Despite the relative decline in state capacity and involvement in industrial development during this period, however, the importance of tariff policy and cartel policy for the development of heavy industries at the time should not be underestimated. Tilly points out that tariffs made cartels more workable in heavy industries, thus enabling the firms to invest and innovate more aggressively.[124] Moreover, during this period, Germany pioneered modern social policy, which was important in maintaining social peace – and thus promoting investment – in a newly-unified country that was politically, religiously and regionally very divided (social welfare institutions are discussed below, Chapter 3, section 3.2.6.A.).
2.2.4. France
As with Germany, there is an enduring myth about French economic policy. This is the view, propagated mainly by British Liberal opinion, that France has always been a state-led economy – a kind of antithesis to laissez-faire Britain. This characterization may largely apply to the pre-Revolutionary period and to the post-Second World War period; it does not however apply to the rest of the country’s history.
French economic policy in the pre-Revolutionary period – often known as Colbertism after Jean-Baptiste Colbert (1619-83), the famous finance minister under Louis XIV – was certainly highly interventionist. For example, given its relative technological backwardness vis-a-vis Britain in the early eighteenth century, the French state tried to recruit skilled workers from Britain on a large scale.[125] In addition, like other European states at the time, the French state in the period leading up to the Revolution encouraged industrial espionage by offering bounties to those who procured target technologies, even appointing an official under the euphemistic title of Inspector-General of Foreign Manufactures, whose main task was to organize industrial espionage (see below, section 2.3.3). It is partly through these government efforts that France closed the technology gap with Britain, becoming successfully industrialized by the time of the Revolution.[126]
The Revolution upset this course significantly. Milward and Saul argue that it brought about a marked shift in French government economic policy, because ‘the destruction of absolutism seemed connected in the minds of the revolutionaries with the introduction of a more laissez-faire system’.[127] In the immediate post-Revolutionary years, there were some efforts to promote industry, and especially technological, development by various governments, particularly that of Napoleon. This was done through schemes such as the organization of industrial exhibitions, public competitions for the invention of specific machinery and the creation of business associations to facilitate consultation with the government.[128]
After the fall of Napoleon, the laissez-faire policy regime became firmly established, and persisted until the Second World War. The limitations of this regime are regarded by many historians as one of the major sources of the country’s relative industrial stagnation during the nineteenth century.[129]
This can be best illustrated with reference to trade policy. Challenging the conventional wisdom that pitches free-trade Britain against protectionist France during the nineteenth century, Nye examines detailed empirical evidence and concludes that ‘France’s trade regime was more liberal than that of Great Britain throughout most of the nineteenth century, even in the period from 1840 to 1860 [the alleged beginning of fully-fledged free trade in Britain.[130] Table 2.2, which comes from Nye, shows that when measured by net customs revenue as a percentage of net import values (a standard measure of protectionism, especially among historians), France was always less protectionist than Britain between 1821 and 1875, particularly up until the early 1860s.[131] As we can see from the table, the contrast in the degree of protectionism implemented by the two countries was particularly large in the earlier periods, but was still significant in the decades following Britain’s shift to free trade in 1846 with the repeal of the Corn Laws.[132]
| Table 2.2 | ||
|---|---|---|
| Protectionism in Britain and France, 1821-1913 | ||
| (measured by net customs revenue as a percentage of net import values) | ||
| Years | Britain | France |
| 1821-5 | 53.1 | 20.3 |
| 1826-30 | 47.2 | 22.6 |
| 1831-5 | 40.5 | 21.5 |
| 1836-40 | 30.9 | 18.0 |
| 1841-5 | 32.2 | 17.9 |
| 1846-50 | 25.3 | 17.2 |
| 1851-5 | 19.5 | 13.2 |
| 1856-60 | 15.0 | 10.0 |
| 1861-5 | 11.5 | 5.9 |
| 1866-70 | 8.9 | 3.8 |
| 1871-5 | 6.7 | 5.3 |
| 1876-80 | 6.1 | 6.6 |
| 1881-5 | 5.9 | 7.5 |
| 1886-90 | 6.1 | 8.3 |
| 1891-5 | 5.5 | 10.6 |
| 1896-1900 | 5.3 | 10.2 |
| 1901-5 | 7.0 | 8.8 |
| 1906-10 | 5.9 | 8.0 |
| 1911-13 | 5.4 | 8.8 |
Source: Nye 1991, p. 26, Table I.
It is interesting to note that the partial exception to this century-and-a-half-long period of liberalism in France, namely, the rule of Napoleon III (1848-70), was the only period of economic dynamism in France during this period. Under Napoleon III, the French state actively encouraged infrastructural developments and established various institutions of research and teaching. It also contributed to the modernization of the country’s financial sector by granting limited liability to, investment in and overseeing of modern, large-scale financial institutions like Credit Mobilier, Credit Foncier (the Land Bank) and Credit Lyonnais.[133]
On the trade policy front, Napoleon III signed the famous Anglo-French trade treaty (the Cobden-Chevalier treaty) of 1860, which reduced French tariffs quite substantially and heralded a period of trade liberalism on the Continent that lasted until 1879.[134] However, as we can see from Table 2.2, the degree of protectionism in France was already quite low on the eve of the treaty (lower than in Britain at the time), and therefore the reduction in protectionism that resulted from this treaty was relatively minor.
125
However, this attempt, organized by the legendary Scottish Financier John Law of Mississippi Company Fame, backfired and prompted the British in 1719 to introduce a ban on the emigration of skilled workers, and especially on the attempt to recruit such workers for jobs abroad (‘suborning’) (see section 2.3.3 for further details).
131
In apparent contradiction to table 2.1, table 2.2 shows that there was still some protection left in the British economy. This is because total free trade prevailed only for manufactured products (as shown in table 2.1) and there were still some ‘revenue tariffs’ for luxury goods left (which are reflected in table 2.2). See the first quote from Fielden 1969 towards the end of section 2.2.1 for further details.
132
Irwin 1993 questions Nye’s conclusion on a number of grounds. The most important of his criticisms is that most British tariffs that remained after the 1840s were ‘revenue tariffs’ imposed on luxury items, and therefore had little impact on industrial incentives. However, in his reply, Nye 1993 points out that even revenue tariffs can have a significant impact on industrial structure and that it was only, in the 1860s that British tariffs became mainly revenue tariffs, thus making his claim valid at least until 1860.
133
Trebilcock 1981, p. 184; Bury 1964, chapter 4; Cameron 1953. Cameron describes