Progressive emergence of the economic liberalism
The dominant economic thinking of the XVIIIe centuries and the previous centuries was that of those which Adam Smith will describe later as “mercantilists”. She preaches the intervention of the State and protectionism and sees in the economy only the science of the enrichment of the Prince. The movement mercantilist is influential in all Europe. In England (then in Great Britain) and in Holland he preaches the development of economies based on the trade (commercialism); in France he seeks to enrich the kingdom via great manufactures (Colbertisme), while he inserts the old Spanish and Portuguese colonial empires in the sterile idea that only gold has importance (bullionism).
The Physiocracy
It is in France, in the context of the blooming of the Lumières that the Economic liberalism is born within the current physiocrat vis-a-vis the doctrines mercantilists then dominant. Breaking with the mercantile tradition focused on the treasuries of the State, the current physiocrat makes agricultural production the only source of value (physiocracy means “ government of nature ”). This confidence in nature concerns the intuition of a spontaneous and optimal economic order. Not managing to make this prescience a theory, the physiocrats allot this “natural order” to divine providence. The realization of this natural kind is allowed by the research of the private interest which contributes naturally to the general interest (idea expressed by Mandeville and taken up by Smith, and already put forward by Spinoza one century earlier). Although one owes them the first circular representation of the economy (François Quesnay, Tableau Economic, 1758), the idea of a automatic regulation by the market did not come to them. In their reflection, the physiocrats (Gournay, Turgot, Quesnay, Of the Bridge of Nemours) were accompanied by great names of philosophy (Condillac, Diderot, Montesquieu, Rousseau) in particular via their participation in the Encyclopédie (1751-1772). Montesquieu wrote for example: “The natural effect of the trade is to carry to peace” ( Of the spirit of the laws , 1748).
Anne Robert Jacques Turgot, a time general inspector of finances of Louis XVI obtained for a short moment freedom of movement of the grains through France.
The physiocrats pled also in particular for the abolition of the corporations, the reduction in the taxes weighing on the peasants and for the suppression of the feudal tax matter advantages in order to avoid the bankruptcy which will lead to the French revolution. However, their influence remained purely intellectual and knew only few concrete continuations.
First events
Following colonial wars against the France, the concerns for treasury of the British government pushed the Parlement with raising new taxation, in particular of the colonial trade. The tax on the (the Tea Act of May 1773) was the cause of the first revolutionary disorders of Boston (the Boston Tea Party ). Three years, exceeded later by the obstacles with the trade imposed by the metropolis, the United States proclaimed to them independence. In France, great names of the thought and liberal mediums (Lafayette, Beaumarchais) used of their influence to convince Louis XVI to intervene.
This same year 1776, in Great Britain, a British professor of morals published his Recherche on the nature and the causes of the richness of the nations . In this book largely influenced by Turgot, and since become the reference of the kind, Adam Smith preached, but especially theorized the great principles of the economic liberalism on the basis of rational demonstration. Colonialism, Protectionism, Interventionism, Slave system, criticism did not miss any target and Adam Smith showed that the invisible Main of the market was more with same as the State to control the economic activity. The book did not fail to attract the curiosity of controlling, and ten years later, in 1786, from the first lowerings of the customs tariffs (Traité Eden-Rayneval) were concluded between the France and the Great Britain (agreements denounced with the French revolution).
The French revolution
Convened for on May 1st, 1789 to regulate the financial crisis of the kingdom, the general states introduced in France the democracy and the vote per capita. Controlling Parisian crowd, and constituting crushing it majorities of the deputies of the third-state, the middle-class is essential naturally on the capacity. After having abolished the feudal privileges (Night of August 4th 1789), the assembly imposed on the France a first form of competition, the free enterprise without Right of association , thanks to the Decree of Allarde (March 1791) and with the Law the Hatter (June 1789) which prohibited Monopole S, coalitions (Grève S), and corporation S.
The originators of this policy knew that they violated the Right of free association, but knew by experiment which one cannot allow to the producers - owners as paid - to organize oneself without taking the risk that they turn this organization towards the search for privileges acquired by violence at the expense of the others: privileges of monopoly and subsidies, and prohibition made with the others work. Revolutionary instability made these institutions quite precarious, but since it is possible to the producers to be organized against the Right of others, and that the prohibition which them was made by it violated certain revolutionary principles, one can doubt that they had been able perdurer very a long time.
