408. Failure of the Continental System.—England scarcely needed political allies in a contest in which the material interests of most of the people of Europe were allied with her own. The obstacles to commerce with the Continent caused the prices of articles like the colonial wares to rise to double, triple, even tenfold, what they were in England. The reader will remember that the practical beginnings of beet sugar manufacture can be dated from this period of dearth. Commercial forces were too strong for any political restrictions, and smugglers brought goods to the people who wanted and would pay for them, despite all penalties. At a time (1809-10) when all the great ports from Riga to Triest were closed, goods reached the interior still, through the Greek islands, Malta, parts of Spain, the Channel Islands, and Heligoland. Napoleon himself had to recognize the impossibility of making the Continental System effective. He clad his own armies in English cloth, sold constantly licenses to evade his own decrees, and sought to win the profits away from smugglers by allowing the introduction of colonial products on payment of duties equivalent to the smugglers’ gain. Certain branches of production and manufacture were furthered on the Continent by the restrictions on trade, but the Continental System, on the whole, resulted only in loss to the people and in the defeat of Napoleon’s own plans. It furnishes a signal example of the futility of attempting to crush a sea power like England, without meeting it on its own element.
409. Effect of the war on England and France.—The effect of the war and the prohibitive system was necessarily injurious to British commerce, and showed itself in a decline of British exports. The injury, however, far from being mortal, was extremely slight. Smuggling was incessant, and if one opening to British trade was closed another was quickly found. When Holland became allied to France and hence closed to England, British exports to Germany increased rapidly; the German people were not consuming more British goods, but acted merely as distributing agents, through whom the goods reached their old markets. Napoleon could not forever coerce a whole continent, and his blockade was generally evaded in northern Europe, with the connivance of the governments, before 1810. On the last day of that year the Czar of Russia bade open defiance to the Continental System; and it crumbled beyond hope of repair after the failure of the Moscow campaign. Even the losses which England suffered were made up, in considerable part, by the profits which she secured from the expansion of neutral trade. England gained valuable additions to her maritime empire (Malta, Heligoland, Cape Colony, Ceylon, etc.), and entered the nineteenth century with her commercial primacy established beyond dispute. France, on the other hand, emerged from the struggle weakened at home and shorn still further of possessions abroad. Hayti (or San Domingo) had been lost by a native revolt; the Louisiana territory had been ceded to the United States; and some of her small islands had passed into the hands of England.
410. Other wars of the nineteenth century.—After the conclusion of this great war the world enjoyed a long interval of peace. The nineteenth century has been marked by internal political development, rather than by international strife. The growth of the spirit of nationality, the idea that people conscious of likeness in language, religion, etc., should be grouped under the same government, has led to several sharp struggles between states; but these have, in general, been short and of no great commercial significance. More important, from the commercial standpoint, has been the revolution in South America, which has enabled the people, formerly bound by the restrictions of the colonial system, to establish independent trade relations. Commerce was seriously affected, moreover, by the Civil War in the United States, which closed to the world for a few years its great source of supply of cotton. Other countries proved incapable of supplying the lack; a considerable portion of the English people (one fifth, it was said then), supported by the cotton manufacture, suffered from the stoppage of work; and consumers were forced to adopt other clothing materials, and did not, for many years, use cotton as freely as before. Of the other wars preceding 1914 the only one that had great economic significance was the war between Japan and Russia in 1905, which brought into the rank of the great powers an Asiatic country with far-reaching commercial ambitions.
411. Removal of old obstacles to commerce.—The greatest benefit which Europe enjoyed from the French Revolution and the ensuing wars was the removal of many remnants of feudal institutions which had persisted, petrified as it were, to this late period of history. Of these remnants none was more harmful to commerce than the feudal institution of the staple. This flourished especially in the German states, and resulted in depriving of a large part of their commercial value the German rivers, which were by nature the cheapest and best means of transportation. It was impossible to travel far on any German river without reaching a staple, where the boatman was subject to delay, inconvenience, and considerable expense. On the Rhine, for instance, there were thirty-two stations of this character where dues were still levied in 1800. As far as regarded the effect on commerce the flow of the rivers might as well have been interrupted by cataracts. It was a great step in progress, therefore, when these interruptions were removed, as little by little they were in the first half of the nineteenth century. The principle of free navigation was extended gradually to include important international rivers like the Scheldt and the Danube. The reader will remember that in the Middle Ages various countries tried to monopolize parts of the sea itself. Denmark had kept its hold on the straits leading into the Baltic Sea, and required ships to stop at Elsinore and pay toll, until 1857, when it sold out its right to levy toll on the payment of a lump sum by the countries interested in free navigation.
