Liberalism at Large Read online

  This study follows the Economist through the sequence of its editors, whose tenures organize the narrative, tracing the tone and direction that each has given to the paper. Variation in the texture of the story is one consequence, reflecting contrasts between different incumbents and their eras – yielding, for example, here a finer-grained sense of British politics or newsroom disputes, there a broader brush on wars or economic conjunctures. I start with a detailed contextual account of the political origins of the Economist and its links to the organized campaign for free trade in mid-nineteenth-century Britain, and a consideration of the extraordinary figure of its founder, James Wilson – whose life and writings have been edulcorated in the few latter-day accounts we have of him. Then I pass to the paper’s famous second editor, Walter Bagehot, whose output and reputation are in a class by themselves in the history of the Economist, overtopping it, so that here uniquely it becomes the story of effectively one person. This sets the stage for the paper’s emergence as the voice of British finance capital at its global peak, punctuated by the exceptional tenure of Francis Hirst, who opposed Britain’s entry into the First World War and was fired in 1916. Disputes between interwar editor Walter Layton and John Maynard Keynes over the gold standard and how to respond to the Depression presage Britain’s global decline and the passing of the imperial sceptre to the United States. After the paper’s turn to America during the Second World War came an all-out commitment to Washington as the Cold War escalated, a fealty consummated in the eras of Ronald Reagan and George W. Bush. Moving into the present, the story ends with what is now – rightly or wrongly – widely perceived as the contemporary crisis of liberalism, and looks at the ways the Economist has contributed to and tried to surmount it. In doing so, it pulls back to survey the long history of liberalism according to the Economist, and lays out a counter-narrative to which its actual record points. No one book can have the last word on the Economist. But I hope enough is said in these pages to alter whatever may come after them.

  This eBook is licensed to Karim Mamdani, [email protected] on 12/02/2019

  I

  PAX BRITANNICA

  This eBook is licensed to Karim Mamdani, [email protected] on 12/02/2019

  1

  Free Trade Empire

  From Hawick to Calcutta

  The 1830s and 1840s were the most tumultuous decades in the history of modern Britain: during this period, a social order forged in the seventeenth century came closer to being overturned than at any subsequent point. Yet in the end it bequeathed that order, albeit in modified form, to the present. Pressures bubbled during the Napoleonic Wars, and nearly boiled over after 1815, as twenty years of rising prices gave way to sharp trade depressions, deflation and discontent, amidst the upheavals of the Industrial Revolution. From 1816 to 1819, protest spread in waves through northern manufacturing towns and rural parishes, with the smashing of power-looms and threshing machines, and bread riots involving laid-off operatives and farm labourers. The famous clash at St Peters Field on 16 August 1819 showed how quickly tensions in the country became political: reformers called a rally to demand parliamentary representation for the large towns and votes for working men, and more than 60,000 people packed into the centre of Manchester. Peterloo was the name given to the killings that followed, an ironic nod to the brave hussars who charged an unarmed crowd.

  A decade later dissent once more assumed an organized form, this time briefly uniting the middle and working classes in urban political unions, just as agricultural workers were exploding into riot throughout the south of England. For the aristocracy that dominated the House of Commons, the three years from 1829 threatened an upheaval whose terrors it associated with the French Revolution. In 1832 a Reform Bill was passed whose purpose was to reconcile a rising middle class, ‘the intelligent and independent portion of the community’, with an oligarchic system and so divert it from any alliance with the masses below.1 In this at least it succeeded. Radical MPs from the industrial towns trickled into the Commons, which continued to divide along the same Whig-Tory party lines.