Triumph of liberalism
The liberal United Kingdom
With the the United Kingdom as in France, the writings of Adam Smith filled with enthusiasm and inspired by many thinkers. On the continent, Jean-Baptiste Say ( Treated political economy , 1803) fustigated the national expenditure, refuted any possibility of durable economic crisis in a liberal economy, and spoke in praise of the contractor and his talent of creator of richness. In order to form this capital class of the population, it created the first business school of the world: the special School of trade (today become the National college of business of Paris). With the the United Kingdom, Pasteur Thomas Malthus ( Test on the principle of the populations , 1798) followed by David Ricardo, rose against the government aid in favor of the poor (the poor laws), which according to him did nothing but feed poverty while allowing the poor “to increase their number”. David Ricardo ( Of the principles of the political economy and the tax , 1817) proposed a theory of the free trade in addition, where all the committed parts found an advantage to trade enters. He criticized the protectionist laws on the corn (Corn Laws) which while contributing to the high price of the subsistence pushed the wages with the rise and thus harmed the profits.
Relayed by the industrialists, undoubtedly more concerned still of their profits than were to it the economists, the criticism of the established legislation allowed the abrogation of many laws. In 1825 the abrogation of the Bubble Act allows the creation of important companies without the downstream of the Parliament. In 1834, the poor laws are abolished and the poor are consequently constrained with work: the job market is established. In 1839, industrialists of Manchester found under the control of Richard Cobden the Anti-Corn Law League, also called “Committee of Manchester” in order to obtain Parliament the abrogation of the Corn Laws . Following a parliamentary debate animated between defenders and opponents with the laws, the Prime Minister Robert Peel, at the hostile origin with the project, lets himself convince by the arguments free-traders and Corn Laws is repealed in 1846. The the United Kingdom, however unquestionable that the other powers will not follow it, becomes the first nation free-trader of the history. In 1856, the Parliament completes to liberalize the economy while renonçant to control the creation of the joint stock companies ( Joint stock companies act ).
German Customs union and liberal protectionism
During this time, Prussia tries to create a customs union in Germany. In 1833, the negotiations, inspired partly by the economist Friedrich List, lead to a first agreement between the Prussia, the Bavaria, the Saxony, the Wurtemberg and the States of Hesse. The Zollverein takes effect at the first January 1834, and is extended gradually to the majority of the German states. It is the first model of the genre, and as a precondition to political integration, it will inspire the EEC. The liberal vision of List was more critical than ideological. In its work of 1841 ( national Système of political economy ), he admits that free trade is desirable, but considers that in their evolution the economies know several stages and that the trade can be equitable only between comparable economies. He recommends for Germany a protectionist policy, a certain time and in certain sectors, in order to allow the development of his industry in childhood. This idea of “educational protectionism” is also applied to the United States in order to allow the development of industry and to ensure the emancipation of the country with respect to the United Kingdom. If the American Civil War, by abolishing slavery, is source of new economic freedoms to the internal plan, it devotes to the plan external the protectionism wanted by the States of North.
Liberal Empire
In France, the disciples of Adam Smith continue to spread as much as they can it the liberal ideas. After Jean-Baptiste Say, Frederic Bastiat combat in satirical writings the ideas mercantilists. He scoffs the defenders at protectionism in some pages with the ironic title: " Petition of the merchants of chandelles" against the unfair competition of the sun (1846). In this style which is clean for him, he will criticize also the fears caused by research of the productivity by inviting the workers to use of their only left hand in order to maintain the dearness of the products and thus to contribute to the illusion of richness. Another disciple of Adam Smith, Jean de Sismondi (Switzerland), deviates from the thought of the other liberals and critical their “liberalism with one way” which allots freedoms only to the industrialists and to the merchants, while the workers are deprived by it by the police force (prohibition of the strikes, of the trade unions, working booklet…).
Influenced by the Count of Saint-Simon, of the graduates of the Universities as Michel Chevalier (Polytechnic) sensitize themselves with the liberal ideas. This last becomes one of the principal advisers of Napoleon III and negotiates with the British Richard Cobden the first agreement of free trade. The treaty Cobden-Knight is signed in 1860 whereas the French industrialists shout with the plot. Taxes remain but they are substantially reduced (of almost 50% initially) and the two countries agree the “clause of the most favoured nation”, which stipulates that any advantage conceded by one of the two signatories with a third country, benefits the other automatically. Similar treaties are signed soon with and between the Belgium, the Zollverein, the Italy, and the Austria. In 1880, the customs duties between France and the United Kingdom are only to 10%.