412. Customs tariffs; the prohibitive system.—The most important topic which remains to be considered in this chapter is that of commercial policy as shown in the customs tariffs. The details of tariff policy must be left to later chapters, in which the different states will be considered separately; place can be found here only for a brief review of the general course of development, and for a consideration of some of the factors which explain the great changes.
Only a few years before the outbreak of the French Revolution France and England had agreed to a commercial treaty, which marked a great departure from the restrictive principles of the old mercantilist policy, and seemed to promise a new era of freedom in trade. The outbreak of war destroyed the new system almost as soon as it had been carried into effect, and changed the relations between the two states into that attitude of fierce antagonism which has been described above. The return of peace found the tariff systems of both France and England set in the old lines. The tariffs included a vast number of duties, both on imports and on exports; the rates were high and often prohibitive; the protection of national shipping by navigation acts was maintained. Similar characteristics marked the tariffs of other European states, and this period may fitly be termed the era of prohibition in recent commercial policy.
413. The period of free trade, 1860-1880.—The prohibitive system held its ground, however, only by force of custom and by the active support of small groups whom it favored. The writings of French and English economists, of whom Adam Smith was the great representative, had convinced thinking men that the people and countries of Europe would benefit by greater freedom of trade, and governments waited only for favorable conditions, political and economic, to lower their customs duties. The movement toward reform was at first local, finding place especially in England and Germany. Soon after the middle of the century, however, it became general in Europe, and led to such sweeping changes that the period extending, roughly, from 1860 to 1880 has often been called the free-trade period in commercial history. This was the time when the technical inventions, especially the application of steam on a large scale to manufactures and transportation, were first showing their full power in increasing productiveness. At this time a state which secluded itself commercially seemed to be renouncing the chance to share in the great movement of progress. Industrial states sought markets for their manufactures and sources of supply for their food and raw materials. Agricultural states found the offers for their surplus products too tempting to be refused. So many profitable openings appeared everywhere that there was little dread of competition and little call for protection.
414. Reduction of customs duties.—In this period, therefore, there was a general overhauling of the old tariffs. Export duties disappeared. Prohibitions were dropped, and import duties were reduced. Narrow restrictions, designed to favor merchant shipping, were reformed. Liberal commercial treaties became the fashion, and Europe was soon covered with a network of them after England and France had set the example in 1860. These treaties became of especial importance because they now included generally the clause of “the most favored nation,” by which a participant in the treaty was assured that it should share, without delay and without need of recompense, in any favors that might be granted to other states. The slightest concession, therefore, effected a general reduction of duties in Europe. An English author, writing in 1882, found that in the period from 1860 to 1880 tariffs had been raised in only two of the sixteen European states. Apart from these two exceptions, which were not important, tariffs had undergone substantial reductions; of 2,140 items existing in 1860 only 136 had been raised, while 900 had remained the same and no less than 1,104 had either been lowered or removed altogether from the list. These reforms were undoubtedly responsible in part for the remarkable growth of the world’s commerce in the period which they covered.
415. The return to protection.—The free-trade movement has been followed, in the last quarter of the century, by a decided reaction to protection. Since about 1880 increase in the customs duties has been the rule in Europe, and reductions have been exceptional. No single cause can be held responsible for this change. The growth of national feeling and of international tension in Europe since 1870 has undoubtedly disposed governments to listen more readily to the complaints of citizens who suffer from competition, and ask for protection against foreigners. Competition, moreover, has widened its range of action and become more keen. The countries which gained new markets for their agricultural products, and flourished during the period of development of steam transportation in Europe, have lost their foreign markets and find their home markets menaced, as the transportation system has grown to embrace other continents and now brings cheap products from across the seas to the door of the European consumer. Countries which willingly accepted the manufactures of advanced industrial states when their own industries were in a primitive stage of development have since aspired to establish modern factories of their own at home.
In spite of the return to higher duties the present protectionist policy has retained many of the changes of the period of free trade. The statesmen who guide the commercial policy of European countries have discarded prohibitions, and use duties discriminating against particular countries only exceptionally. Down to the close of the century they have continued to grant to nations in general the treatment accorded to the most favored nation, and in some ways have extended the scope of this practice. The general level of duties, moreover, though it may seem high in comparison even with the general average of the period of prohibitions, offers a much less effective bar to trade, because of the reduction of the expense of transportation. It is impossible to state accurately the relative height of various tariffs. The following table gives an estimate of the tariffs on some important manufactures towards the close of the century: Russia 130 per cent, United States 72 per cent, France 30 per cent, Germany 25 per cent, Belgium 13 per cent, New Zealand 9 per cent, etc.