March 25, 2010

Indian Textiles, Chinese Underwear, Machiavelli, Economics and the State

A couple of years ago the main news story in the UK was about Chinese underwear- or rather Chinese made underwear which was being exported to the EU. The assumption was that because it was cheaper it would wipe out the EU industry in underwear and therefore various companies were campaigning for protection against it. The debate may seem very young- but actually it isn't. It has plenty of resonances in history going back at least into the eighteenth and seventeenth centuries if not before. In the late seventeenth century European thinkers were in the process of abandoning a traditional obsession with military might. Machiavelli had taught them about the rise of the Roman Republic and the need for states to continue to grow and prosper or like Venice and Sparta stagnate and decline, yet the new commercial world of the late seventeenth century with the invention of a public debt and the importance of trade seemed subject to different rules about power. For Charles Davenant or Andrew Fletcher or Henry Martyn or even John Locke the new competition was about trade: only nations which exported a lot would conquer and military might was, if not obsolete, reliant upon a massive military-industrial complex that depended on government debt.

That introduced a new set of questions- one which Istvan Hont in his essay Free Trade and the Economic Limits to National Politics: Neo-Machiavellian Political Economy reconsidered considers. Hont's article is too long to be adequately described here- but a central preoccupation for those who he writes about is competition internationally and the survival of the state. Almost all these writers presumed that the main factor behind successful competition was cheap wages. Therefore they argued for national self restraint when it came to wages. Charles Davenant wanted a system where the unemployed were forced to work, thus having the effect of lowering wages. He wanted any Irish woollen industry strangled before birth in order that it might not compete with the English. Davenant was opposed by others who objected to an industrial strategy at all: some who argued that it was too uncertain to prosper, others who believed that with Henry Martyn the market might naturally compensate. The point though of Davenant and the rest though is what they are analysing for: fundemental to all the analysis is the observation of Sir William Temple, diplomat and economist, who argued that the central fact of the 17th Century was the monopoly of trade developed by the Netherlands and the invasion of that monopoly by the great territorial powers of Europe.

Trade is a means to succeed in the power politics of Europe. In that sense it is Machiavelli's dynamic- particularly for Davenant that matters- the point of Machiavelli's analysis was that the world turned through cycles of frugality and corruption. Republicanism had to be dynamic- without it being so it would be overcome. What Temple and others thought they had established was that it was not republics but frugal states- states willingly poor- who could sustain wealth. Davenant and others had to consider how to find trade in which England might be the cheapest competitor- and they worried about Indian woollen goods invading Europe. The central point of this economic debate as it is now is the threat of cheap labour from overseas wiping out industry. Then the issue was Indian wool and the concern was that cheap textiles would destroy the English industry and any latent dream of English imperium or even survival. If Trade is the mechanism behind state power, then failure to maintain competitive advantage could be doom.

There are two interesting things here: the first I have discussed already- the contrast between old Machiavellianism and current concern with workers. But there is another interesting dynamic- one might say that the concerns of Temple and Davenant about India reveals how little contemporaries can understand of their own economic situation. What they did not know is that within a century, King Coal would have taken the monarchy of King Wool and British politicians would hardly care about the ancient textiles industry. Secondly though it is the importance- which Martyn perceived of the carrying trade- the industrial revolution as Chris Bayle argues is his Birth of the Modern was partly born because of the investment of capital created because of the advantages the East had in cheap goods over the West. Perhaps a third reflection is due- Davenant, Temple and Martyn all had complex and interesting theories (Hont develops them in ways I have not here) and that suggests that economics is a far older science than we give it credit for.

The fascinating point about these economists as that the Machiavellian direction that some of them took economics revealed how a politics of virtue might be constructed out of an economics: ultimately the constraint that Davenant and the rest feared was the constraint of economics creating wealth, corruption and dependance. In this sense they could be said to be reinventing the cycle- but now that cycle was one of trade where poverty led to exports, exports to wealth, wealth to imports, imports to rising prices and corruption and the circle continued. Like a good Machiavellian, Davenant in particular believed that you had to engage in that contest- but like a good Machiavellian he knew that the contest would eventually destroy the state.