The Lie That Broke Britain

Free trade is lauded as an absolute good. But great nations know better.
From the September 2003 Trumpet Print Edition

The American people are being fooled. So are the British. The English-speaking peoples seem blind to the economic catastrophe that awaits them. How is this so?

There exists a dichotomy at present in the circle of economic theorists. One school of thought claims that the ability to consume is the proof of a nation’s wealth. The other holds that it is the ability of a nation to produce. Which of these theories truly holds water? Consider their fruits.

Take Britain. Revisionist history aside, the truth is that the British peoples never deliberately set out to aggressively build an empire. What this “nation of shopkeepers” did do is set out to trade with the world. It established global trading posts, shipping raw materials from all over the world to the home-base in Britain. These materials were manufactured into finished goods within the greatest industrial empire of the time. The finished goods were sold for domestic consumption; the surplus was exported. By the mid-1800s, Britain produced double the output of America, with Europe’s future industrial giant, Germany, not even beginning to figure in the equation.

To that point, the British held to a “Britain trade first” policy, protecting their home manufacturing base from foreign competition. The empire was self-supporting, the most wealthy collection of nations ever seen. What’s more, Britain enjoyed absolute sovereignty.

All of that changed in 1860 when “enlightened” politicians embraced the free-trade economic policies of John Stuart Mill. Competition from cheaply produced, inferior-quality, low-cost goods made in foreign countries began to flood its markets. The abandonment of protection over its home manufacturers resulted, barely 50 years later, in Britain producing less than half the output of America. By 1914, it had even been surpassed by a German industrial economy that had not existed half a century before.

Today, Britain’s trading empire, source of its past wealth, is gone, its formerly great industrial base dismantled, largely gobbled up by foreign enterprise. Even strategic services, such as its postal system, water distribution, power generation and distribution, publishing, telecommunications and port facilities, increasingly are being captured by its former enemies.

Meanwhile, what has happened to America? Consider.

In the founding days of the nation, Alexander Hamilton delivered his “Report on Manufactures.” A former aide to Washington, Hamilton had noted a profound strategic weakness during America’s war of revolution: The country had simply been dependent upon a foreign nation, France, for the provision of armaments. Hamilton determined to mend this great national weakness. “Not only the wealth, but the independence and security of a country, appear to be materially connected with the prosperity of manufactures,” he wrote. “Every nation … ought to endeavor to possess within itself all the essentials of a national supply. These comprise the means of subsistence, habitation, clothing and defense.”

Subsequent U.S. governments followed Hamilton’s dictum on national self-sufficiency for over 100 years. The result was that by the start of World War i in 1914, the U.S. had become the wealthiest single nation on Earth. As Patrick S. Buchanan rightly observes, “The self-sufficiency and industrial power Hamiltonian policies created enabled us to rearm in security, crush the Axis in four years, rebuild Europe and Japan, and outlast the Soviet empire in a Cold War, while meeting all the needs of our people” (American Conservative, Aug. 11).

But after the war, the Wilsonian philosophy of opening the U.S. home market to foreign competition started the American economy on a downhill run. With the revival of post-World War ii Japan and Europe (Germany in particular), foreign competition started to bite. What Germany and Japan had not obtained through hot war, they were largely seizing by unfettered free trade! The U.S. was rapidly changing from being a dominant net exporter to becoming a gluttonous consumer of imported goods.

The outcome? Author Pat Choate, in his recent book Agents of Influence, lists the following levels of dependence that the U.S. now has on foreign countries for the supply of strategically critical goods: metalworking machinery—51 percent; engines and power equipment—56 percent; computer equipment—70 percent; communications equipment—67 percent; semiconductors and electronics—64 percent.

The U.S. has become, once again, dependent on foreign imports to sustain its military. And it prefers to have it so! Believe it or not, both the Pentagon and U.S. industrialists joined forces in July to oppose legislation that would have required a 65 percent American content in weapons procured for the country’s defense. That is military and economic suicide!

The outcome is entirely predictable. There are precedents.

The first chancellor of Germany, Count Otto von Bismarck, understood the clear connection between industry,wealth and sovereignty. In 1834, he created a customs union, the Zollverein, as a strategic move in his quest for a German empire. He maintained that Germany must be able to feed itself and equip its armies without any reliance on foreign countries for their supply. In short, Germany formed this closed union of European trading partners for aggressive purposes—to prepare for imperial expansion by warfare.

Compare this experience with what is happening in Europe today. The German-dominated European Union has developed from a post-war protected common market into what is, already, a self-sufficient empire in the making. It has captured a global industrial base, producing wealth of a quantity that places it now in the uppermost league of federal economies. Its new constitution will establish the EU as a sovereign federal superstate, in exchange for individual member nations sacrificing their own national sovereignty.

The old Britons were right. Hamilton was right. Bismarck was right. Though the motivations of each differed, they all acknowledged a great truism currently ignored by our present leaders. In the words of Mr. Buchanan, “Free trade does to a nation what [alcoholism] does to a man: saps him first of his vitality, then his energy, then his independence, then his life.”