Was the impact of free trade positive for the British economy?
Was the impact of free trade positive for the British economy?
In the early 18th century, before the introduction of free trade, the British economic system was known as mercantilism. It intended to protect and stimulate domestic interests. This was achieved by implementing Navigation acts and tariffs. The theory of the tariff is to raise prices of the produce and therefore generate tax revenue. It also has the effect of reducing imports. The tariff was imposed in order to fund war and interest on national debt. The by-product of this tariff was a reduction in imports into Britain, which meant that domestic producers were protected. The large disadvantage to this fiscal intervention was that it created an incentive to smuggle and black markets established themselves. Protectionism was also imposed by way of Corn Laws, from 1815-46, they were strictly enforced. These laws restricted the growth of the domestic market for manufactured goods by forcing food prices up to an artificially high level.
Throughout the late 18th century a number of economists voiced their dislike of the mercantilist system and argued that free trade would be more beneficial to both the economy and individual consumers. Adam Smith, amongst others, argued that through the theory of comparative advantage, the lowest prices for consumers would be achieved under the system of free trade. This would be done because resources would be allocated more efficiently. The Tariffs imposed on imports lead to a long-lasting trade deficit, which was not helped by protectionism hampering export growth. Public response to the deficit was to protest in the form of marches riots and general disobedience. The government at the time were faced with a difficult decision. There was a conflict of interests between keeping the public content and the country’s financial position because, although the regulations on trade created social disruption, customs duties finance a vast proportion of already decreasing
In the early 18th century, before the introduction of free trade, the British economic system was known as mercantilism. It intended to protect and stimulate domestic interests. This was achieved by implementing Navigation acts and tariffs. The theory of the tariff is to raise prices of the produce and therefore generate tax revenue. It also has the effect of reducing imports. The tariff was imposed in order to fund war and interest on national debt. The by-product of this tariff was a reduction in imports into Britain, which meant that domestic producers were protected. The large disadvantage to this fiscal intervention was that it created an incentive to smuggle and black markets established themselves. Protectionism was also imposed by way of Corn Laws, from 1815-46, they were strictly enforced. These laws restricted the growth of the domestic market for manufactured goods by forcing food prices up to an artificially high level.
Throughout the late 18th century a number of economists voiced their dislike of the mercantilist system and argued that free trade would be more beneficial to both the economy and individual consumers. Adam Smith, amongst others, argued that through the theory of comparative advantage, the lowest prices for consumers would be achieved under the system of free trade. This would be done because resources would be allocated more efficiently. The Tariffs imposed on imports lead to a long-lasting trade deficit, which was not helped by protectionism hampering export growth. Public response to the deficit was to protest in the form of marches riots and general disobedience. The government at the time were faced with a difficult decision. There was a conflict of interests between keeping the public content and the country’s financial position because, although the regulations on trade created social disruption, customs duties finance a vast proportion of already decreasing