Great Powers Can Have Tariffs Or Die

There's No Middle Ground

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In the mid-19th century, particularly from the 1850s-1870s, England was not only at the peak of her prosperity, but was a power of the sort the rest of the world could only imitate.

Her factories pumped out goods sold for immense profits around the world, both in the empire and without, and the innovation behind them had only America as a near rival. Her navies ruled the seven seas with nary a challenger in sight, blasting to bits those like the Chinese who tried to resist.¹ Her landed society and all supported by it — from the farm laborers to lords, farmers to village tradesmen — was more prosperous than it ever had been or would be.² She was the leading merchant marine, the leading railroad builder, and the leading empire, and she set the standard lesser mortals of nations could merely imitate.

Then came the decline.

Much like the slowly decaying columns that grace the spines of Gibbon’s famous “Decline and Fall of the Roman Empire,” the decline was neither sudden nor all at once, but did roll on near-inexorably over the following decades.

First came the Agricultural Depression,³ which wreaked much havoc in the countryside and hollowed out all levels of country society, from the now near-starvation laborers to the increasingly impoverished lords.

Next came the wealth taxes, death taxes, income taxes, and regulations of Churchill, Lloyd George, and Asquith of 1909-11.⁴ These further hollowed out traditional society and pushed increasing amounts of wealth and power into the hands of financiers.

Then came World War I, a war England had no reason to be in but which drained her of her best men, her wealth, and her imperial vigor nonetheless. At the end of it she had nearly a million men dead, over a million and a half wounded, and a country on the precipice of self-immolation.

By the time the Empire was at its greatest extent in the 1920s, a hollow victory given the increasing despondency and impoverishment of the population, England was somehow in a worse position than she found herself in when the war ended. Namely, Churchill’s botched attempt to return to the pre-war gold standard⁵ further obliterated England’s export industries and led to a class war of the sort the 1926 General Strike epitomized.

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[AUDIO] Great Powers Can Have Tariffs Or Die

The last gasp of Brittania came with World War II, when a land hollowed out by years of socialist policy and a stomach-churningly expensive war just two decades before threw itself back into the breach, losing hundreds of thousands more men as its empire fell apart and every last ounce of its gold reserves, along with much of its foreign reserves, found themselves in FDR's hands.⁶

And with that came the end, the battered bits of the last pillar of empire smashing against the ground for good, though with a dull thud than one last magnificent roar of the imperial lion. Gone were the days of glory, the empire disappeared like sand falling through fingers, and the navy that once ruled the waves now would have trouble policing the Thames, much less forcing opium upon China.

So, what happened? It is not as if England had never before faced years-long, highly expensive wars before. From 1756-1815, Britannia faced a near-constant state of war that spanned the world as England fought first France, then America, then France again in conflicts spanning from Central America to Waterloo, Boston to Egypt, Jamaica to the Raj. Those decades of war cost perhaps over a billion pounds a time when money was real, leaving England with 240% of its GDP as debt when the wars finally ended in 1815. By contrast, its debt as a percentage of GDP was 270% in 1945, a relatively similar number.⁷

In short, it is not that the wars by themselves did the empire in, that the England of 1914 or 1939 found itself in an impossible situation of a sort unknown to it. William Pitt the Elder and Lord Chatham, his son, had guided the country through similar squalls a century beforehand, and it came out of them not only fine, but stronger than ever. In fact, though its debt burden was substantial, it came out of those wars able and willing to cut taxes severely, much to the benefit of the agricultural reformers like Coke of Norfolk who proceeded to make English agriculture the envy of the world in the following decades.⁸

If those wars and the debt burden associated with them - the usual reason given for England’s collapse as a power - is not what is to blame, then what is? Tariffs.

A Lack of Tariffs Destroyed England

I have written and spoken about the manifold problems caused by England’s recission of the Corn Laws before,⁹ and so won’t do so again here. In any case, while a major issue for her prosperity, they weren’t what caused the empire’s decline.

Rather, the destruction of industrial tariffs that came with the rise of the Liberal party was the issue: it was their rise to power that meant England lacked a stable market for the goods of its factories and so lost the benefit of those factories, leading to disaster in World War II.

Perfidious Liberalism

As a bit of background, before the late 1850s, England’s politics were dominated by two parties, the Tories and the Whigs.

