From mid-17th century, England was powerful enough to impose the Navigation Acts (1651, 1662), barring foreign traders from its colonies and giving British shipping “the monopoly of the trade of their own country” (imports), either “by absolute prohibitions” or “heavy burdens” on others (Adam Smith, who reviews these measures with mixed reservations and approval). The “twin goals” of these initiatives were “strategic power and economic wealth through shipping and colonial monopoly,” the
Cambridge Economic History of Europe
relates. Britain's goal in the Anglo-Dutch wars from 1652 to 1674 was to restrict or destroy Dutch trade and shipping and gain control over the lucrative slave trade. The focus was the Atlantic, where the colonies of the New World offered enormous riches. The Acts and wars expanded the trading areas dominated by English merchants, who were able to enrich themselves through the slave trade and their “plunder-trade with America, Africa and Asia” (Hill), assisted by “state-sponsored colonial wars” and the various devices of economic management by which state power has forged the way to private wealth and a particular form of development shaped by its requirements.
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As Adam Smith observed, European success was a tribute to its mastery of the means and immersion in the culture of violence. “Warfare in India was still a sport,” John Keay observes: “in Europe it had become a science.” From a European perspective, the global conquests were “small wars,” and were so considered by military authorities, Geoffrey Parker writes, pointing out that “Cortés conquered Mexico with perhaps 500 Spaniards; Pizarro overthrew the Inca empire with less than 200; and the entire Portuguese empire [from Japan to southern Africa] was administered and defended by less than 10,000 Europeans.” Robert Clive was outnumbered 10 to 1 at the crucial battle of Plassey in 1757, which opened the way to the takeover of Bengal by the East India Company, then to British rule over India. A few years later the British were able to reduce the numerical odds against them by mobilizing native mercenaries, who constituted 90 percent of the British forces that held India and also formed the core of the British armies that invaded China in the mid-19th century. The failure of the North American colonies to provide “military force towards the support of Empire” was one of Adam Smith's main reasons for advocating that Britain should “free herself” from them.
Europeans “fought to kill,” and they bad the means to satisfy their blood lust. In the American colonies, the natives were astonished by the savagery of the Spanish and British. “Meanwhile, on the other side of the world, the peoples of Indonesia were equally appalled by the all-destructive fury of European warfare,” Parker adds. Europeans had put far behind them the days described by a 12th century Spanish pilgrim to Mecca, when “The warriors are engaged in their wars, while the people are at ease.” The Europeans may have come to trade, but they stayed to conquer: “trade cannot be maintained without war, nor war without trade,” one of the Dutch conquerors of the East Indies wrote in 1614. Only China and Japan were able to keep the West out at the time, because “they already knew the rules of the game.” European domination of the world “relied critically upon the constant use of force,” Parker writes: “It was thanks to their military superiority, rather than to any social, moral or natural advantage, that the white peoples of the world managed to create and control, however briefly, the first global hegemony in History.”
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The temporal qualification is open to question.
“Twentieth-century historians can agree that it was usually the Europeans who broke violently into Asian trading systems that had been relatively peaceful before their arrival,” James Tracy writes, summarizing the scholarly study of merchant empires that he edited. They brought state trading to a region of relatively free markets, “open to all who came in peace, under terms that were widely known and generally accepted.” Their violent entry into this world brought a “combination, characteristically if not uniquely European, of state power and trading interest, whether in the form of an arm of the state that conducts trade, or a trading company that behaves like a state.” “The principal feature that differentiates European enterprises from indigenous trade networks in various parts of the globe,” he concludes, is that the Europeans “organized their major commercial ventures either as an extension of the state...or as autonomous trading companies...which were endowed with many of the characteristics of a state,” and were backed by the centralized power of the home country.
