started he adjusted his goggles and gloves and took the wheel.  His face being the bug screen.  His muscles being his ‘powered’ steering.  Clutching through the gears.  Gearing down and stomping down on the breaks to stop.  It was man’s work driving our first cars.  Dirty, filthy man’s work.  The automatic starter, automatic transmission, power steering and breaks, though, changed all of that.  All American developments.  Allowing women in heels and a short dress to start and drive a car as well as any man without losing any of her dignity.  And she could sip a latte on her drive to work.  While listening to music.  And on those hot days she didn’t sweat through her clothes before getting to work.  Thanks to air conditioning.  Another American invention for the car.  And she’s able to enjoy this freedom because of some other inventions.  Two in particular that let her pursue a career.  And enjoy any activity whenever she chooses.  The birth control pill.  And the tampon.  Again, products of Western Civilization. 

Women in Western Civilization have it pretty good these days.  Where for the most part their standard of living has caught up to men.  There are some earning disparities.  But a lot of that is due to women leaving the workforce to raise children.  And then reentering at a later time.  Having to play catch-up with those who didn’t leave the workforce to raise a family.  Not too bad when you consider what women are going through where they don’t embrace free market capitalism.  For not only do they have none of these everyday comforts we take for granted but they often go without food.  Up until the 18th century famines were pretty common.  But with the advances we’ve made in farming and our other institutions we have that give us a modern and bustling economy (and our high living standards) there really haven’t been any famines in Western Civilization since the 18th century.  There may have been a few but they were very rare.  Unlike the famines in the 20th century that killed tens of millions in Russia, the Soviet Union, China, North Korea, Southwest Asia, Southeast Asia and Africa.  But famine is not the only thing killing people in these countries.  They have also suffered the greatest acts of genocides.  As rival groups battle each other for political power.  With the innocent masses stuck in the crossfire.  Something a prosperous middle class has put an end to in Western Civilization.

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