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Section 1. Trend of Fiscal Policy, 1700-1850. Section 2. Walpole and Twenty Years of Peace. Section 3. Trade Policy in War Time, 1793-1815. Section 4. The Financial Policy of William Pitt.

Section I. Trend of Fiscal Policy, 1700-1850

CROMWELL brought England and Scotland into one Commonwealth with one Parliament. Though it was the right solution, it was the achievement of a revolutionary soldier and collapsed with him; and a half-century of mutual trade exclusion followed. To secure an independent foothold in the New World, Scotland embarked in 1695 on the project of a colony in Darien, a project anticipating in its economic purposes the Panama Canal; but it was a disastrous failure, and the failure forced Scotland to swallow her national pride and enter the precious circle of England's Colonial Empire by the path of political union. By the treaty of 1707 the separate Parliaments of England and Scotland became the Parliament of Great Britain; and henceforth on the high seas the commercial rights of England and Scotland were equal under the protection of the British Navy.

It was the tragedy of Ireland that she was excluded from a share in the colonial trade by the legislation of 1663 1 and 1670-1.2 She was not allowed to send to the colonies anything but provisions or to import directly from them their leading products. These restrictions robbed her of the overseas trade which her favourable situation and coast line would otherwise have secured to her. In the last quarter of the 18th century the boycott was relaxed, and in 1800 by the 6th Article of the Act of Union between Great Britain and Ireland it was entirely removed, but Ireland's economic condition was then too weak to allow her to recover the lost ground.

Thus from 1707 onwards England and Scotland had one trade policy. Ireland and other parts of the Empire were regulated by it, but they were not equal partners. The purposes of this policy were fourfold: (i) to strengthen the mercantile marine, (ii) to develop the colonies and other overseas possessions as


15 Chas. II. c. 7 (The Staple Act).


22 & 23 Chas. II. c. 26.

sources of supply of raw materials and as markets for British goods, (iii) to promote arable farming at home, especially the cultivation of the staple foodstuff, wheat, (iv) to foster the ancient industries of the country, especially the premier industry of woollens.

These too had been the purposes of 17th-century trade policy, but in the 18th century the emphasis was shifted from colonisation and shipping to productive development at home. Utilising the resources and markets furnished by an aggressive policy of navigation and colonial monopoly, Great Britain turned inward to develop herself her agriculture, communications, coal mines and manufactures; in brief, her provincial hinterland. But at no time did she seek self-sufficiency at the expense of foreign trade. She sought to grow rich by exporting the products of her own land and by re-exporting those of her overseas possessions. Carrying for others was a good thing, and still better was the carrying to others of commodities which had been manufactured in Great Britain from native or colonial materials.

The 19th century, with like purpose, aimed to grow rich by foreign trade, but experience showed that the political independence of the United States of America, so far from severing raw supplies, was attended by a remarkable expansion in them; and therefore merchants and manufacturers, enjoying after the defeat of Napoleon an easy priority in world trade, were converted to the belief that the regulation of trade defeated its own end. They did not, indeed, advocate tariff reduction against themselves, but they fought with enthusiasm for the removal of the chief remaining barrier to their export trade, the monopoly of the East India Company in India and China, and having secured this in 1813 and 1833 respectively,1 they assailed the protective Corn Laws by which their export trade in manufactures to Europe was indirectly checked. The exigencies of war-the Seven Years War (1756-63), the American War (1776-83) and the long French Wars (1793-1815)-so overburdened and distorted the British tariff that in the interest of simplification statesmen and merchants after 1815 desired freer trade; but it was only in the course of the Anti-Corn Law campaign (18381846) that statesmen and industrialists accepted free trade as an economic faith. Cobden and Bright, the leaders in this campaign, enveloped the fighting trade policy of their predecessors in the halo of international peace. Huskisson was a militant

15 Geo. III. c. 155 (1813), opened the trade to India to H.M. subjects after April 10, 1814, with the exception of the trade with China and the trade in tea from all parts between the Cape of Good Hope and the Straits of Magellan ; 3 & 4 William IV. c. 93 (1833), repealed these exceptions.

all his life, but Peel in 1846 surrendered to Cobden's spell, and Gladstone, who combined a genius for finance with a peaceloving temperament, carried free trade to completion. The old clash between trade policy and the collection of revenue was ended. The President of the Board of Trade became an administrator without a tariff problem; the Chancellor of the Exchequer had to consider import duties solely from their desirability as sources of revenue.