  But electoral concessions did not stop pressures for reform, even if those who were aggrieved now pursued their goals separately, and as often at odds with each other. Agitation revived at the onset of the economic crisis of 1837, with the almost simultaneous birth of Chartism and the Anti-Corn Law League. The Chartists focused popular anger into six demands, including universal male suffrage and the ballot; what Engels called the ‘first proletarian party’ mobilized new factory workers and once skilled craftsmen now threatened by penury behind it. But the strikes it bred were swiftly repressed, and its petitions fizzled out.2 Based in the manufacturing middle-class, the Anti-Corn Law League was both more ‘respectable’ and far more effective. Avoiding any broader issues, what it demanded was the repeal of the laws that British landowners had imposed in 1815 to keep foreign competition in wheat out of the country, and domestic prices high. This aristocratic tariff squeezed the industrial cotton masters of Lancashire during a severe depression, and obstructed their pursuit of export markets. In the League they created a formidable machine to overturn agrarian protection and move Britain toward unilateral free trade. If its programme was much narrower than that of Chartism, its organizing capacity – drawing in not only manufacturers, merchants and middle-class professionals, but a good many workers too, attracted by its promise of cheaper bread – greatly outstripped it.

  Between 1839 and 1843 the League petitioned parliament over 16,000 times, collecting nearly six million signatures. From a Manchester warehouse it shipped 9 million pamphlets, posters, newspapers, almanacs and every other kind of printed matter in 1843 alone. Lecturers fanned out to hundreds of local chapters across the country. There were banquets, balls, conventions, tea parties, bazaars – precursors to the great exhibitions, whose celebrations of technical progress drew hundreds of thousands of visitors. In 1845 Covent Garden was dressed up as a Gothic hall, with industrial displays, libraries, raffles, puppet shows, and stands selling Anti-Corn Law-themed crockery, tablecloths, thimbles, handkerchiefs, scarves, razors and stickers to seal letters at the post office: ‘Free communication with all parts of the empire is good: free trade with all parts of the world will be still better.’ The money involved was staggering: a budget of £25,000 in the first three years, £50,000 in 1842–1843, £100,000 in both 1844 and 1845, with a goal of £250,000 (or £29 million in today’s money) for 1846.3 By then a pressure group seeded in a single chamber of commerce, controlled by factory owners in search of lower labour costs at home and new markets abroad, had convinced much of the rest of the country that repeal was vitally in its interest too, as a master-key to general prosperity. It had also shown how far the issue of free trade could travel, and the passions it aroused. Consciously echoing earlier agitation against the slave trade, and its dissenting and evangelical overtones, the League built links abroad – including to American free-traders, who nonetheless remained a minority in the US well into the twentieth century.4 In no other country would the forces that came together under the banner of the League prove so successful, or enduring, as in Britain.5

  Credit for repeal of the Corn Laws, when it came in 1846, went to one League leader above all, Richard Cobden. A calico printer turned politician, Cobden had risen from a clerk in a City of London warehouse to the smoggy heights of Manchester’s cottonopolis: in 1836, five years after moving from commission to factory production, his firm had £150,000 in turnover, with profits of £23,000, a hint of the sums to be made from textiles in flush times.6 John Bright was the other outspoken leader of the League, born, unlike Cobden, to a prosperous family of Quaker cotton spinners in the town of Rochdale in Lancashire. Both were eloquent and tireless proponents of free trade, though in each case – untypically – their radicalism reached past the Corn Laws, to electoral and land reform, an end to primogeniture, and religious disestablishment. ‘The colonies, army, navy and church are, with the Corn Laws, merely accessories to aristo
cratic government’, wrote Cobden in 1836. ‘John Bull has his work cut out for the next fifty years to purge his house of those impurities!’7 Long before victory over the Corn Laws was in sight, however, Cobden and Bright met James Wilson, a Scottish hat manufacturer and author, whose powerful vision of a free trade world, first set out in 1839, gave their campaign its winning argument.