Portugal paved the way by extracting a tribute from Asian trade, “first creating a threat of violence to Asian shipping,” then selling protection from the threat they posed while providing no further service in return: “in modern terms,” Pearson notes, “this was precisely a protection racket.” Portugal's more powerful European adversaries took over, with more effective use of violence and more sophisticated measures of management and control. The Portuguese had not “radically altered the structure of [the] traditional system of trade,” but it was “smashed to pieces” by the Dutch. The English and Dutch companies “used force in a much more selective, in fact rational way” than their Portuguese predecessors: “it was used only for commercial ends...the bottom line was always the balance sheet.” The force at their command, and its domestic base, was far superior as well. The British, not succumbing to the “Dutch disease,” largely displaced their major rivals. The leading role of state power and violence is a notable feature in the “essential” contribution of the colonies to “the state of Europe” that Adam Smith described, as in its internal development.
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Britain has been considered an exception to the crucial role of state power and violence in economic development; the British liberal tradition held this to be the secret of its success. The assumptions are challenged in a valuable reinterpretation of Britain's rise to power by John Brewer. Britain's emergence “as the military
Wunderkind
of the age” in the late 17th and early 18th centuries, exercising its authority “often brutally and barbarously” over subject peoples in distant lands, he concludes, coincided with an “astonishing transformation in British government, one which put muscle on the bones of the British body politic.” Contrary to the liberal tradition, Britain in this period became a “strong state,” “a fiscal-military state,” thanks to “a radical increase in taxation” and “a sizable public administration devoted to organizing the fiscal and military activities of the state.” The state became “the largest single actor in the economy,” one of Europe's most powerful states “judged by the criteria of the ability to take pounds out of people's pockets and to put soldiers in the field and sailors on the high seas.” “Lobbies, trade organizations, groups of merchants and financiers, fought or combined with one another to take advantage of the protection afforded by the greatest of economic creatures, the state.”
During this period, the British tax rate reached a level twice as high as France (traditionally considered the over-centralized all-powerful state), and the discrepancy was widening. Public debt grew rapidly as well. By the end of the 18th century, taxes absorbed almost a quarter of per capita income, rising to over a third during the Napoleonic wars. “Judged both absolutely and comparatively, Britain was heavily taxed.” The growth of tax receipts was over five times as high as economic growth in the period when the military
Wunderkind
emerged. Part of the reason was efficiency; to an extent unusual in Europe, tax collection was a central government function. Another factor was the greater legitimacy of the more democratic state. The role of “the largest economic actor in eighteenth-century Britain, namely the state,” was not merely to conquer: rather, it acted to promote exports, limit imports, and in general pursue the protectionist import-substitution policies that have opened the way to industrial “take-off” from England to South Korea.
9
Excessive liberalism apparently contributed to the collapse of the Spanish imperial system. It was too open, permitting “merchants, often non-Spanish, to operate in the entrails of its empire” and allowing “the benefits to pass through and out of Spain.” The Dutch, in contrast, kept the benefits “very firmly in the country,” while “indigenous merchants were the empire and were the state,” Pearson concludes. Britain pursued similar policies of economic nationalism, assigning rights to state-chartered monopolies, first (1581) for Turkey and the entire Middle East, then the rest of Asia and North America. In return for the grant of rights, the quasi-state companies provided regular payments to the Crown, an arrangement that would be replaced by more direct engagement of state power. As British trade and profit rapidly increased in the 18th century, government regulation remained important: “Less restrictions in the nineteenth century were a result of English dominance, not its cause,” Pearson observes.
Adam Smith may have eloquently enumerated the harmful impact on the people of England of “the wretched spirit of monopoly,” in his bitter condemnations of the East India Company. But his theoretical analysis was not the cause of its decline. The “honorable Company” fell victim to the confidence of British industrialists, particularly the textile manufacturers who had been protected from the “unfair” competition of Indian textiles, but called for deregulation once they convinced themselves that they could win a “fair competition,” having undermined their rivals in the colonies by recourse to state power and violence, and used their new wealth and power for mechanization and improved supply of cotton. In contemporary terms, once they had established a “level playing field” to their incontestable advantage, nothing seemed more high-minded than an “open world” with no irrational and arbitrary interference with the honest entrepreneur, seeking the welfare of all.
