April 16, 2010

Partial Laissez-Faire: Absolute Economy: the Political Thought of William Gladstone

We now turn to discussing the economc thought of that greatest of Victorian Statesman William Gladstone . He was in broad measure a “political economist” in the lingo of his era that is a believer in “Laissez-faire” or limited government intervention in the economy-government existing solely to provide a framework of law enforcement. This was particular true in terms of opposing government borrowing. However what were the sources of Gladstone’s beliefs- and their precise nature?

As already stated Gladstone’s religious views did a great deal to influence his political views on nationalism and church government. This was broadly true of his views on political economy as well as.. He believed in a vision of a moral society and believed low regulation low taxatyion and low expenditure would create one.

In this he was hugely influenced by his great mentor Robert Peel. Peel had developed and influenced Gladstone int he notion that removing commercial restrictions ,distortions of taxation and high expenditure could not only promote prosperity but also promote good character. Laissez-Faire is often caricatured as a system of thought which ignores ethical issues and is based on a amoral view of economic transaction, and a “if it feels good do it” ethos. For Peel and Gladstone as for so many Victorian advocates of Laissez-Faire this could not have been further from the truth.

For them it was to promote morality particularly those parts of morality most linked to discipline-such as thrift and self-reliance. They believed that by abolishing special “privileges” such as the Corn laws or by keeping welfare payments in the form of the Poor Law down they would promote a more moral society where people succeeded through their own efforts or through the charity of others (Gladstone was an enthusiastic philanthropist himself) . They also believed this would lead to a more prosperous society but it is important to believe they saw it as achieving both. This is often seen as an expression of Victorian evangelicalism but It’s worth remembering that while Peel was arguably evangelical Gladstone’s own moral ethos was formed in an Anglo-Catholicism which saw the evangelical culture as insufficiently committed to moral discipline.

Arguably even more important in his own thought was Gladstone’s strong attachment to absolute rules which could be applied universally and rigidly. This arguably represented his education and the philosophy he absorbed when young-in a sense a reflection of the latter Enlightenment particularly in the British Isles. It also seems to have fitted in way his ideas of justice and the notion of equality before he law that was central to the liberalism he embraced. Just as the state should not make distinctions between religions) so it should not make distinctions on economics.

On economics he was fundamentally Laissez-faire. But it’s important to note that this was much more true in some respects than others.

One area this took the form was his absolute insistence on balancing the budget above all else-including raising taxes to do so. Gladstone believed even in wars taxation not borrowing should pay for spending. This I think clearly reflects both a desire to eliminate limits to spending and the degree to which his belief in “economy” was founded in a form of moral values like responsibility- avoiding the consequences of spending was immoral.

Secondly he was much more hostile to government expenditure than government regulation. IN some fields of regulation such as of sexual behavoiur such as sex by the under sixteens he was if anything unusually enthusiastic for regulation. Even in more purely “economic” regulation such as that of the railways he was often more supportive than the average opinion of the time. One major piece of legislation passed by his government in the 1890’s (it was eviscerated by the House of lords only for the Tories to pass a more extensive one) was a bill to force employers to pay compensation to injured employees. Perhaps most significant of all was his reforms of Irish land reform achieved by his government in the early 1880’s. This by giving tenants in Ireland certain rights of possession and to compensation for deterance was arguably the greatest attack on private property rights by the British government for centuries. This should not be exaggerated Gladstone even in old age was naturally sceptical of most regulation. For example his favoured solution to the problem of alcohol abuse was to reduce taxes on wine imports which he believed would lead to more civilised drinking habits than hard spirits-he was a drag on his party’s support of a more restrictive alcohol regime.

But his attitude on spending was much more rigid. While Gladstone’s decades of influence (till the last decade or saw) saw a temporary freeze in the previous constant rise in government spending and taxation totals he still saw spending as far too high. In His first (1868-1874) ministry Robert Lowe one of the most tight fisted Chancellors in UK history was pushed out by Gladstone for spending too much. Similarly he was proud in reducing by hundreds of thousands and was a fervent opponent of Defence Spending. IN fact the fact defence spending was so large a part of government expenditure (and particularly sudden rises in expenditure) probably does a lot to explain his fairly pacific foreign policies. He finally resigned the premiership in 1894 against an increase in government expenditure on defence.
It is typical of the contrasting attitudes of Gladstone on “economy” vs government spending that his Irish reforms did not involve providing money for tenants to purchase their freeholder. That was done by Lord Salisbury’s government of the late 1880’s. Salisbury was in virtually all respects more supportive of the rights of property than Gladstone. But he was also less fanatical on the issue of Economy. Or to put it another way on matters of regulation Gladstone was probably as regulatory as the average Victorian (which is to say not much). On matters of expenditure and borrowing he was even by Victorian standards a fanatical supporter of Laissez-faire.

What explains these differences in Gladstone’s attitudes to Laissez-Faire? I would suggest partly it was ministerial experience. Gladstone rose from a major minister to the leading political figure in the country was essentially on the back of his experience as Chancellor of the Exchequer-thus he developed an obsession with low expenditure and balanced budgets.this is partly because being measured in terms of money it’s quantifiable - today its not obvious how to “quantify” the restrictions imposed by regulations and that was of course vastly more true then . Also by paying for costs and making people pay as far as possible for their own costs Gladstone’s fundamental belief in responsibility and character development through struggle could drive his fiscal policy in essentially all circumstances (even on military matters his disdain for military culture could feed it) . On matters such as alcohol or the duties of employers and landowners the belief that responsibility could only be enforced by law had more weight.

This is a picture of Robert Peel the Great Prime minister who did so much to shape Gladstone’s views of the proper role of a minister and the proper role of the state.