War, Wine, and Taxes: The Political Economy of Anglo-French Trade, 1689-1900

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Overview

"In War, Wine, and Taxes John Nye overturns the widespread belief that Britain promoted the free trade that eventually brought so many benefits in the nineteenth century. Britain, it turns out, was surprisingly protectionist, and the political economy of its tariffs has left a mark on French winemaking and on British pubs that still survives today."—Philip T. Hoffman, author of Growth in a Traditional Society: The French Countryside, 1450-1815

"The humorist Artemus Ward famously said, 'It ain't so much the things we don't know that get us into trouble. It's the things we do know that just ain't so.' Everyone knows that England was the first European nation to move, largely unilaterally, toward a free-trade regime. And everyone also knows that this was the cause of British prosperity and power. The problem is that it just ain't so, as Nye shows in this remarkable book. Using data that have long been available, but that have never been compiled and compared in any systematic manner, Nye meticulously discredits the conventional wisdom. And the history he writes of the economics of trade in beer and wine is a tour de force, well written and with as many strange characters and unexpected twists as a detective novel. It is no exaggeration to say that this is the most controversial, and possibly the most important, book on political economy yet published in the new millennium."—Michael Munger, Duke University

"Nye's arguments are novel and fresh, and they are enunciated with great gusto. He brings to bear a fine intuition and understanding of economic analysis, and he combines his economic history with a deep understanding of political economy and the complex ways in which special interests and ideology jointly affect policy decisions. His analysis of the politics and economics of protectionist legislation is quite compelling, and his handling of the data and ability to see in them something that others have missed are quite impressive."—Joel Mokyr, author of The Gifts of Athena

"Nye provides a new view of British commercial policy and its links to financing war. Historians have long studied politics, war, taxation, and trade. What they have failed to do is see how all these are connected. Nye's strength is suggesting how these stories tie together into a single story. Along the way emerges a wonderful treatment of the industrial organization of beer and wine, particularly why Britain was a nation of beer drinkers and France of wine."—Barry Weingast, Stanford University

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Editorial Reviews

European Legacy
Nye has performed a useful service by providing an accurate portrayal of the true state of the trade policy of the British government, a policy that was often at odds with the free-trade claims of thinkers and politicians.
— K. Steven Vincent
Seattle Weekly - Maggie Dutton
Nye writes 100 percent pure, uncut nonfiction to get your geek on, putting the myth of three centuries of British trade superiority on trial. Examining the protectionist tariffs the country used against the French, particularly on agriculture and wine imports, War, Wine, and Taxes casts Britain in a less liberal light than most histories. Free trade being one of the hottest topics of our age, Nye's fresh hindsight is timely.
Choice - M. Veseth
Conventional wisdom holds that Great Britain was the great free-trade hegemonic power of the 19th century...Nye's fascinating new book aims to undermine the conventional wisdom, and it does so very successfully...Nye presents interesting, well-argued analyses of Britain's trade barriers on French wine and their effect on both the domestic brewing industry and the ability of the British state to raise revenues by taxing beer.
Enterprise and Society - Nicholas Alexander
The core substance of the book is a clear, well-argued, methodically executed and explained attempt to rewrite assumptions about the realities rather than the rhetoric of British trade policy and the notion of free trade. There is always something exhilarating about an argument, especially when it is well presented. . . . It is heady stuff, and it has to be said the work makes a very convincing case for abandoning complacent, conventional assumptions. Likewise, the core contribution of the book succeeds very well in raising questions regarding the state, conceptualizations of the state, and ultimately the role of the state.
Daniel W. Drezner blog - Daniel W. Drezner
This is a very important work of economic history. . . . If you don't buy this book, it's OK. I'm sure your mother would understand . . . while she sits alone in her kitchen . . . thinking of nothing but your happiness.
European Legacy - K. Steven Vincent
Nye has performed a useful service by providing an accurate portrayal of the true state of the trade policy of the British government, a policy that was often at odds with the free-trade claims of thinkers and politicians.
From the Publisher
"Nye writes 100 percent pure, uncut nonfiction to get your geek on, putting the myth of three centuries of British trade superiority on trial. Examining the protectionist tariffs the country used against the French, particularly on agriculture and wine imports, War, Wine, and Taxes casts Britain in a less liberal light than most histories. Free trade being one of the hottest topics of our age, Nye's fresh hindsight is timely."—Maggie Dutton, Seattle Weekly

