The Wealth Of A Nation

Adolf Hitler, the spirit of Dunkirk, Independence Day and, last week, Caesar and Brutus -- Brexit has had its share of historical references. Strangely forgotten, however, has been a defining chapter in the history of modern Britain and the world: when Britain was a free trade empire, from 1846 to 1931. There has been a collective amnesia about what Britain actually did with its commerce when it was, as we have heard it called so often lately, "a great trading nation". A look at that history offers a useful perspective and points to major challenges ahead.

The British empire meant conquest, violence and racism. But when it came to trade it threw its door wide open to Europe and the rest of the world, for almost a century, from the repeal of the corn laws in 1846 to the world recession in 1931. We have heard a lot in recent months about Britain's glorious past and the need to "take back control". Why, then, did Britain, at the height of its power, choose unilateral free trade instead of commercial bullying? Proposals for "tariff reform" and trade bargaining were defeated at the general elections of 1906, 1910 and, again, in 1923.

One reason was economic. Britain relied on cheap imports to produce more profitable manufactured exports. The City's interests, too, were more global than imperial. But just as decisive was that free traders told a powerful popular story, and it was this: the British people had advanced from hunger and oppression to cheap food and freedom. In the years before the First World War, free trade was linked to social reform, democratic empowerment and a sense that the state should be fair and neutral. Free trade, in this view, protected housewives (still without the vote) and the public against vested interests and a state that would cater to them.

All that "Remain" had was an economic argument. It had no story, let alone a popular one about the wider benefits of openness. It entirely forgot that economic arguments, however strong and valid, do not win by themselves. Austerity, moreover, meant that the case for openness lacked the support of social reform that Churchill and Lloyd George could count on in the Edwardian era.

We have heard a lot about Churchill in these last few months. It is worth remembering that he was a passionate free trader and in 1904 crossed the floor, from the Conservatives to the Liberals, in defense of the open door. "Broad economic principles", he said in a great speech in Manchester in 1904, "always in the end defeat the sharp devices of expediency; science is better than sleight of hand; justice outwits intrigues; free imports can contend with hostile tariffs; honesty is, in fact, the policy that pays the best. [Cheers.]"

When Britain finally did abandon free trade in 1931 and "took control", it negotiated a number of trade agreements with the Dominions, Scandinavian countries, Poland and Argentina. The results ranged from miniscule to miserable. Negotiations with Poland, for example, involved over a hundred meetings but yielded less than half a million pounds' worth of British products, according to the Board of Trade. Britain made greater advances in Argentina, but only because the collapse of the world beef market left Argentina with few cards to play. Britain had far less control than one might imagine, even at a time when it was more powerful than now.

23 June 2016 is a watershed, but it is not entirely that Britain is entering unchartered waters. The Conservatives have an unrivaled track record of tearing themselves apart over trade. British and European commentators have stressed that it will be difficult for Britain to secure access to Europe's single market without also accepting the EU's core principle of freedom of movement. But there is a second tension that deserves our attention, and that is between "take back control" and the pledge to restore democratic sovereignty.

We can agree that the EU suffers from a democratic deficit and needs reform. The single market may be free on the inside but is protectionist on the outside. But taking back control over trade is not automatically democratic and it risks even greater interference with trade. More often, it has the opposite effect. Trade deals involve striking bargains, give and take, preferences to some and sacrifices for others. It means lobbies and vested interests fighting over who gets the best deal. Who will win out: fishermen or the aerospace industry which relies on foreign equipment, car manufacturers or pharmaceutical companies, farmers or scientists?

Not everyone can be a winner -- who will decide, and who will protect the public interest against sectional interests? Trade negotiations are not the stuff of open democracy -- they take place behind closed doors, and not always with democratic partners. The Transatlantic Trade and Investment Partnership has attracted a great deal of criticism for those reasons. TTIP will be remembered as a walk in the park compared to what will happen if Britain starts to negotiate its own treaties with the rest of the world. Here was a main reason why both British voters and the British state rejected trade deals 110 years ago: they understood that the legitimacy of Westminster and democratic sovereignty would suffer if government policy became the football of organized interests. Free trade minimized social conflict.

And, let's remember, it needs two to tango. Sure, Britain might strike its own deal with China. But what then about the United States, Canada and other allies? You can only give away so many preferences. If they are extended to everyone, preferences become meaningless. Trade deals have a tendency to lead to trade wars and international friction. That does not mean that free trade is always best or that an active trade policy is necessarily bad. It is possible to build up so-called "infant industries" behind a shelter, but at a cost. Above all, it requires a long-term strategy of development, which no one seems to have.

This historic chapter has fundamental lessons for today. Brexit is not just about economic costs and benefits. The fall of the pound, worried investors and anxieties about house prices -- of course, these matter. But a nation's wealth is about more than money. Economy and politics go hand in hand. The public deserves to know how any new trade policy will be squared with the demands of democracy, fairness and transparency. This is not just a question for the 48 percent or the 52 percent. It should be a crucial question for the 100 percent.

Frank Trentmann is the author of Empire of Things, and helped launch UNLIMITED* (www.unlimited.world) at Oxford University.