The Tories of the day were generally motivated by a belief in hierarchy, natural order, and aristocracy. With that mindset, a prevailing one during the periods of war and into the early Victorian Age, came an acceptance of mercantilism generally, from tariffs to keeping the colonies as resource extraction hubs and captive markets for domestic industry.

The Whigs, though less supportive of policy built around enshrining hierarchy, were, regardless, supportive of tariffs,¹⁰ seeing them as necessary for national prosperity.

And so through the first six decades of the 19th century, along with all those centuries that came beforehand, English industry was protected. Both the Whigs and Tories, who shared power until the 1860s, supported tariffs, and so they were a common feature of English economic life. That, in turn, meant that England’s industrial secrets were kept secret and safe while trade was protected, so domestic producers had an inimitable advantage, and generally, the manufacturers were able to prosper. Hence England’s lead in the important aspects of the Industrial Revolution. Her mills were the first on the scene and produced textiles by the mile for markets at home and across the empire, particularly the Raj. Her inventors came up with steam power, the railways, the Bessemer process, and many more of the ideas for which the Victorian Age is known. And on and on the achievements went, many of them possible in large part because the domestic and imperial markets were protected.

Over that period, England ran into a central and unchangeable fact: the Home Islands are only so large, can only support so many people, and thus can only hold so large a market. The colonies, particularly the Raj, could help provide larger markets…but only if protected, and still then only to a point. Grain farmers in Canada, Stone Age tribes in Africa, and impoverished Indian Untouchables could only buy so many feet of cloth, pounds of steel, and hogsheads of flour. Thus, any larger country that got on track for the Industrial Revolution could, in the absence of protection, use the economies of scale provided by its much larger domestic market, paired with protection meant to keep out English goods, to create goods so cheap the English producers couldn’t compete.

At first, that was no issue. Both parties were generally supportive of industrial tariffs, and only America was anything approaching a competitor…and a distant one at that.

But then two changes came. First, as mentioned above, the Liberal Party was created and rose to power in the late 1850s and early 1860s, just as the empire was cresting in prosperity and glory, and a major plank of its platform was doing away with tariffs. Just years later, Bismarck united Germany, and on Britain’s doorstep sat a budding industrial behemoth that produced steel and coal on a scale commensurate with its size.

The confluence of those two changes was devastating. England went from being the leading industrial producer to one gradually edged out by its larger competitors, namely America and Germany. Critical to England’s deteriorating situation was that its competitors had protected markets it couldn’t touch, while Palmerston, Gladstone, and the other Liberals left England’s market open to being flooded with goods produced far more cheaply by its competitors thanks to their economies of scale.

With that came industrial decline, and with industrial decline came an increasing inability to produce the implements of war on a scale commensurate to England’s ambitions. At first, the issue was limited; at great expense, England could still produce more dreadnaughts than Germany, even with Germany’s industrial advantages.

But gradually those issues ate away at the empire and the Home Islands, with the problem becoming all the more severe as England had to buy weapons it could no longer make at the scale it needed from America in World War I to support its war effort even as American goods, from grain at the low end to cars at the upper end, put its domestic producers out of business, and thus its laboring classes out of work. All the while, the Liberals aided and abetted that destruction of British industry, claiming, as do our free traders now, that it was more “efficient” and thus good. Winston Churchill was a leading promoter of that view.

Then came disaster in World War II. Unable to produce the implements of war it needed at any real scale, particularly the mechanized equipment like trucks, planes, tanks, and automobiles, England bought them from America. But, before America entered the war, England had to pay in gold. Already limited, those gold reserves were emptied to pay for what England could no longer produce, and across the Atlantic came arms and equipment as ships full of gold went in the other direction. Even wedding rings were confiscated as Churchill’s armies armed themselves. Meanwhile, the other forms of wealth in the country, particularly dollar-denominated assets held by private parties, were confiscated and used for purchases of weapons left by retreating armies on the beaches of Dunkirk, the deserts of North Africa, and the streets of Singapore.

In the past, England would have been able to produce its own weapons and thus keep its gold and other assets in the country as the wealth of the nation. Such is what it did during the 7 Years’ War, the War of American Independence, and the Napoleonic Wars. So, though those fights proved expensive, they weren’t the ruination of the country. Its assets were intact.

