The Founding Fathers and Free Trade

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There is an ongoing small cottage industry of historical revisionism aimed at showing that America since its founding was friendly to protectionism and that this protectionism benefited the early American economy. This includes hagiographies of Henry Carey and the New American School of Economics and an attempt to tie the doctrine of free trade to the Confederacy and slavery. It is true that America drifted into protectionism early, but it is not the case that the Founding Fathers would have approved.

Take, for instance, the Declaration of Independence itself, which condemns King George “[f]or cutting off our trade with all parts of the world.” Much of the agitation about commerce before the Revolution concerned British protectionist policies, such as Parliament granting the East India Company a  monopoly on tea.

George Washington was particularly concerned with British regulation of trade, for the very personal reason that his successful businesses could fall victim to it. As my colleague John Berlau puts it in his book George Washington, Entrepreneur:

Throughout the 1760s, Washington watched an increasingly interventionist British government frustrate the efforts of entrepreneurs like himself, and he became increasingly concerned that Britain’s power to levy taxes and impose regulations on the colonists without their consent could effectively shut down his gristmill and other enterprises.

John also describes the problems of the Iron Act and other mercantilist policies aimed at protecting British “infant industries” at the very beginning of the industrial revolution. The founding fathers were well aware of how these policies hurt Americans, and as John notes, Washington himself had read and made notes on Adam Smith’s Wealth of Nations, which attacked these very policies from the British point of view.

John Adams, meanwhile, goes to great lengths in his correspondence with William Tudor to spell out the ills perpetrated on the colonies, and particularly on New England, by the Navigation Acts and other laws that restricted trade in the Americas. An example:

13th and 14th of Charles II., chapter 13, “An act for prohibiting the importation of foreign bone-lace, cutwork, embroidery, fringe, band-strings, buttons, and needlework.” Pray, Sir, do not laugh! for something very serious comes in section third.

“Be it further enacted, that for the preventing of the importing of the said manufactures as aforesaid, upon complaint and information given to the justices of the peace or any or either of them, within their respective counties, cities, and towns corporate, at times reasonable, he or they are hereby authorized and required to issue forth his or their warrants to the constables of their respective counties, cities, and towns corporate, to enter and search for such manufactures in the shops being open, or warehouses and dwelling-houses of such person or persons, as shall be suspected to have any such foreign bone-laces, embroideries, cutwork, fringe, band-strings, buttons, or needle-work within their respective counties, cities, and towns corporate, and to seize the same, any act, statute, or ordinance to the contrary thereof in any wise notwithstanding.”

The connection between tyranny and trade restrictions was plainly visible to Adams and the other founders. After a while, Adams proclaimed, “I cannot search for any more of these mincing laws” and deemed it “the whole selfish, partial, arbitrary, and contracted system of parliamentary regulations in America.”

These examples show that the Founders were fully aware of what protectionist laws do to businesses and industries that are not the recipients of legal favor, and just why they included the complaint about trade in the Declaration.

Indeed, John Jay, in a letter responding to inquiries from Spain in 1780 as to whether the United States had the power to protect national industries, said quite plainly:

With respect to the protection of national industry, I take it for granted that it will always flourish where it is lucrative and not discouraged, which was the case in North America when I left it: every man being then at liberty, by the law, to cultivate the earth as he pleased, to raise what he pleased, to manufacture as he pleased, and to sell the produce of his labour to whom he pleased, and for the best prices, without any duties or impositions whatsoever.

As for the argument that the drafters of the Constitution allowed for tariffs, Thomas Jefferson himself pointed out in a letter to James Madison that proposals to use tariffs to “promote the general welfare” were contrary to the meaning of the Constitution. He offered a draft resolution for the Virginia assembly that stated:

This assembly does further disavow, and declare to be most false and unfounded, the doctrine, that the compact, in authorising it’s federal branch to lay and collect taxes duties, imposts and excises to pay the debts and provide for the common defence and general welfare of the US. has given them thereby a power to do whatever they may think, or pretend, would promote the general welfare, which construction would make that, of itself, a complete government, without limitation of powers; but that the plain sense and obvious meaning was that they might levy the taxes necessary to provide for the general welfare by the various acts of power therein specified and delegated to them, and by no others.

As the proposal makes clear, the idea of government favoring industries though tariff policy went against the constitutional principle of a limited government of enumerated powers.

As for Alexander Hamilton, the father of American mercantilism, in 1791 he wrote to Jefferson to say, “My commercial system turns very much on giving a free course to trade and cultivating good humour with all the world.” Yet in his Report on Manufactures and other writings he gives a clear picture of a man who had bought into the follies of mercantilism, contrary to the experience of the other Founders. As William Graham Sumner put it, “The great pity about Hamilton’s position in this matter was that it helped to turn the current of American opinion against what, according to all the logic of the American situation, it ought to have been.”

Conservatives who claim that free trade is antithetical to American history have to explain why the Founders, even including Hamilton at one point, were so much in favor of it.