"Conventional wisdom holds that Great Britain was the great free-trade hegemonic power of the 19th century...Nye's fascinating new book aims to undermine the conventional wisdom, and it does so very successfully...Nye presents interesting, well-argued analyses of Britain's trade barriers on French wine and their effect on both the domestic brewing industry and the ability of the British state to raise revenues by taxing beer."—M. Veseth, Choice

"The core substance of the book is a clear, well-argued, methodically executed and explained attempt to rewrite assumptions about the realities rather than the rhetoric of British trade policy and the notion of free trade. There is always something exhilarating about an argument, especially when it is well presented. . . . It is heady stuff, and it has to be said the work makes a very convincing case for abandoning complacent, conventional assumptions. Likewise, the core contribution of the book succeeds very well in raising questions regarding the state, conceptualizations of the state, and ultimately the role of the state."—Nicholas Alexander, Enterprise and Society

"This is a very important work of economic history. . . . If you don't buy this book, it's OK. I'm sure your mother would understand . . . while she sits alone in her kitchen . . . thinking of nothing but your happiness."—Daniel W. Drezner, Daniel W. Drezner blog

"Nye has performed a useful service by providing an accurate portrayal of the true state of the trade policy of the British government, a policy that was often at odds with the free-trade claims of thinkers and politicians."—K. Steven Vincent, European Legacy

Seattle Weekly
Nye writes 100 percent pure, uncut nonfiction to get your geek on, putting the myth of three centuries of British trade superiority on trial. Examining the protectionist tariffs the country used against the French, particularly on agriculture and wine imports, War, Wine, and Taxes casts Britain in a less liberal light than most histories. Free trade being one of the hottest topics of our age, Nye's fresh hindsight is timely.
— Maggie Dutton
Choice
Conventional wisdom holds that Great Britain was the great free-trade hegemonic power of the 19th century...Nye's fascinating new book aims to undermine the conventional wisdom, and it does so very successfully...Nye presents interesting, well-argued analyses of Britain's trade barriers on French wine and their effect on both the domestic brewing industry and the ability of the British state to raise revenues by taxing beer.
— M. Veseth
Enterprise and Society
The core substance of the book is a clear, well-argued, methodically executed and explained attempt to rewrite assumptions about the realities rather than the rhetoric of British trade policy and the notion of free trade. There is always something exhilarating about an argument, especially when it is well presented. . . . It is heady stuff, and it has to be said the work makes a very convincing case for abandoning complacent, conventional assumptions. Likewise, the core contribution of the book succeeds very well in raising questions regarding the state, conceptualizations of the state, and ultimately the role of the state.
— Nicholas Alexander
Daniel W. Drezner blog
This is a very important work of economic history. . . . If you don't buy this book, it's OK. I'm sure your mother would understand . . . while she sits alone in her kitchen . . . thinking of nothing but your happiness.
— Daniel W. Drezner
Seattle Weekly
Nye writes 100 percent pure, uncut nonfiction to get your geek on, putting the myth of three centuries of British trade superiority on trial. Examining the protectionist tariffs the country used against the French, particularly on agriculture and wine imports, War, Wine, and Taxes casts Britain in a less liberal light than most histories. Free trade being one of the hottest topics of our age, Nye's fresh hindsight is timely.
— Maggie Dutton
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Product Details

Meet the Author

John V. C. Nye is Professor of Economics and History at Washington University in St. Louis. From the Fall of 2007, he will be Professor of Economics at George Mason University and will occupy the Frederic Bastiat Chair in Political Economy at the Mercatus Center.

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Read an Excerpt

War, Wine, and Taxes The Political Economy of Anglo-French Trade, 1689-1900
By John V.C. Nye Princeton University Press
Copyright © 2007
Princeton University Press
All right reserved.

ISBN: 978-0-691-12917-4


Chapter One Problems of Perspective: The Myth of Free Trade Britain and Fortress France

Why do the British drink beer and not wine? How did commercial tariff policy designed to protect domestic interests help the British state raise revenues to the point where Britain emerged as the leading European power of the eighteenth century? These two seemingly unrelated issues are at the heart of the one of the most important and underexplored cases in modern economic history. To understand the political economy of British wine tariffs is to open a window onto the ways in which small policy decisions can have large, long-term consequences. It provides us with an exceptional historical case with which to see how patterns of trade, consumption, and taxation are shaped by international geopolitics and the economics of special interests. But before discussing the arguments contained in this book, it might be helpful to understand something about its intellectual genesis.