  James Wilson’s Winning Argument

  Wilson was born in Hawick, a busy town in the Scottish Borders, whose River Teviot powered the textile mills that sprang up along its banks in the 1700s. His father, William, a devout Quaker, owned one of these establishments and secured from it a very respectable livelihood. His mother, Elizabeth, died giving birth for the fifteenth time in 1815, leaving five surviving daughters and five sons, of whom James, born in 1805, was the fourth. His education was brief. For four years he attended a school run by the Society of Friends in Ackworth where, an aunt recalled, he was ‘exceedingly clever … but never excelled in play’. The austerity there agreed with him: at fifteen he wanted to become a schoolmaster, though he soon thought better of it. After a year at an Essex seminary he wrote home to his parents, ‘I would rather be the most menial servant in my father’s mill than be a teacher.’ He and his older brother were apprenticed instead to a hatmaker, a business their father eventually bought them.

  It was during this period, from ages sixteen to nineteen, that Wilson seems to have read most of the authors on whom he would later draw as editor. Adam Smith, James Mill, Thomas Tooke, David Ricardo and the Frenchman Jean-Baptiste Say supplied a mix of moral philosophy and political economy.8 The title he later chose for his paper indicates how far these fields of inquiry overlapped. ‘Economist’ had yet to acquire its modern meaning; its sense was ‘the economizer’, he who does not waste money and manages resources efficiently. Wilson was a talented economizer. Walter Bagehot described his approach to intellectual matters in a memorial. ‘For some years at least he was in the habit of reading a good deal, very often till late at night. It was indeed then that he acquired most of the knowledge of books he ever possessed. In later life he was much too busy to be a regular reader, and he never acquired the habit of catching easily the contents of books or even of articles in the interstices of other occupations. Whatever he did, he did thoroughly. He would not read even an article in a newspaper if he could well help doing so.’

  These habits may seem strange in someone Bagehot also described as a ‘great belief producer’, but were in fact the precondition for his passionate faith. ‘He was not an intolerant person but the qualities he tolerated least easily were flightiness and inconsistency of purpose. He had furnished his mind, so to say, with fixed principles, and he hated the notion of a mind which was unfurnished.’9 Wilson was already a busy, practical man of affairs before his twentieth birthday, with all the theoretical knowledge about political economy he considered useful. In 1824 he and his brother left Hawick to set up Wilson, Erwin and Wilson in London, each with a further £2,000 of paternal capital in pocket. His father must have been extremely wealthy to give such generous gifts – the equivalent today of around £400,000 – to just two of his sons. In 1831 Wilson bought out his partners, renaming the hatter James Wilson & Co, and the following year Wilson married Elizabeth Preston and so into a line of Yorkshire gentry then living in Newcastle, members of the Church of England. His conversion to Anglicanism opened the way for his nuptials and a career in politics. Four years later Wilson and his new family moved from a house near the factory in Southwark to a mansion in Dulwich Place. By 1837 Wilson had amassed a fortune of £25,000. But, in a sign of the speculative financial turn his business interests were taking, that year he lost most of his wealth betting on the price of indigo, which fell when he had expected it to rise. The firm was on the line: in a global financial panic, with unlimited liability, he rushed to satisfy his creditors. This he managed to do, though the manner in which he mortgaged certain assets to raise capital raised awkward questions later on.10

  Wilson refused to despair over this setback. Instead he began to investigate what he saw as their general cause, publishing his first pamphlet in 1839, Influences of the Corn Laws as Affecting All Classes of the Community, and Particularly the Landed Interests. Cobden and Bright were impressed with this text, which also marked a turning point in the repeal debate, in arguing that free trade would usher in an organic harmony of all economic interests. The aim and effect of repeal was not to remove the advantages of the landed interests, as both those who were for and those who were against it had been saying since at least 1815. ‘We cannot too much lament and deprecate the spirit of violence and exaggeration with which this subject has always been approached.’ Rather it was protection – a flawed, unnatural system of government interference with commerce – that was the enemy, ‘prejudicial to all classes of the community’.11 It was not a matter for ‘class enmity … the interest of all classes was the same’, and Wilson spoke privately, on this score, of ‘the rubbish they have been talking at Manchester’.12 It is unlikely Cobden and Bright were ever won over to this line of thinking, so different from their broadsides against the parasitism of rent-seeking aristocrats. Cobden even ventured a small criticism at the time. ‘I think you have lost sight of one gain to the aristocratic land-lords … the political power arising out of the present state of their tenantry – and political power in this country has been pecuniary gain.’13

