Economic policies and free trade 1812-32

Question 1

What did government policies help to do in this period?

Answer 1

Increase trade and industry

Question 2

What principles did Liverpool’s government follow?

Answer 2

Laissez faire

Question 3

Define laissez faire

Answer 3

The doctrine that the state should not interfere in the workings of the market economy

Question 4

Which two political economists developed laissez faire principles in Britain?

Answer 4

Adam Smith and David Ricardo

Question 5

Why do laissez faire principles suggest that the government should not intervene in the economy?

Answer 5

Because it believes that the law of supply and demand would allow things to settle at a place that is most efficient for the market

Question 6

Why was the governments laissez faire approach inconsistent?

Answer 6

Because they were willing to intervene with the corn laws when it protected their own interests

Question 7

How did these laissez faire principles manifest themselves in terms of government policy?

Answer 7

It translated into an active economic policy of free trade and a rejection of mercantilism in the 1820s

Question 8

Why were the budgets of 1824 and 1825 important?

Answer 8

Because they were the first to apply the principles of free trade

Question 9

What did these budgets do?

Answer 9

Freed trade from tariffs and restrictions and therefore encouraged an expansion of trade

Question 10

Who were these budgets principally the work of?

Answer 10

William Huskisson, the president of the board of trade, and J.F Robinson, the chancellor

Question 11

List some of the freeing reforms these budgets brought about

Answer 11

• Prohibitions on manufactured goods entering Britain were abolished and protective duties were reduced
• The prohibition on the import of silk goods was replaced with a 30% duty
• Raw wool could be exported for the first time

Question 12

Why were the changes to the rules around importing silk so controversial?

Answer 12

Because it threatened the existence of the fragile British silk industry

Question 13

What did the 1823 Reciprocity Act do?

Answer 13

Encouraged trade treaties with other countries on the basis of mutual tariff reduction

Question 14

Who were preferential duties set up for?

Answer 14

Raw materials from Britain’s colonies

Question 15

Give an example of preferential duties being set up for the colonies

Answer 15

Silk from India and wool from Australia

Question 16

How did Huskisson modify the Navigation Code?

Answer 16

He got rid of outdated restrictions on trading in foreign ships, but retaining the condition that trade within the British Empire was to be carried out in British ships

Question 17

What did these measures do?

Answer 17

Stimulated industry and trade bringing lower prices for manufactured goods and an increase in British exports and shipping

Question 18

What did these measures reduce?

Answer 18

Smuggling

Question 19

What happened to mercantilism towards the end of the 18th century?

Answer 19

It weakened as an economic policy

Question 20

Why was it necessary that mercantilism be replaced with free trade at this time?

Answer 20

• Because mercantile regulations were being ignored, with smuggling becoming a profitable business. Free trade removed these regulations and made smuggling unprofitable
• Free trade proved successful in and appropriate for the new age of economic expansion - as Britain’s trade grew and became more varied, it became difficult to control through tariffs

Question 21

What happened when the commercial upturn ended in 1825?

Answer 21

There was heavy criticisms of Huskisson’s free trade theories and of the Liverpool government’s economic policies

Question 22

What happened after this economic optimism vanished?

Answer 22

Banks failed, business went bankrupt and there followed the usual distress from the labouring classes at low wages and a lack of employment security

Question 23

What did Liverpool blame for this downturn?

Answer 23

The spirit of speculation

Question 24

What did the government do once the worst of the crisis was over?

Answer 24

Responded with the 1826 Bank Act

Question 25

What did the Bank Act do?

Answer 25

Made it legal for banks other than the BoE to operate as joint stock banks

Question 26

What is a joint stock bank?

Answer 26

A limited liability company that engages in banking as its trade, founded by shareholders whose liability is limited to the amount of money they subscribe - if the bank fails, they lose this and nothing more

Question 27

What was the thinking behind the Bank Act?

Answer 27

Because the previous small private banks had failed as soon as they were faced with a crisis

Question 28

What does Hilton say the commercial upturn of 1822-5 allowed GB to do?

Answer 28

It allowed us to accrue healthy enough revenues that indirect taxes could be reduced, starting with duties on foreign timber

Question 29

How does Hilton say free trade measures were received?

Answer 29

For as long as prosperity lasted, they were welcomed by the commons

Question 30

Why does Hilton think it is wrong to attribute far sightedness to Robinson and Huskisson for their free trade policies?

Answer 30

Because it was mostly a tidying up operation