How left-wingers abandoned free trade

FOR MOST of modern political history, free trade has been a radical idea. The Economist was founded in 1843 to campaign against the Corn Laws, tariffs on Britain’s grain imports which kept food expensive for the poor while enriching landowners. We were allied with the Anti-Corn Law League, a group formed in Manchester and led by Richard Cobden, a pacifist who saw tearing down trade barriers as the ultimate anti-nationalist, anti-imperialist project. But Cobdenism was so radical—populist, even—that James Wilson, our founder, tried to keep the League at arm’s length. He would convince the elites that food tariffs should be abolished. Cobdenism was for the masses; its disciples would later pair the principles of “Marx and Manchester”.

In “Pax Economica”, Marc-William Palen of the University of Exeter chronicles the history of left-wing free traders. They are a breed that is now almost extinct, but remnants of their influence are everywhere. He traces the tradition of thought from Cobden and Henry George, an advocate of land taxes in the late 19th century, through to Cordell Hull, Franklin Roosevelt’s secretary of state, and other internationalists who helped build the rules-based world order in the mid-20th century.

The Manchester viewpoint duelled with the “American school” of Alexander Hamilton and “German historical school” ideas of Friedrich List, which argued for protecting domestic manufacturers. Marx himself supported free trade, albeit only as a step in capitalist development before the proletarian revolution (he called the Anti-Corn Law League a “squint-eyed set of Manchester humbugs”). Cobden thought no revolution was necessary. Free trade would usher in a global Utopia in which all boundaries—nations, races, classes—would be broken down. Peace would reign (hence “Pax Economica”).

Where did the left-wing free traders go? Today’s progressives, like the right’s economic nationalists, have turned towards protectionism. Both sides increasingly disdain markets, which enjoyed a burst of freedom in the 1990s and 2000s. President Joe Biden favours “Buy American” clauses and recently announced big tariffs on Chinese electric vehicles. Britain’s Labour Party opposes what it calls “hyperglobalisation”. Even some prominent economists, including Angus Deaton, now doubt many of the benefits of trade.

In Mr Palen’s telling, the world was on its way to realising Cobden’s vision after the second world war, when international institutions, such as the IMF and the un, were built. But later in the century the free-trade cause was captured by “neoliberals” such as Ronald Reagan and Margaret Thatcher who, he claims, prioritised free enterprise above other freedoms, supported authoritarian-but-capitalist regimes and used the institutions visionaries had built to impose austere “Washington Consensus” policies on the developing world.

But not much of his familiar critique of the supposed neoliberal era matches the facts. Far from working against the interests of the world’s poor, the era of globalisation saw more than 800m people lift themselves out of poverty in China. The Washington Consensus did not fail. After 1990 low- and middle-income countries began to enjoy catch-up growth, closing the gap with the rich world. Mr Palen writes that after the Reagan and Thatcher revolutions the world was “becoming more unequal” when the opposite is true: global inequality—surely the only kind that should matter to a cosmopolitan—has fallen since 1980. A recent paper by Maxim Pinkovskiy of the Federal Reserve Bank of New York and three co-authors finds that, even measured within individual countries, inequality has mostly been flat since 1990.

Like many critics of economic policy after the 1980s, Mr Palen also claims that “free enterprise displaced the welfare state”. In fact redistribution grew in America because of tax credits and the expansion of publicly provided health care. In 1979 the bottom fifth of American earners received means-tested transfers worth on average 32% of their pre-tax income. By 2019 the figure had more than doubled, to 65%. And though it is true that Western governments have hardly been Cobdenite pacifists, in 2005 the world did enjoy a low in the global death rate from state-based conflict, providing some fleeting evidence for the idea that a globalised economy might be a more peaceful one.

The biggest challenge for Manchester-school ideas has been the world’s recent descent into a new cold war. At the turn of the century President Bill Clinton and others made a Cobdenite prediction: that China’s integration into the global trading system would cause it to turn towards democracy. Instead, growth in China has so far unleashed a mercantilist power that has become more authoritarian, and in turn inspired economic nationalism in the West, which Mr Palen rightly laments.

China’s ability hitherto to sever the link between trade and freedom is the biggest failure of Cobdenism in practice, not the record of the late 20th century, during which the benefits of free trade for the world’s poor were manifest. The modern left has been part of the failure to defend that progress. As a result, on all sides of the political spectrum supporting free trade once again feels radical. ■