10
Those who expect to win the game can be counted on to laud the rules of “free competition”âwhich, however, they never fail to bend to their interests. To mention only the most obvious lapse, the apostles of economic liberalism have never contemplated permitting the “free circulation of labor...from place to place,” one of the foundations of freedom of trade, as Adam Smith stressed.
There is little historical basis for much of the reigning belief on the impact of Adam Smith's doctrines; for example, Chicago economist George Stigler's assertion that Smith “convinced England” from 1850 to1930 “of the merits of free international trade.” What “convinced England”âmore accurately, Englishmen who held the reinsâwas the perception that “free international trade” (within limits) would serve their interests; “it was not until 1846, by which time the British manufacturing interests were sufficiently powerful, that Parliament was prepared for the revolution” of free trade, Richard Morris notes. What convinced England of the contrary by 1930 was the realization that those days had passed. Unable to compete with Japan, Britain effectively barred it from trade with the Commonwealth, including India; the United States followed suit in its lesser empire, as did the Dutch. These were significant factors leading to the Pacific war, as Japan set forth to emulate its powerful predecessors, having naively adopted their liberal doctrines only to discover that they were a fraud, imposed upon the weak, accepted by the strong only when they are useful. So it has always been.
11
Stigler may well be right, however, that Smith “certainly convinced all subsequent economists.” If so, that is a comment on the dangers of illegitimate idealization that isolates some inquiry from factors that crucially affect its subject matter, a problem familiar in the sciences; in this case, separation of abstract inquiry into the wealth of nations from questions of power: Who decides, and for whom? We return to the point as Adam Smith himself understood it.
The wealth of the colonies returned to Britain, creating huge fortunes. By 1700, the East India Company accounted for “above half the trade of the nation,” one contemporary critic commented. Through the following half-century, Keay writes, its shares became the “equivalent of a gilt-edged security, much sought after by trustees, charities and foreign investors.” The rapid growth of wealth and power set the stage for outright conquest and imperial rule. British officials, merchants, and investors “amassed vast fortunes,” gaining “wealth beyond the dreams of avarice” (Parker). That was particularly true in Bengal, which, Keay continues, “was destabilized and impoverished by a disastrous experiment in sponsored government”âone of the many “experiments” in the Third World that have not exactly redounded to the benefit of the experimental subjects. Two English historians of India, Edward Thompson and G.T. Garrett, described the early history of British India as “perhaps the world's high-water mark of graft”: “a gold-lust unequalled since the hysteria that took hold of the Spaniards of Cortes' and Pizzaro's age filled the English mind. Bengal in particular was not to know peace again until she has been bled white.” It is significant, they remark, that one of the Hindustani words that has become part of the English language is “loot.”
12
The fate of Bengal brings out essential elements of the global conquest. Calcutta and Bangladesh are now the very symbols of misery and despair. In contrast, European warrior-merchants saw Bengal as one of the richest prizes in the world. An early English visitor described it as “a wonderful land, whose richness and abundance neither war, pestilence, nor oppression could destroy.” Well before, the Moroccan traveller Ibn Battuta had described Bengal as “a country of great extent, and one in which rice is extremely abundant. Indeed, I have seen no region of the earth in which provisions are so plentiful.” In 1757, the same year as Plassey, Clive described the textile center of Dacca as “extensive, populous, and rich as the city of London”; by 1840 its population had fallen from 150,000 to 30,000, Sir Charles Trevelyan testified before the Select Committee of the House of Lords, “and the jungle and malaria are fast encroaching...Dacca, the Manchester of India, has fallen from a very flourishing town to a very poor and small town.” It is now the capital of Bangladesh.