Napoleon III undertakes to facilitate the circulation of the currency. The Latin Monetary Union is instituted in 1865; the germinal franc becomes the currency of France henceforth, of Belgium, of the Suisse, of Italy, of the Greece and the Bulgaria. The Empire grants also the right to strike in 1864 and authorizes creation without obstacles of public limit companies in 1867.
Between 1850 and the 1873 international exchanges were almost multiplied by 3 in value.
The imposed free trade (a misunderstanding?)
If the European great powers of the 19th century ended well up including/understanding the interest of the internationalization of the exchanges, the mutually advantageous character of free trade was not their concern first. The internationalization of the exchanges indeed makes it possible to provide outlets to industry and to reach raw materials absent from the national ground. More than liberalism, this obviousness with encouraged the Colonialism.
In 1838, the emperor of China decides the destruction of stocks of Opium of the town of Canton in order to limit the consumption of this drug in his country. Between 1838 and 1842, the ships of the British fleet run the jonques ones which the Chinese oppose. In 1842 China concedes the opening of 4 new ports in addition to Canton like HongKong. (Treaty of Nankin). The other European nations take again on their account the British requirements and impose in their turn their trade in China.
In 1853, an American forwarding bombards the Japanese port of Uraga in order to obtain the following year a free entry of the American ships in certain ports of the archipelago and a strong reduction of the customs duties. The other great powers will follow the American example and will also impose on Japan “unequal treaties”.
The European powers launch out especially in a second era of colonization (the first being that of Americas). In front of the House of Commons, Jules Ferry declares: “the colonial policy is girl of the industrial policy” and the France launches out in the colonization of the Africa and the Indo-China. The Belgium and the Netherlands also benefit from the division of the world while the sun never lies down on the British empire. Opposed by principle to colonialism, the the United States do not hide nevertheless their temptations imperialists on their continent, as since 1823 the Doctrine Monroe testifies some and in 1898 the war delivered to the Spain “to release” Cuba.
Retreat of the economic liberalism
Dispute and revival of the liberal thought
In 1867, the publication of the first book of the Capital of Karl Marx prophesies the end of the Capitalisme and the nearest advent of the Communisme. In fact, the liberal company is afraid of the workmen. In 1871, Paris is delivered to the flames by the Commune. Vis-a-vis the analyzes of Marx, economists renew the liberal thought. At the beginning of the Years 1870, the economists marginalists (or neo-classic) Carl Menger, Stanley Jevons and Leon Walras is based on a scientific study of the rational behaviors of the individuals in order to develop the whole of the theories constituting the Micro-économie. The mathematical reasoning of Walras and Jevons arrives at many conclusions: competition is desirable and allows the right factor income (i.e. accuracy of the wages and the profits); it makes it possible the economy to tend towards an optimal theoretical balance; they also show that unemployment is always voluntary. The scientific power of their reasoning convinces a middle-class public in advance acquired, but the coldness of their step, which wants to be a force, will be often regarded as the sign of a too long distance with respect to reality. Their theories, improved by one second generations of authors (Vilfredo Pareto, Alfred Marshall…) compose despite everything the new economic dogma dominating.
First relative retreat of free trade
Whereas the Grande Depression (1873 - 1896) prevails, progress in the maritime transport and the emergence of concurrent economies in Asia (Japan) and in America (the United States especially and to a lesser extent certain countries of South America), causes concerns among European industrialists. The exacerbation of nationalisms, which in the diplomatic field prepares the gears of the First World War, contributes to the found influence of the protectionist speeches. Dice 1879 Germany joins again with its protectionist tradition and is followed by other European nations. France timidly reacts in 1892 with the law Méline while the United Kingdom refuses, under the councils of the economists cambridgiens, to give up free trade. In 1890, the tariff Mac Kinley raises the American customs duties to 49% on average. At the dawn of the First World War, Russia applied a tax on on average 84% to the imports, the United States 44%, Japan 30%, France 20%, Germany 13%.
However the value of the international exchanges continued to grow over this period, of 2% only on average per annum during the Great Depression (1873-1896), then of 4,5% on average per annum until in 1913. In 1914, the British army faces a scandal when the public opinion discovers that its uniforms are dyed thanks to the products of powerful German chemical industry.
Liberal paradox in the United States
The end of 19th and the beginning of the 20th centuries are marked with the the United States by a vigorous intervention of the State to found the conditions of liberalism. The legislative arsenal Anti-trust is installation by the Sherman Act (1898) and the Clayton Act (1914), and certain companies are dismantled: the Standard Oil of Rockefeller is in three independent companies in 1911.
