1843 saw some significant events in world history: Hong Kong was proclaimed a British Crown colony, the amusement park at the Tivoli Gardens opened in Copenhagen (currently the second oldest in the world!), and The Economist published its first issue. This August is the 175th anniversary of The Economist, so it seemed a good opportunity to look back at that first issue.
Working with the Economist Intelligence Unit, Gale digitised the back issues of the archive which, at the time of writing this blog post, now runs to the end of December 2014. The first edition is rather different to a copy you would pick off a shelf today, though many of the core principles have remained the same (not least the policy of publishing articles anonymously to avoid creating bias in the reader).
In the beginning…
The Economist was founded by banker James Wilson (1805-1860) as a mouthpiece to challenge the harsh import tariffs that he believed were heavily restricting economic growth in Britain, particularly the Corn Laws (what would now be called protectionist policies). The original title spells out the aim: The Economist: or, the Political, Commercial, Agricultural, and Free-Trade Journal was an advocate of free-trade, an emerging and slightly radical economic theory at the time, brought to prominence by Adam Smith (1723-1790) and David Ricardo (1772-1823) as a challenge to the dominant mercantilist approach to trade in eighteenth-century Britain.
The Prospectus laid out the thirteen areas the journal would cover, but that comes after an opening editorial that could be considered one of the most legendary in the history of the British press: a roaring argument for the adoption of (international) free trade, based on cutting-edge economic theory (or Political Economy, as it was known at the time). The article gives powerful insight into one of the major debates of economics in the 1840s, and is a reflection of the rapidly changing relationship between business and governmental policy.
Restrictive Systems and Free Trade
In a time of massive social change during the Industrial Revolution, the concept of progress and growth were at the heart of British national thinking. However, one area that James Wilson felt had not seen any progress was economic policy, which is especially strange given the colonial expansion and rapid development of trade routes, coupled with developments in technology that made shipping and haulage increasingly quicker and efficient.
Who was to blame for this impasse? The government, The Economist suggests, and its laws that restricted trade. The restrictions placed on international trading meant that “legislation still sought to confine the country in the same swaddling clothes in which it had been wrapt [sic] a quarter of a century before” (introductory article, p.4).
The system of heavy government intervention was limiting economic growth, as the rate of consumption was growing but the rate of supply was staying the same: “The want of more trade prevents that trade we have being profitable: the excess of produce beyond the demand lessens the value of the whole producing ability and this must continue as long as no effort is made to extend our markets as our population and productive ability increase” (introductory article, p.6).
The writer (presumably Wilson) states that: “it is a serious reflection on the intelligence and wisdom of the times, that the greatest popular political influence which ever existed in this country, scarcely achieved one important act of liberation to commerce and industry” (introductory article, p.4). The ‘restrictive system’ placed on trade went against what the author saw as the ‘natural law’ of free trade, and if the “suicidal restriction and monopoly still prevails”, the social and economic consequences could be grave.
The solution proposed was to open the doors to the products of other nations: “There is no cure, there is no remedy, for all these evils but increased demand; there can be no increased demand without increased markets; and we cannot secure larger markets without an unrestricted power of exchange, and by this means add to our territory of land, as far as productive utility is concerned” (introductory article, p.7).
Then and now
In 1843, this argument, put forward in the opening editorial of The Economist, was ahead of its time. Today, variations of free trade are the norm. Though many countries will still have a certain level of protectionist policies in the form of quotas and tariffs in certain areas, bodies such as the World Trade Organisation (established in 1995) have been formed to regulate free trade across many of the world’s nations.
The argument against protectionist policies, and the advocacy of free trade as a ‘healthy’ approach to the economy, receives strong advocacy in our age. Liberalisation is seen a worthy goal (though as with any approach, it has its critics), and the once popular mercantilism is rarer in the modern climate.
After 175 years, James Wilson’s vision of free trade is shared by the majority of the world’s major nations. The Economist has moved with the times as the definition of ‘economics’ has grown to cover a more diverse range of areas than the traditional definition of Political Economy in Wilson’s time, and in doing so has become one of the most influential and respected sources of analysis around the world.