This chapter lays out how British trade policy was neither so free nor so selfless as many had thought. This is done by not simply looking at British average tariffs over time but also by comparing them to the tariffs of France, who by most accounts was both less enthusiastic about free trade and more desirous ofprotecting domestic production interests. Furthermore the analysis in this chapter looks closely at which tariffs British chose to lower or remove, and which remained after the reforms of the 1840s. It will then be seen that British liberalism was wanting when measured against the yardstick of protectionist France. More significant is the fact that most of the goods that continued to be taxed were precisely those products that had been the source of mercantilist conflict a century and a half earlier. And many of the tariffs of the mercantile system that Adam Smith had so vigorously denounced remained in place and continued to serve many of the protectionist goals that had been sought as early as the mid-1600s.

Why these tariffs have been ignored and still tend to be dismissed by those making use of the story of British free trade will then be discussed. The analysis will then move to why interpreting the tariffs illustrates different conceptions of the role of trade policy and the nature of protection. All this will then serve as the starting point for the rest of the book's move backwards in time to the beginnings of the Anglo-French trade wars.

The last two decades have witnessed serious revisions in our views of modern English and French economic history. For instance, our views of the relative sizes of the state in late seventeenth and eighteenth century Britain and France have been altered by the work on the relative tax burdens in the two countries (Mathias and O'Brien, 1976a, 1976b; O'Brien, 1988). Without overturning the conventional findings of Eli Heckscher (1935), regarding the interventionist character of the French relative to the British governments, the more recent research has reversed the received wisdom concerning the relative size of the state and the average tax burden in the two nations.

Conventional wisdom still treats the nineteenth century from a perspective of strong contrasts between the two nations. England is still viewed as having had the liberal, virtually minimalist state par excellence with small government, laissez-faire at home, and free trade abroad, while France had the backward economy, dirigiste government, and was closed to trade. Why such a difference? How can we reconcile the conflicting views and what changes must have been wrought to bring about this transformation? The problems of reconciling these interpretations are made greater still when taking into account the revisionist work in economic history that has done much to diminish the perception of French economic failure in the nineteenth century. The revisions narrow the development gap between the two nations and have stimulated new thinking about the course of economic growth in the two wealthiest European nations.

The conventional literature has stressed the ideological changes in English governance beginning in the early to mid-1800s, in particular the embrace of laissez-faire as an overarching principle. Under no circumstances are the importance of this intellectual shift and its influence on the thinking of other national elites contested. But in policy terms, the changes were more gradual. The major change is supposed to have come in the area of international trade and in the move to free trade in the nineteenth century.

Paul Bairoch writes the following of the period in the Cambridge Economic History of Europe:

The situation as regards trade policy in the various European states in 1815-20 can be described as that of an ocean of protectionism surrounding a few liberal islands. The three decades between 1815 and 1846 were essentially marked by the movement towards economic liberalism in Great Britain. This remained a very limited form of liberalism until the 1840s, and thus only became effective when this country had nearly a century of indus trial development behind it and was some 40-60 years ahead of its neighbors. A few small countries, notably The Netherlands, also showed tendencies towards liberalism. But the rest of Europe developed a system of defensive, protectionist policies, directed especially against British manufactured goods. (Bairoch, 1989, p. 6)

But an examination of British and French commercial statistics suggests that the conventional wisdom is simply wrong. There is little evidence that Britain's trade was substantially more open than that of France. Very little of the existing work on British or French trade has taken a comparative perspective, and there has been little economic as opposed to political analysis of the commercial interaction between nations. Most of the economic work has focused on the volume of trade in the two nations and has taken the changing tariffs for granted as an interesting stylized fact.

When the comparison is made, the trade figures suggest that France's trade regime was more liberal than that of Great Britain throughout most of the nineteenth century, even in the period from 1840 to 1860. This is when France was said to have been struggling against her legacy of protection while Britain had already made the decision to move unilaterally to freer trade. Although some have recognized that Napoleon III had begun to liberalize France's trade regime even before the 1860 treaty of commerce, both current and contemporaneous accounts treat the period before the 1860s as protectionist in France and relatively free in Britain.

