The Age of George III
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Britain's wealth depended on trade. Pitt was the first PM to implement a freer trade economic policy. Pitt was a disciple of Adam Smith, who had published his Wealth of Nations in 1776. Pitt tried to put Smith's ideas into practice, altering British economic philosophy, at least temporarily but setting a precedent. The traditional 17th and 18th century economic philosophy was that of mercantilism or protectionism which involved the exclusiveness of trade. Protectionism resulted in heavy duties being incurred on colonial goods. Also, and partly to help Government revenue, partly, heavy import and export duties were levied on most goods to encourage home producers.
Protectionism is useful if:
Protectionism does not work if
Britain fell into both of these latter categories by the 1780s
Monopolies figure heavily in protectionism by developing their own area of influence. This is effective in the early days of development and was continued until Pitt's time. The East India Company was a monopoly company.
Wealth of Nations said that protection was wrong and advocated Free Trade. Smith thought that monopolies should be abolished in favour of free market forces because free trade created competition, cheaper goods and higher profits. This was also the philosophy of the new industrialists because Britain had the lead in world commerce and industry because there were many specialist manufacturing industries. These created a demand for more imported raw materials such as cotton, tobacco, coffee and sugar. The tariff barriers were restrictive and prevented the expansion of these companies. However, free trade would lead to a fall in indirect taxation where most Government revenue came from so some form of direct taxation would eventually prove necessary.
The 1786 Vergennes (or Eden) Treaty was a commercial treaty with France negotiated successfully in the face of strong opposition from leading statesmen in both countries. It was so favourable to Britain that even the Foxite opposition was amazed and stunned into silence.
By the terms of the treaty, Britain was left free to negotiate cheaper duties with Spain and Portugal for oil, wines and spirits because there was no clause limiting British trade solely with France. France wanted British goods and the French market for British exporters potential was huge. If Britain was at war, the chances were that she would be fighting France, but could take all France's trade if France got involved in a European war. France gained little, although the Treaty operated until 1792, when Britain got involved in the Revolutionary Wars. Napoleon blamed the Treaty for bankrupting France and causing the Revolution. Although the treaty did not last very long, the experiment proved to be worthwhile and Huskisson built on it in the 1820s with a series of reciprocity treaties.
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Last modified 5 January, 2011
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