Free Trade And Its Defense:Corn Laws Debate In Britain And Development Of Classical Political Economy

The financial crisis of 2008 has raised serious doubts about the credibility of economic liberalism and mainstream economics.The Brexit vote in 2016 has signaled a popular movement against globalization.One of core elements of both economic liberalism and globalization is free trade which is a policy proposal as well as an economic theory.As a theory,it was convincingly argued through the explanation of the free market mechanism by Adam Smith in Wealth of Nations in 1766.After the publication of David Ricardo's On the Principles of Political Economy and Taxation in 1817,it had become the synonym of classical political economy and been gradually accepted as a scientific truth.As a policy proposal,although free trade was put forward by many authors of pamphlets before Adam Smith,it had been adopted widely from 1820s and peaked at the repeal of the Corn Laws in 1846,which represented the first resounding triumph of it.Therefore,the nineteenth-century was labeled as a liberalism era of Britain.Corn trade becoming the last stronghold of mercantilist trade policy is due to the dual attributes of corn,namely,it is private consuming goods as well as basic necessity.Because of this,corn trade must play an essential role like a "touchstone" in the debate about free trade both in theoretical and practical level.It was Adam Smith and David Ricardo who helped free trade pass the test of this touchstone.This study aims to explore the process through which free trade both as an economic theory and as a policy proposal jointly scored their first triumph and to analyze the ways and mechanisms of interaction between them in this process by the case of corn trade.Firstly,based on the history of Corn Laws from the mid-16th century to 1846,the study examined two heated public debate about free corn trade between the mid-18th century and 1846 and analyzed the arguments put forward by Smith and Ricardo in the debate.The first one took place between 1750s and 1770s,and the second one took place between 1814 and 1846.Both Smith and Ricardo joined the first and second debate respectively and proposed the main theoretical arguments for their sides.Although both of them defended free corn trade,their arguments were different.Corn Laws sparked off heated public debate for the first time in Britain in Smith's time,when the main measures of Corn Laws were regulating domestic market and putting bounty on exportation.Therefore,Smith applied the general principle of free market to domestic corn market and demonstrated the two previously misunderstood effects,namely,first,palliating dearth and preventing famine effectively and second,encouraging improvement and cultivation of domestic land.Meanwhile,Smith thought corn had a unique attribute because of which corn was different from all other goods and so bounty on corn exportation was impolicy.Also,Smith placed more crucial importance on agriculture than other industries regarding morality,politics,and economics.Thus,Smith avoided the dilemma between his two policy proposals:free corn trade and the crucial importance of agriculture.However,corn exceptionalism led to a paradox in his economic analysis.This implied that Smith just successfully broke the first shield of mercantilism providing by corn.Around 1814,Corn Laws reignited heated debate in Britain which continued to the repeal of the Corn Laws in 1846.During this period,the main measures of Corn Laws were restricting the importation severely.Both Malthus and Ricardo who were key figures of opposite sides in the debate during this period discovered the paradox caused by corn exceptionalism in Smith's theory.Malthus had followed Smith's other analysis,and inevitably come to a conclusion of corn trade protection for the reason of the crucial importance of agriculture.So Ricardo had to find a new way to defend free corn trade.Ricardo creatively developed a brand new corn model or another version of corn exceptionalism.By this way,Ricardo assigned corn trade a decisive role in domestic wealth growth,and therefore defended free corn trade successfully.This indicated that Ricardo broke the last shield of mercantilism providing by corn and free trade scored its first triumph in theory.However,policy-making is a complicated process in which ideas,interests,and institutions work together.Because of this,both Smith as a professor and Ricardo as an MP had no apparent influences on making of Corn Laws and other trade policies of their own time.Secondly,as we showed,the arguments presented by Smith and Ricardo were entirely different from each other even though both of them advocated free corn trade.The considerable difference in arguments between them reflected a critical transformation in the development of political economy which has been called "Smith-Ricardo transformation" in this study.This change included four essentials.The first was the difference in economic attribute of corn.They put forward two versions of corn exceptionalism:the one suggested corn price regulated the price of all other goods;the other suggested corn price regulated the general rate of profits.The second was the difference in attitudes towards how to put free trade theory into practice.The former advocated natural liberty and free trade;even so,he rejected to arbitrarily impose change on the world according to theory.The latter showed a much stronger inclination towards laissez-faire.He almost opposed any government intervention,and strived for a utopian world of free trade.The third was the difference in their views on the wealth-generating capability of agriculture,manufacture and commerce,and their evaluation of landlords,farmers,manufacturers,and businessmen.The fourth was the difference in their understanding of the final aim of human economic activities,namely,happiness.Thirdly,the study explored the major reasons behind this transformation.From the perspective of internal history of theory development,the study identified two reasons.First,Smith and Ricardo hold different viewpoints of methodology and epistemology.The former viewed theoretical exploration as an open and evolutionary process,so that theory must be fallible and imperfect by its nature.The phenomena which are new-observed or not be explained by existing theories are the main impetus for theory development.The latter contended that the primary focus should be on long-term trends and "the natural and constant." Further,he viewed the economic laws produced by this methodology "as certain as the principle of gravitation" and even rejected testing the theory empirically in excuse of long-term trend.Second,the economic analysis,moral philosophy,and politics were blended with each other in Smith's Theory.However,Ricardo was much purer.His economic theories had no direct philosophy basis and he purposely eliminated moral and political considerations from political economy.From the perspective of external history of theory development,the debate on Corn Laws played a critical role in the transformation and dominance of Ricardian economics in classical political economy.The debate about Corn Laws motivated Ricardo to shift the focus onto the problems of rent and profit.His original aim of exploring laws which regulate the distribution was to offer arguments against Corn Laws,which led him to a "narrower and more rationalistic"approach.Meanwhile,in the arena of Corn Laws,Ricardian economics stood out from its competition by a felicitous combination of theory and policy and became the mainstream and orthodoxy of the classical political economy.More importantly,the predominance of Ricardian economics greatly stimulated the scientification and professionalization of economics,and thus had far-reaching influence on the ensuing development of economics.If economics could be considered as a set of analytical tools or a way to understand the real world,Ricardo was,without exaggeration,the real founding father of modern economics despite the fact that this title has been commonly given to Smith.Unfortunately,the consequence of predominance of Ricardian approach in modern economics has been the impoverishment of it.Hence it has been more and more away from the real world,which triggered severe crisis of trust in modern economics.A natural and effective remedy no doubt is back to Smith.