A proper reading of the evidence would suggest a more balanced, less heroic view of British trade policy, and it would underline the links between government policy in the eighteenth century and its constraining influence on government action in the nineteenth century. The demonstration that all is not well with the traditional picture of a uniquely free trade Britain in the nineteenth century rests on a simple comparison that had never been made previously. The simplest and most basic index of overall tariff levels is the nominal average tariff-that is, total tariff revenue as a fraction of the value of all imports. On the basis of the conventional stories of free trade in Britain and high tariffs in France, what would you expect the outcome to be?

The average tariff levels of both France and Britain are given from 1820 to 1900 in figure 1.1. These figures are based on the work of Imlah for the United Kingdom and Lévy-Leboyer and Bourguignon for France. They indicate quite dramatically that British average tariffs were substantially higher than those in France for the greater part of the nineteenth century. This is especially startling for the period from 1840 to 1860 after Britain began the repeal of her Corn Laws and the move to freer trade and before the 1860 Anglo-French Treaty of Commerce, thus refuting the traditional stories of a lone free trade Britain surrounded by hostile, anti-free trade nations such as France. In fact, not only was Britain's tariff higher than that of France until 1860, it was about on a par with the average tariff of the United States-a nation not known in the nineteenth century for its devotion to free trade.

Average French tariffs in the earlier period were comparable to, but lower than those in Britain after she had begun her move to free trade with the abolition of the Corn Laws. Judging by the absolute size of the fall in average tariff levels, Britain seems to have shown a much greater change in tariff levels than France. But Britain started out from much higher levels-over 50 percent-than did France, which never exceeded 25 percent in any single year. Bearing in mind the high point from which British tariff levels fell, one notes that the changes in tariffs seemed to fit the conventional chronology, beginning in the late 1820s and falling rapidly from the 1840s onward. Similarly, French tariffs steadily declined until the early 1850s and then plummeted to a low of around 3 percent in 1870-well below the minimum for Britain at any time in the nineteenth century. French tariff levels remained at quite low levels until the move back toward protection in the last ten or fifteen years of the century. British average tariff levels did not compare favorably with those of France until the 1880s and were not substantially lower for much of the time. The view of Britain as the principled free trader is most consistent with the tariff averages from the end of the nineteenth century, indicating Britain's commitment to keeping tariffs low in opposition to rising protectionist sentiment both at home and abroad. Furthermore, her movements toward free trade were magnified by the scale of her involvement in the world economy. In fact, Britain's rapid shift to freer trade was fully matched in timing and extent-and even anticipated (in the French discussions of tariff rationalization before 1830)-by the commercial restructuring taking place in France.

There is no widely accepted and perhaps no possible universal index of "partially free" trade. Either a nation admits all goods without taxes, restrictions, and supplementary domestic distortions of any sort or it deviates from the pure ideal of free trade. Into the latter category all nations fall. Thus there will always be room for argument regarding what is an "acceptable degree" of "unfree" trade. Moreover, it will always be difficult (many economists believe it to be impossible) to rank countries whose choice of restrictions are quite dissimilar. This problem plagues any comparison of Britain and France. So the point of this chapter is to demonstrate that using a number of reasonable and varied measures, France's trading regime emerges as freer than that of Britain for most of the nineteenth century. It does not argue that France's trade was freer than Britain's on every relevant margin.

The nominal average tariff is not a perfect measure of a nation's deviation from free trade, but do note that it is the common first measure (and is often the final measure) used by many authorities to discuss the relative openness or freedom of a nation's trade. Notably, both Imlah (1958) and McCloskey (1980) used just this measure in their seminal and influential discussions of Britain's move to free trade. Their common use however, does not free us from confronting the weaknesses of the measure. In particular, high tariffs on some items may lead to such a drop in their importation (as was the case with British tariffs on French wine and spirits, and French tariffs on finished textiles) that these tariffs do not receive much weight in the calculation of the averages.

