Ilia Chavchavadze on Adam Smith, Free Trade, and the Future of the United States

In a previous article, we have already talked about the views of the founder of Georgian liberal thought, Prince Ilia Chavchavadze, on private property. It should be noted that his reviews were not limited to only internal issues; in 1887, Ilia dedicated a series of articles to issues related to foreign trade, including customs policy, free trade, entrepreneurship, and protectionism.

In general, he was well acquainted with the political, economic and social processes taking place in the West, and often covered them in the newspaper “Iveria” (for example, he analyzed Otto von Bismarck’s militaristic policies on the European continent, and predicted the subsequent economic hegemony of the United States). 

According to Ilia Chavchavadze, the main reason for the English power was not the abundance of the army, but economic strength. Some of the other great European powers had much larger armies, but in many cases England had a decisive say. Therefore, since that time, the main task of diplomacy was the improvement of economic conditions, finding the new markets and selling the goods. In his opinion, the states that had access to the sea (such as Spain, France, England, Italy) strived to conquer overseas lands, while the states that did not have such access (for example, Russia) fought to gain this access. 

Ilia made a sharp distinction between free trade and protectionism (of course, he preferred the former). In the beginning, he talked about the essence of free trade meaning:

Then Ilia mentioned that this doctrine was founded by Adam Smith:

Ilia was not limited to the theoretical side of Adam Smith’s teachings; he was also well acquainted with the practical steps which had been taken in this direction in England, and with the followers of this doctrine in other European countries. First, he pointed out the 1831 Anti-Corn Law League made by Richard Cobden, John Bright, and others demanding the abolition of all duties on corn imported from abroad. Ilia believed that this was the first attack on protectionism. Still in his belief, when Robert Peel became the British Prime Minister in 1841 (second term), and Wellington and Aberdeen were the ministers with him, “then this scientific theory made its way into life itself” (Iveria, 1887, №115: 1). He also prepared the ground for repeal of the Navigation Acts. Supporters of this doctrine soon appeared in other European countries. In this regard, Chavchavadze referred to Frédéric Bastiat, Michel Chevalier, Louis-Antoine Garnier-Pagès and others. Over time, this doctrine gained an international momentum. Based on it, in 1860 the free trade agreement between France and Great Britain was prepared (it was called the Cobden-Chevalier Treaty). 

Ilia Chavchavadze was convinced that free trade brings countries closer politically and culturally, while protectionism gives the opposite result. According to him, the free trade system was more effective before France and Germany confronted each other (the author implies the Franco-Prussian War of 1870-1871). At first, Bismarck supported the policy of free trade, but then turned to protectionism, blocking the circulation of the French goods in Germany through customs duties. At the same time, Ilia noted that countries that are not at war with each other cannot directly close the door to each other, as this is not a commonplace in European politics. Instead, they use customs policy, mainly increasing the price of goods and customs duty. In this regards, Ilia said:

Customs violence is of great importance for the economic life of the country. Many things depend on the amount of the customs duty, both for other states and for the duty-imposing state. This duty can cause a lot of harm both at home and abroad, if one behaves carelessly and recklessly. Because it is so, today each rival state is trying to hurt its opponent with this regard, and to impose so many duties on the goods, with abundance of which the state lives and is fed, that it does not have the means to sell them in the market of the duty-imposing state (Iveria, 1887, №112: 1).  

In 1889, Ilia Chavchavadze published another letter entitled as the “European militarism and the future of America” in which he showed significant differences between European countries and the United States in terms of actions, methods, and goals. The author pointed out that Europe always aspired to arms race while the United States focused on economic prosperity and wealth. He said that “for more than one hundred and fifty years, the eminent French philosopher Montesquieu complained that Europe is gradually increasing its armies and guns, sparing no expense for this, and thereby impoverishing itself”, and that “no one paid attention to Montesquieu’s words, and today the European states are sitting at gunpoint and are ready to drown each other in whirlwind of blood. Such a state of affairs in Europe is followed by the impoverishment of the nations”. 

Ilia claimed that the United States was superior to European countries in trade and industry, and he hoped that it would soon dominate Europe economically. According to him, “as time goes by, the ruthlessness and hatred between the nations is getting stronger and stronger in Europe. America presents us with a completely different picture. The American states intend to establish fraternal union of states, for which the Congress will meet in the city of New York” (Ilia meant the First International Conference of American States (1889-1890), which established the Pan-American Union. The focal point of the Conference dealt with arbitration of territorial and financial claims, codification of international law, etc.). Finally, Ilia concluded that “there is no doubt that the American states will be settled in a brotherly manner, while Europe, which is obsessed with militarism, will be beaten even more economically, and America will inherit the world leadership”.