Not so with the world wars, particularly the Second World War. By then, decades of Liberal-minded policy meant that English industry, once the envy of the world, had been opened up to the world and thus ruined by it. As such, the factories, mills, and works on which it once would have been able to rely weren’t there, and thus every drop of wealth left was packed on a ship and sent to America. Now it resides in Fort Knox, where America holds everything from sovereigns and Brittannias to pieces of eight and doubloons, the accumulated treasure of centuries shipped here for obsolete tanks, trucks, and planes the country that had once accumulated that gold had made itself unable to produce.

There were voices in the wilderness crying about the emergency before it came. Leopold Amery, a Conservative politician and friend of Churchill’s who was a virulent opponent of free trade, pointed this out in the interwar period and described it in depth in his memoirs, My Political Life. Telling the story through the lens of the automobile industry, Amery noted that in the beginning, it was English cars that dominated; though Rolls Royce and Bentley, luxury automakers par excellence, were the best known, for a time, there were non-luxury carmakers around as well. But they were left unprotected. And so Henry Ford in America, a nation of 100 million, took advantage of that economy of scale to produce the Model T. Imported to England with a price tag depressed by the millions of potential sales available in America, it was far cheaper than anything a domestic producer could make, and meanwhile those English producers were kept from competing on the American market by tariffs. And so, destroyed by unfair circumstances and left undefended by their callous government, they were destroyed.

That became a public problem when World War II came: those car factories that would have existed had they been protected by tariffs would have built the planes and vehicles necessary for the war effort. But because of Ford and Churchill, they no longer existed. They went out of business, were sold off, and the employees that would have worked there and known how to make such things non-existent. So instead of producing what it needed, England bought what it needed from America and bankrupted itself in the process.

Thus ended the empire. Left broke, unable to produce what it needed, swamped by foreign goods, without productive industry to tax to pay off its debt, and in the throes of class war created by the tough economic environment of free trade (a problem McKinley saved America from with tariffs),¹¹ England was a basket case in 1945 and remains one today. The empire dribbled away, the wealth never returned, and now what was once an industrial power that ruled a quarter of the world is a service economy full of real estate owned mainly by Arabs and the Chinese.

The Lesson

Therein lies the lesson for Great Powers, of which America is certainly still one. To be such a power, tariffs are necessary, as only with them can a power avoid the pitfalls shown by England, namely the problem of relying on a foreign government’s generosity in times of crisis.

America was to England a far friendlier trading partner than China would be to us in times of war, yet we rely on it even more than England relied on us. As shown by COVID, everything in America is dependent on China, from pharmaceuticals¹² to missiles.¹³ That wouldn’t last long in the case of war…particularly with China as an enemy, and even if it did, we’d find ourselves bankrupted as England was. Industry matters, and economies of scale of the sort presented by China’s population, when paired with tariff regimes of the sort it has, are disastrous for those left open to them.

America, thanks to corrupt and nefarious politicians like Mitch McConnell,¹⁴ is open to China. We had, until Trump, next to no tariffs on it while it placed immense tariffs on us, provided subsidies for its domestic producers, and stole our intellectual property. Now BYD is displacing American carmakers, Huawei underpricing our companies, and the American industrial base has been outsourced to hellholes where labor is so cheap as to be competitive with China, which often means in China.

That is a disastrous state of things. It is exactly where England found itself as the 19th century ended and the 20th began, and it will lead to the same disastrous results if we’re not willing to take the steps necessary — sky-high tariffs and equally high domestic investment — to reverse it.

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1. https://en.wikipedia.org/wiki/Opium_Wars

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5. https://www.parliament.uk/about/living-heritage/transformingsociety/private-lives/yourcountry/collections/churchillexhibition/churchill-the-orator/gold-standard/

6. Described succinctly here: https://x.com/michaelbd/status/1891992780446237137

7. The history of the debt: https://en.wikipedia.org/wiki/History_of_the_British_national_debt#World_War_II

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10. https://www.history.com/articles/whig-party

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12. https://www.yahoo.com/news/us-relies-china-key-medicines-110000319.html

13. https://thehill.com/opinion/5090860-us-china-trade-war-impact/

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