A first response to this is straightforward. Reweight the tariff measures making different assumptions about the distribution of import quantities. This follows an existing adjustment in the literature; Mc-Closkey's (1980) study of British trade policy wherein a given year's tariff was recomputed using import quantity weights from other periods, in particular, years with very low tariffs. This more fully approximated the weight of a given tariff under nearly free trade conditions. In the case of prohibitions, differences in the domestic and foreign prices of certain goods were used as the upper-bound implicit weights and then applied the highest reasonable number to each category of items. In addition, one can test for the sensitivity of the French figures to large swings in import composition and tariff rates by applying the rates in every period to the import shares in every other period. Furthermore, the weights were selected in all cases to bias the calculations only against the French, choosing to ignore similar problems in Britain. When the recalculations are made, the findings are clear and unambiguous: France's average tariffs are lower by decade than those of Britain until the late 1870s and the new averages are very insensitive to changes in the weights used, often changing by only a few percentage points even if the tariff weights on textiles are biased upwards. Under no set of reasonable assumptions could the French averages be made so high as to match those of Great Britain before around 1870.

Table 1.1 presents the table used by Deirdre McCloskey, in examining the fall of British tariffs under different assumptions. Table 1.2 shows a variety of alternative calculations of French tariff rates using the trade weights from different decades drawn from the official trade statistics. (The reader may note that the figures used were actually lower than the tariff averages reported by Lévy-Leboyer and Bourguignon I used to construct the figure comparing British and French tariff rates. I cannot reconstruct their figures and so revert to material in the Tableau Décennal du Commerce.)

The French figures are robust to fairly substantial respecification. In contrast to the British figures, which change greatly depending on which weights are used, the French averages are fairly stable, partly a testimony to the low French rates and the extent to which so much of French trade was not subject to any tariff at all. In no case do the average tariffs increase by more than two to four percentage points. The numbers used in calculations were selected to bias the results upward. To deal with the problem of prohibitions on textiles, the effective tariff was assumed to be 50 percent. This figure was derived from the comparative prices on cotton yarn for the period from 1825 to 1864, calculated by O'Brien and Keyder (1978, p. 46) using an exchange rate of 25 francs to the pound. O'Brien and Keyder's figures show cotton yarn in France to be some 30 to 40 percent higher than in Britain during this period; 50 percent would seem to be a reasonable upper bound. This number is consistent with the writings of even the most fervent French protectionists who argued that a rate of 30 to 40 percent, consistently applied, would have been sufficient to defend existing producers against foreign competition. Most of the textiles excluded had fairly elastic demands and therefore faced much smaller effective tariffs. No easily comparable price series are available for wool, but woolen textile prices did not seem to be systematically higher in France than in Britain. Jean Marczewski's numbers show even a lower average price for raw wool in France than in Britain throughout the century (1965, p. xxii). At any rate, using the 50 percent markup from cotton yarn for wool is certainly an overestimate. Besides my using a high tariff rate in these cases, the use of the import composition of the 1860s and 1870s with the tariff rates for the earlier periods ignores any changes in income or responses to lowered textile prices that would have increased consumption of such products (so long as they could be imported), thus tending to overstate the weight of textiles in the recalculations. Any further adjustments that minimize the upward bias would only serve to confirm that French tariff levels averaged 10 to 15 percent for the 1840s and 1850s and 4 to 8 percent for the 1860s and 1870s. (Continues...)



Excerpted from War, Wine, and Taxes by John V.C. Nye
Copyright © 2007 by Princeton University Press. Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
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Table of Contents

Preface ix
Introduction xiii
Chapter 1: Problems of Perspective: The Myth of Free Trade Britain and Fortress France 1
Chapter 2: The History of British Economic Policy 20
Chapter 3: The Unbearable Lightness of Drink: Assessing the Effects of British Tariffs on French Wine 32
Chapter 4: The Beginnings: Trade and the Struggle for European Power in the Late 1600s 44
Chapter 5: Counterfactuals or What If? 60
Chapter 6: Wine, Beer, and Money: The Political Economy of Brewing and Eighteenth-Century British Fiscal Policy 68
Chapter 7: The Political Economy of Nineteenth-Century Trade 89
Chapter 8: Trade and Taxes in Retrospect: Were British Fiscal Exceptionalism and Economic Success Linked? 110
Appendix: Modeling the Effects of British and French Tariffs on National Income 121
Notes 145
References 159
Index 167

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