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• Preface
• The Manchester School of Economics
• Introduction: Manchester Revisited
• 1: What the School Was
• 2: The Economists and the School
• 3: The Corn Laws
• 4: The Campaign For Repeal
• 5: Why the Laws Were Repealed
• 6: The School After Repeal
• Bibliography
• I.: The School, Its Leaders, and the Ideas
• II.: The Repeal Campaign
• The League
• The Struggle
• III.: The Period, the People, and Their Ideas
• The Economist
• The Non-conformist
• IV.: The Economists On the Corn Laws

3

The Corn Laws

The greatest obstacle in the way of free trade was the corn laws. When the Manchester School began its campaign against them, the regulation of foreign trade in corn was more than 150 years old. In most of that time their purpose had been to assure an adequate supply of corn and to stabilize its price. From about 1660 to 1765, there usually was a domestic surplus, and the regulation took the form of an export bounty; but Britain thereafter became an importing country, and the bounty, though not repealed, was inconsequential. During the Napoleonic Wars, the domestic demand for corn increased while the supply from abroad diminished; and the government urged the farmers to increase their output by bringing more land into cultivation and by using all lands more intensively—to sink it under the iron of machinery. (The development was noticed by Ricardo in his distinction between the extensive and the intensive margin of cultivation.) An import duty was imposed in 1804, but was inoperative because the domestic price never fell to the amount at which the duty was effective. When the war ended in 1815, the price of corn was driven down by a number of factors—an increase of imports and the decline in the domestic price level were two—and the farmers clamored for protection. Thereafter, protection instead of price stability became the major purpose of the corn laws. To the free traders, protection and monopoly were synonymous, and in their campaign “protectionist” and “monopolist” were interchangeable terms of censure. The Act of 1804 had imposed a fixed duty when wheat was selling for less than 63 shillings a quarter. In 1815, it was amended so that imports were prohibited entirely when the price was under 80 shillings, and were admitted freely when over that. At all times under that act, wheat (and other grain) was admitted duty free to bonded warehouses, from which it could be taken when the price rose above 80 shillings. When it was, the price then often fell precipitously. The agricultural interests complained that the practice gave them neither stability, which had been the purpose of the old system, nor protection, which they had been promised under the new. In 1828, a flexible duty was introduced—the “sliding scale”—by which the duty varied inversely with the price of corn, rising as the price fell and decreasing as the price rose. The intent was to combine price stability with protection, but again neither was secured. The price fluctuations actually were made greater, because as the domestic price climbed to near the amount at which the duty would be reduced, the foreign supply diminished until the price was reached, after which it increased substantially and drove the price down. In 1841, Lord John Russell, acting for the Whig government, proposed to replace the system with a fixed duty of 8 shillings. The proposal was rejected by both the protectionists and the free traders; the government fell, and Peel established a Conservative ministry. In 1842 he secured a modification of the sliding scale by which the duty, instead of changing with every small change in the domestic price, changed only when the price changed by a larger amount.

What the effect of the different duties was on the domestic price and what proportion they bore to it, I do not know. In 1838, Cobden said that the law of 10 years earlier had imposed an effective 100 per cent ad valorem duty, but he offered no proof. M’Culloch made it much smaller, but his arithmetic is quite unconvincing. In 1840, Deacon Hume said the price of wheat was 10 shillings a quarter higher because of the tariff. None of the systems proposed after 1815 was satisfactory to the farmers, and their discontent cannot be dismissed as the automatic response of a vested interest, because none of the systems provided continuous protection or price stability. Peel’s law endured until he proposed its repeal which was carried in 1846 and became effective in 1849. The operation of the corn laws was, however, suspended by executive order in 1846, and from that time onward there was free trade in corn.

There were five groups in the country on whom the laws had a noticeable economic effect or who believed themselves to be affected. Thanks to the rule of Ricardian economics, the way in which each group was actually affected was not always the same as the way it was believed to be affected. The groups were the landlords, their tenants, the farm laborers, and the manufacturers, and their workers. The laws affected everyone of course by reducing the economy’s total output (which was the classical argument against protection), but the effect was too abstract to interest most people except when they noticed it in the high price of food. We usually do get the right answers to policy questions by looking, as Henry Simons once said, to the consumer interest. But ordinarily, the consumer interest does not look to itself until it is made to by the producers whose aims are in harmony with it. And that is what the free traders did.

The landlords believed their rents would be lowered by free trade, and they were supported by the rent theory of the day, a fact they were aware of and made use of. They had it on Ricardo’s authority that repeal would lower prices, take land out of cultivation, and reduce rents. In this instance, as in another (the effect of the laws on wages), classical economic theory was more useful to the protectionists than to the free traders, in its normative aspects only less than in its positive elements. It was the positive elements that counted for more, because while there could be argument over whether or not rents should fall, there could be no disputing that under free trade they would fall. So much the landlords believed, but they probably were mistaken in believing their rents would fall immediately. Rents in fact changed quite slowly, and it was the tenants (and the small farmers who worked their own land) who immediately noticed the changes in the price of grain; and the changes were very great—e.g., wheat varied between 39 and 70 shillings per quarter between 1830 and 1840. A part of the burden was put on the farm laborers whose wages must have been affected but to what extent I do not know.