  Whatever its flaws, however, the pamphlet proved strategically invaluable. The League and the Leeds Mercury (a leading voice of provincial Whiggism) reprinted it. Cobden praised Wilson for ‘labouring to prove to the Landlords that they may safely do justice to others without endangering their own interests.’14 J. R. McCulloch, the chief disciple of David Ricardo, called it ‘one of the best and most reasonable of the late tracts in favour of unconditional repeal’.15 It was even quoted by certain Tories, then the party of protection, including the prime minister Sir Robert Peel. Such was its power to transform debate and attract formerly committed foes of free trade in the countryside that, for a time, even Cobden adopted its language. ‘I am afraid, if we must confess the truth, that most of us entered upon this struggle with the belief that we had some distinct class interest in the question, and that we should carry it by a manifestation of our will’, he told a Manchester crowd in 1843. ‘If there is one thing which more than another has elevated and dignified and ennobled this agitation, it is, we have found, that every interest and every object which every part of the community can justly seek, harmonize perfectly with the views of the Anti-Corn Law League.’16 In Wilson the League discovered that in pursuing its own class interests it was pursuing those of all classes.

  Yet it is just as easy to see the appeal his early tracts against protection held out to enterprising landowners. In Influences, his clearest point was conveyed in statistical tables which claimed to show that production costs in England were competitive with Europe; given other variables, like soil conditions and cost of transport, foreign grain was unlikely to flood the home market.17 Still more significant, however, were the theoretical foundations for this claim. In contrast to Ricardo and Thomas Malthus he did not see class conflict as an inherent fact of economic life: from the former he discarded or modified the theory of marginal rents and wages, and from the latter the pessimistic forecast that population always outpaces food supply. Ricardo suggested that landed capital gained at the expense of industrial capital, and Malthus that working-class wages tended towards the bare minimum necessary for survival. Wilson favoured a model of rapid growth, in which rent, profits and wages all rose in tandem – provided that a free trade system was in place, allowing Britain to exchange its finished goods for the raw materials of less advanced nations. The less advanced nations could then buy even more from Britain. Given such a system, Ricardo had written, ‘it is difficult to say where the limit is at which you could cease to accumulate wealth and to derive profit from its exploit’.18 If this blueprint for growth owed much to Ricardo, however, th
e universal identity of class interests it presaged belonged to Adam Smith.

  Wilson posited a theory of price fluctuations to explain a status quo that only appeared to benefit agriculture at the expense of capital and labour. High grain prices ensured by protective tariffs encouraged farmers to over-cultivate during good times, only to see their surplus grain mouldering during subsequent crashes. Worse, falling prices meant a reverse cycle of abandoned fields and diminishing investment. As prices began to rise again the home grower had little to sell; foreign wheat was then called in and it reaped the profits. Landowners suffered nearly as much, faced with the unpalatable options of accepting steeply reduced rents, ruining their tenants without being able to find new ones, or taking over the fields themselves.19 Manufacturing would also be served by reform, though not in the way many Leaguers assumed. Repeal was not going to lower the price of provisions or labour. Quite the contrary, since prices were bound to climb in step with the general prosperity attendant upon a more productive application of labour and capital and the rise in exports. What of the workers? Price swings were, finally, most regrettable for their effect on ‘the moral and political condition of the labouring population of all kinds.’ No one could forget the terror which swept the countryside during the last crisis: ‘the awful and mysterious midnight fires … anonymous letters; secret societies to fan and inflame the worst passions; highway robberies and personal attacks.’ And all this carried out by the indigent peasants whose miseries ‘were really much more apt to excite our pity than our blame’. Factory workers were even more cruelly used, lulled by ‘the temporary possession of comforts and luxuries far beyond what their average condition will enable them to support’.20