Section 2.

Walpole and Twenty Years of Peace

It chanced that at the opening of three centuries Great Britain was engaged in serious war with a leading European Power. In the first two France was the enemy, in the third Germany. The war with Louis XIV ended in 1713; that with Napoleon in 1815; the Great War on November 11, 1918. Walpole was a great peace minister. He came into power shortly after the final settlement of the dynastic disturbances and civil upsets which had arrested for a century the internal development of England. He was in supreme power from 1721 to 1742 ; and down to 1739, that is, almost to the end of his term, he kept England at peace with the nations of Europe. To secure for his/ country internal and external stability was the dual purpose of his life. For the first it was necessary to hold the confidence of the Crown, the City and the landed gentry, and in this he succeeded by constitutional means, laying the foundations of Cabinet government. For the second two things were necessary: naval security and the avoidance of fruitless war. Walpole maintained a strong Navy and increased it. Under its protection British and colonial shipping flourished and great fleets of merchantmen carried British goods to the four corners of the world. Yet the trade greed of the nation forced him to declare war on Spain in 1739, for the avenging of Captain Jenkins' ear, and he fell from office, condemned for the finest action of his life, his resistance to a marauding war. But happily internal peace was not involved. The nation easily survived the escapade of the Pretender in 1745; and from that day to this Great Britain enjoyed that greatest of aids to continuous economic development, freedom from war on her own soil.

In trade policy the age is wider than the man. This was the age of mercantilism, and Walpole was a mercantilist. Thev protection of native industry preceded Walpole, was continued by him and persisted after him. Small regard was paid to the final consumer. But one trade's finished product was sometimes another's raw material; and inasmuch as the finishing trades

manufactured, they employed more people and therefore possessed a superior claim to the consideration of the State. On this ground in 1721 the brass-using trades successfully resisted the demand of the copper and brass smelters for higher duties on the superior Dutch product. The prohibition of Indian calicoes from 1720 onwards was intended similarly to protect the woollen and silk weavers against the loss of their occupation.

In Walpole's time the encouragement of industry was effected mainly by the encouragement of export and took three formsthe abolition of prohibitions and prohibitive duties on exports, export bounties, and the drawback of import duties on re-export. Since 1660 there had been steady progress in the freeing of exports, beginning with foreign bullion in 1663 (15 Chas. II, c. 7, s. 9). In 1721 Walpole removed the export restrictions on over one hundred articles of manufacture and at the same time gave freedom of import to certain raw materials, such as cochineal, indigo and undressed flax. Bounties were given on corn, gunpowder, sugar refined from British plantation sugar, ribbons and silks, and the products of the herring and whale fisheries. Sometimes the granting of a drawback on re-export hurt the home producer, and to prevent this Walpole abolished the drawbacks on imported unwrought hemp and paper. Apparent contradictions in this complicated policy of regulation can usually be resolved by remembering that the general purpose was to strengthen the export power of British producers.

In colonial affairs Walpole showed his shrewdness by declining to entertain the idea of taxing the colonies and by winking at the infraction of unenforceable laws. In 1733, under pressure from the West Indian planters, the Molasses Act (6 Geo. II, c. 13) was passed, but as the penalties it imposed on sugar from the French West Indies would have crippled the chief trade of the New England colonies, it was allowed to remain a dead letter. In 1764, after the conclusion of the Seven Years War (1756-63), the Molasses Act was re-enacted and the duty lowered from 6d. to 3d. a gallon, with a view to its enforcement for revenue; and the friction caused by this measure and the Stamp Act of 1765 (5 Geo. III, c. 12), which also had as its object the raising of revenue from the colonies, strained their loyalty. In 1773, when the East India Company was given a monopoly of the American tea trade, it snapped and Boston had a tea party. Walpole's successors forgot his ruling motto, 'Let sleeping dogs lie.'

Walpole made his name as a financier by the handling of the South Sea crisis in 1720.1 This crisis was the first and greatest

1 Cf. the authoritative account in W. R. Scott, History of Joint Stock Companies to 1720, III. 288-360.

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