The manufacturers were affected in several ways or thought they were. There were businessmen in the textile industry who were utterly convinced that their wage costs were raised by the high price of corn. Supporting their conviction was the Ricardian wage doctrine; the common man’s version of it in the belief that wages were determined by the cost of living; and the Allowance system. None proved the businessmen were right. However, they probably were not altogether wrong, and that for a different reason. It is likely that money wages were not regulated wholly by the supply and demand for labor: they hardly ever are. There were large employers in the Midlands who were genuinely attentive to the welfare of their workers, and they probably took the price of bread into account when making their wage offers, which, because they affected a large part of the labor market, influenced the wages offered by others. The humane employers were not so attentive as to keep real wages constant by allowing money wages to be regulated entirely by the cost of living—they were, after all, in business for a profit—but neither did they allow their wage offers to be dictated wholly by the market. It is my impression that money wages were slightly raised by the corn laws. I have no wage statistics to support my view, and it is based on what is known of the practices of employers like the Gregs, Ashton, Ashworth, the Brights, Cobden, and other “opulent and enlightened mill-owners,” as Senior described them. None of those named, it is interesting, wanted repeal because they believed it would reduce money wages.

If my impression is correct, it follows that the corn laws made money wages slightly higher than they would have been with free trade and the same amount of employment. But if there had been free trade, there probably would have been greater factory employment and still higher money wages. It follows that the employers were partly correct who believed the laws increased their costs—“partly” because the increase was not large—and that the workers were wrong who believed repeal would lower money wages. Majority opinion of the day was different. It was that money wages were raised by high bread prices, not because of the liberality of some employers but by the mechanics of the market, and that a drop in the price of bread, which was sure to occur if the corn laws were repealed, would reduce money wages. The protectionists accused the manufacturers of wanting repeal only in order to reduce wages, and most of the workers were persuaded, because then as now they were more interested in money than in real wages. The accusation is examined below.

The more thoughtful manufacturers believed that the laws had a more important effect on the supply of foreign than on the supply of domestic textiles. They noticed that output on the Continent had been increasing since 1815 and that in Germany the increase was especially large after Prussia promoted the establishment of the customs union. They thought that the corn laws contributed to the increase (in ways explained below), and that the growth would be arrested if the Continent were brought into a system of free trade, which they believed it would be if Britain led the way. Still another important effect was on the demand for textiles. Although it could not be claimed that the laws decreased the demand for textiles over the long period, it plausibly could be claimed that from time to time they did, and that in the long period they retarded the increase of demand. By raising the price of food at home and causing more to be spent on it, the laws caused less income to be spent on textiles in the domestic market. They also, of course, limited British imports and, consequently, the foreign demand for British exports, of which about half were textiles. In these two ways, the laws made the output, employment, and wages in the textile industry less than they would have been under free trade in corn. It also was believed, and probably was true, that when there were unusually large imports of corn (as there sometimes were) there was a deflationary outflow of gold, and the demand for textiles was pulled down along with that for all goods.

In addition to their economic effects, the corn laws had political effects which probably were just as important in determining the course of the contest over repeal. It was believed that repeal would reduce the power of the landed interest, and, specifically, make it difficult for that interest to perpetuate the unequal representation in the House, whereby five or six rural voters, usually under the influence of a landlord, had as much representation as thousands in a city. It also was believed that a victory for the free traders would make the manufacturers more assertive, and that in time it also would increase the power of the working class which in the past had combined the repeal of the corn laws with its demand for the Charter. All of this is to say that it was believed, both hopefully and fearfully, that free trade would cause a substantial redistribution of political power (as well as of income), of which the salient changes would be a reorganization of the House and an extension of the franchise. That is just what did happen, and the great mover of it was Bright. It was first administered by Gladstone, a convert to free trade, and promoted by Disraeli, never a free trader, to keep the Tories from being overwhelmed, just as Peel had tried to preserve them by abolishing the corn laws. In the early and brash days of their campaign, the free traders proposed to guarantee the Duke of Buckingham his rents for 20 years if he would support them. “Ah,” Lord Nugent explained to their emissary, “but the Duke wants something else, he wants the county representation!”1 The school encouraged its followers to buy a piece of property yielding 40 shillings a year, which, by the Reform Bill of 1832, entitled them to the vote; and it created an agency expressly to gather small savings, put them into property, and give the owner the vote. When the House debated Peel’s motion to abolish the laws, Cobden made only one speech. He said that if the motion were not passed, the free traders would make thousands into property owners, and at the next election would overwhelm both parties. Peel later told Cobden that he could have parried even his power for a while, but that he had yielded because in a short time he would have been forced to. When in 1848 he heard the news of the revolution in France, he said that he had saved England from an uprising by yielding in time to the Manchester people.

[1.] Emilie I. Barrington, The Servant of All. Pages from the family, social, and political life of my father, James Wilson (London, 1927), I, 27.