Tuesday, November 9, 2010

How Free Trade Wrecked England.


                              THE STORY OF THE CORLISS

            There is an antique fair held every year in northeast Iowa, at a place called Antique Acres. While most of the things to be seen at Antique Acres are items brought to the fair by individual collectors, there is a museum which houses a permanent collection of large stationary steam engines.  They have about six engines, though their boiler is only large enough to operate one at a time. The prize of their collection is a large Corliss engine. The Corliss was an American invention, and it marked a radical improvement in engine efficiency. The Corliss used spring-loaded valves. The engine still used an eccentric driven off the crankshaft to re-cock the springs and trigger the release. But when a valve on any Corliss opens or closes, it is being snapped open or shut by a spring, and the action is almost instantaneous.  This allows more precise valve timing, which radically improves efficiency.  I saw my first Corliss at the Smithsonian, about 1986.  Though still on display, it had been part of the exhibition of 1876, in fact it had been the crown jewel of that show—the summation of 19th century American genius.
            In 1999, my wife and I spent a week in London, and we spent most of the week in museums. At the Science Museum, they have a magnificent collection of old steam engines, including a small demonstration model built by James Watt himself. But what caught my eye was a huge old Corliss, shown in the above photo.  I asked why it was there. Wasn’t this museum just for British technology? I was told that this was indeed a British engine, and was shown the bronze nameplate. It was built in England, about 1885 I think—under license from Corliss USA.  This was pretty astounding. Why? Well, let’s take a look at what happened to the British industrial base in the 19th century. 
             At the start of the 18th century, England lagged far behind most of Europe in technology. So they deliberately became the most protectionist economy in the world.  All imports were heavily taxed. (Many novels set in that period mention smugglers or smuggling.) Local manufacturing thrived.  Factories became profitable and the profits were re-invested in those same factories, since investment in overseas facilities would make no sense if the output of such facilities could not be imported to England.  By the end of the Napoleonic Wars, after a century of protectionism, England led the world in every kind of manufacturing.  So, at the Congress of Vienna in 1815, Britain did an about face and proposed a free trade agreement. There is little advantage having a technological lead if you can’t pry open other countries’ markets to make use of that lead.  And no one will open markets to you, unless you open yours.
          But there’s a paradox. Any trade advantage gained this way will be short lived.  As soon as you open doors to imports, capital will begin to flow out of the country.  If a British factory owner chooses between building a new factory in England and building it in India or some other low-wage country, the low-wage option will surely be more profitable.  So when Britain adopted free trade, they began a period where for several decades, no Englishman with money invested it in England.  Being starved for capital, their industrial base declined, and their standard of living stagnated.
               Germany quickly realized that free trade with England would not benefit Germany.  If their factories lagged behind England, being forced to compete with British goods would only put them further behind, and eventually put them out of business.  So Germany pulled out of the free trade agreement and instead adopted the protectionist policies of Frederich List. The various German-speaking states entered a “Zollverein,” or customs district, in which goods among member states moved freely, but other goods was kept out.  This plan was superbly successful, and German industrial output doubled every decade for the rest of the century.  This boom paid for schools, so that near universal literacy was quickly achieved, and as Germany became food self-sufficient, German workers were better fed than the English.
               As Wm Engdahl points out in his excellent book, A Century of War, when Germany began to shift away from free trade in 1850, they produced only tiny amounts of iron. But by 1900, they passed Britain and by 1910 their output was 50% higher than Britain, at 15 million tons. Between 1880 and 1900, their steel output rose over 1000 %.   The situation was the same for coal, textiles, electric power, and chemicals.  In fact, Germany practically invented the modern chemical industry.  Mr. Engdahl’s book was not written till a few years after my visit to the Science Museum. But even then I knew that England’s 19th century free trade policy had cost it much of its manufacturing base. I knew this in spite of the fact that most history books take elaborate pains tell you the opposite, or at least manage to avoid discussing it.  (The royal tailors prefer not to discuss “the king’s new clothes.”)  But I was astounded to discover that as early as the 1880s,  Britain had lost not only manufacturing capacity, but had totally lost its edge in technical innovation. Think about it.  The steam engine is a British invention.  In 1840, Britain made the finest steam engines in the world. Yet by the 1880s, the American Corliss engine was so superior that British manufacturers were paying patent royalties for the privilege of building it.  Yet you could read 10,000 pages of nineteenth century history, written within that century, and find total agreement that free trade was a boon to England and would make the English rich.  In fact, even at the close of the 20th century, fully a hundred years after free trade had finished wrecking what was once the greatest manufacturing base in the world, the standard explanation by the leaders of British government, business, and academia was that free trade was wonderful, and no one could disagree except those fools who didn’t quite understand it.
        But it was all self-delusion, lies, and nonsense.  If any of it at all had been true, then that bronze plaque in the Science Museum could not exist.  But it did exist. Archaeology is history, except that the artifacts speak for themselves. Histories can be in error, or can be written to deliberately deceive. Engdahl claims that Arnold Toynbee, the premier British historian of the 20th century, was a British MI 5 agent for nearly his whole life.  But iron doesn’t lie.  It is what it is.
          All archaeology draws inferences about a society by observing the remains of its material culture. When you walk through a museum, an antique shop, or even a junk yard, you are studying the remains of our own material culture. And there are “Rosetta stones” hiding behind every corner, if only we could read them. Here’s to the perusal of elderly iron. 


                       
               

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