The First World War
Since years, the countries of Europe are devoted to a true arms race. However, after a few months of war, the weapons miss. It is necessary that the State intervenes to organize the economy vis-a-vis the challenge of a particular request: at the time more the violent ones of the conflicts of the million shell are drawn in a few days. The easy ways as the requisition of the taxis of Paris cannot be enough with the effort to war. One needs hundreds of trains to ensure the supply of the face of men and material. The State multiplies the ministries (in France its budget is multiplied by 7 and becomes seriously overdrawn), plans and manages the economy while the industrialists, satisfied with orders without precedent, do not complain.
Following the conflict, the role of the State will not be able to be reduced so that it was before (required to reconvert a destabilized economy, assistance to the million widows, orphans, and disabled person). The hatred carried by the war veterans with the war profiteers will have also his importance in the critic of the economic liberalism.
The Great crisis
The Années 1920 represent one economic period combining an exceptional growth (often reaching the 5%) with imbalances never yet seen. The franc is unstable and is regularly attacked, the debts interallied are colossal, while the debt of Germany east if confusing that one decides to distribute of it refunding until in 1989.
Nevertheless, the majority of the great powers (with exceptions as fascistic Italy after 1925) sought to maintain the economic liberalism:
“the intention of this decade was deeply preserving, and expressed the conviction quasi universal that only the re-establishment of the system of before 1914 could bring back peace and prosperity.” Karl Polanyi, the Great Transformation , 1944
Mr. Do Nothing
The american company reaches the consumption of mass as of the roaring twenties . However at the end of the years 1920 the Bourse of New York packs. The shareholders misent with credit, sometimes lend what they borrowed, and so on as long as the purse enables them to gain more than they do not have to refund. The economist John Maynard Keynes in vain warns against this “saving in casino”. Thursday October 24th 1929, Stock Exchange New York knows a first Krach. It loses quickly more than 20%. In about thirty month the index Standard & Poor' S lose 80% of its value. The stockholders are ruined, and because of their insolvency of many banks go bankrupt. The effects on consumption are disastrous.While massive unemployment appears (4,3 million unemployed as of 1930), the federal government of the president Herbert Hoover, in spite of some attempts at rectification, believes that balance must especially return from itself. American calls this president attached to liberal orthodoxy Mr. Do Nothing.
The thought keynésienne, New Deal and the popular front
It is on a program openly interventionist, the New Deal, that the president Franklin Delano Roosevelt is elected in 1932. The American Federal state then takes an always increasing place in the economic life. In 1936, France sees the come to power of the Popular front which also wants to be him in rupture with the liberal traditions. In Germany Hitler, man little attached to freedoms, becomes chancellor in 1933.
Whereas the economic crisis is propagated, the whole of the nations protect their industries staggering by protectionist laws, doubled regular devaluations in order to start again exports. International commercial flows fall down quickly on their level of 1918, so that the crisis worsens. If the majority of the leaders agree on the advantages of free trade, they are unable, vis-a-vis the difficulties of their respective countries, to get along so that the rises of customs duties follow one another and are connected in vicious gears. The European metropolises are folded up on their empires. The Statut of Winchester of 1931 then the Ottawa agreement in 1932 make the British Commonwealth a zone of quasi free trade.
In opposition, with its neo-classic Masters, John Maynard Keynes theorizes in 1936 the imperfection of the market and preaches the intervention of the State as only solution at a way out of crisis ( general Théorie of employment, interest and currency ). Its theses are immediately disputed by Friedrich Von Hayek, but this last in the immediate future does not manage to impose its point of view.
Birth of the Welfare state
The thought of Keynes quickly will cause vocations and new economists, the keynésiens, will generalize it and extract it from the precise context of the crises to make a mode of economic regulation of it permanent. In Europe as to the United States the keynesianism will become the dominant economic thinking while the neo-classic theories for a time are eclipsed. Moreover, the politicians want to make after war a world better than that which had preceded it. In 1942, the first Report/ratio Beveridge (Social insurance and allied services) described the broad outlines of the Welfare state. This Welfare state becomes the prototype of the savings in Europe: Social security, free health system (the National Health Service of 1946 in the United Kingdom), Family benefits… the majority of the governments make full employment a priority, following in that the second Beveridge report/ratio of 1944 ( Full employment in has free society ) and less see it like one consequence than a requirement of the growth. Certain countries, like France, perennialize their planning system (adopted at the origin for the rebuilding). A managed agricultural policy is installation in Europe. Everywhere, the theory keynésienne legitimates the frequent recourse to the budget deficit. In France and in the United Kingdom from many firms are nationalized. One thus witnesses a significant retreat of the economic liberalism to the internal plan.
Return to free trade then contemporary resurrection of the economic liberalism
The globalisation of the exchanges
The ideas keynésiennes are not opposed to free trade and its advantages. Anxious to prevent that many economies are closed again on itself as in the Années 1930, and conscious of the risks of overproduction which the US economy according to war runs, the United States will encourage the economic opening of the borders. In October 1947 the agreements of GATT ( General Agreement one Tariffs and Trade ), become World Trade organization in 1995 are signed by 23 country. This organization had as an end to provide a framework to future the negotiations on lowerings of customs duties between the Member States. The purpose of rounds of negotiations, broken up into regular meetings are to regulate the possible litigations and to grant multilateral and nondiscriminatory tariff concessions (clause of reciprocity). Of an average of 40% in 1945, the customs duties were brought back to on average 5% in 1990.
The United States supported also the efforts of economic integration of the European countries in particular via the constitution of OEEC in 1948. After a progressive evolution, ECSC (1951) with the European Union (1992) the Western Europe became the model of economic integration and regional zone of free trade more succeeded. However the less advanced zones of free trade multiplied throughout the world. ALENA in North America in 1994, the Mercosur in Latin America in 1991, ASEAN in Asia.
The customs duties are from now on around 3% on average, but of many nontariff forms of protectionism appeared: different standards between the medical States, requirements, where still famous the cultural Exception French.
Between 1948 and 1971 the volume world trade at summer multiplied by five, in spite of the oil crises it continued to grow much more quickly than the production during the following decades. In 2000, it believed according to OMC of more than 12% in only one year. The transnational firms create subsidiary companies throughout the world in order to benefit from the advantages of each country (according to in that analysis of Ricardo). Under their aegis, a international Division of work is set up.
to also see on this subject the article: economic Universalization
Rebirth of the economic liberalism
To read the article Néolibéralisme
End of the Years 1960 mark first first steps of the crisis which the oil crisis of 1973 reveals. The incapacity of the State to answer the brutal rise of unemployment in the Années 1970 makes it possible to the liberal economists to find their last audience. The ideas of Hayek and the Austrian École end up taking the scale of those of Keynes, while new currents of liberal thinkers (new traditional, monetarists…) appear and explain how the intervention of the State led to the crisis, inflation and imbalance. In 1979, the election of Margaret Thatcher to the head of the the United Kingdom announces large change in this country where the State and the “trade-union dictatorship” became the main actors of the economic life. Between 1979 and 1996 the number of civils servant passes of more than 700.000 to less than 500.000. The British large companies are privatisés (they represented nearly 12% of GDP). The rate of unionization passes from 52% in 1980 to approximately 30% in 1996. The government reduces the share of the national debt in the GDP. On their return to the capacity, the members of the Labor Party reccueillent certain heritages of the thatcherism in their new program with center aiming of the “third way”.
In 1980, Ronald Reagan, converted as Margaret Thatcher with the ideas of Friedrich Hayek are elected with the presidency of the the United States. Reagan had very strong personal convictions on the importance of a marginal rate of reasonable imposition, which it had acquired when, actor, it was prone toa rate higher than 90%; he imagined that the dissuasive effect applied to all. This experiment strongly inspires its measurements of fall of the taxes. He is opposed also firmly to the inflation, of which he considers the unjust effects. For him, the economic problems cannot be solved by the State, the State being itself the problem. On the councils of the “Supply siders”, heirs to J-B Say which make supports offer (of the production) the priority, the American administration starts again private initiative by tax lowerings without precedent.
In France, the first Socialist government of Ve republic, under the presidency of François Mitterrand, elected to the topic of the “rupture with capitalism”, finally does not apply its program separately the nationalizations of the first years, and blocks the wages in order to restore monetary balance. This policy, which does nothing but solve the problem of inflation, is pursued privatization of the majority of the great groups under governments successively of right-hand side and lefts.
The fall of the Soviet Union in 1991 causes the progressive liberalization of the economies of the Russia and the countries of Europe of the East. The China converts with the market economy and joined OMC (in 2001).
References
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