chapter  8
21 Pages

8 Charles Francis Bastable on trade and public finance

ByTOM BOYLAN, JOHN MALONEY

Charles Francis Bastable was born in Charleville, County Cork in 1855, the only son of the Revd Robert Bastable, Rector of Knocktemple and Kilbolane. His early education was at Fermoy College, Fermoy, County Cork, from where he proceeded in 1873 to Trinity College Dublin. There he studied history and political science, a course which then included political economy. Graduating in 1878 with a Senior Moderatorship (first-class honours) in history and political science, he switched his attention to law and was called to the Irish Bar in 1881. He completed his MA degree in 1882 and was awarded a LL D in 1890 (Black 1947). Unquestionably the Irish Bar would have provided Bastable with a distinguished legal career. But in 1882, after only a year at the Bar, the Whately Professorship of Political Economy in Trinity College Dublin, then a five-year fixed-term appointment, became vacant. Bastable applied, and, under the chairmanship of John Kells Ingram, the board of examiners appointed him from a field which included a future Lord Chief Justice of Ireland. On completion of his statutory five-year term the rules were changed to allow indefinite holding of the position. Bastable was re-elected and held the chair until his retirement in 1932 at the age of seventy-seven. By then the Whately Professorship was a 100 years old and Bastable had occupied it for fifty of them, a record which, his successor Professor G.A. Duncan commented, was ‘memorable not so much for its mere duration as for its persistent civilizing influence upon successive generations of students’ (Duncan 1945: 242). Bastable died at the age of eighty-nine, on 3 January 1945 at his home in Rathgar in Dublin. The Whately Professorship was modestly paid, reflecting the less than onerous obligations demanded of its holder, and Bastable sought to supplement his income with other academic posts. He was appointed Professor of Jurisprudence and Political Economy in Queen’s College, Galway (now the National University of Ireland, Galway) in 1883, a position he held until 1903. He further added to his portfolio of positions in 1902 when he was appointed Professor of Jurisprudence and International Law, and again in 1908 when he became Regius Professor of Laws, both in Trinity College Dublin. These two appointments, which he held until his retirement in 1932, meant that the largest proportion of his time and efforts was devoted to teaching and administration in the School of Law in Trinity College, though his real interest lay in political economy (Smith

1945). Bastable was also appointed George Rae Lecturer at the University College of North Wales and during the academic year 1909-10 he held the Warburton Lectureship at the University of Manchester (Black 2004). Bastable also made an active contribution to the principal learned societies related to political economy in both Ireland and England. He acted as Honorary Secretary to the Statistical and Social Inquiry Society of Ireland from 1886-95 and was one of the Vice-Presidents from 1896 to 1915 (Black 1947; Daly 1997). From 1881 to 1895 he was an examiner for the appointment of suitable candidates to deliver the Barrington Trust Lectures, a series of lectures in political economy for the general public, which had been endowed in 1834 by John Barrington, and had since 1849 been administered by what was originally the Dublin Statistical Society but was later to become the Statistical and Social Inquiry Society of Ireland (Boylan and Foley 1992). Between 1882 and 1893, Bastable delivered nine papers to the Society, ranging from contemporary monetary questions to issues in Irish trade and development. He was a founder member of the Royal Economic Society and served on its first council. From its foundation in 1891 and up to the early 1920s Bastable was an active contributor to the Economic Journal, contributing twenty-seven articles as well as being one of its most active book reviewers. He was president of Section F, Economics and Statistics, of the British Association in 1894, and 1921 he was elected a Fellow of the British Academy. Bastable had wide interests across economic theory and policy, although his reputation rests on his contributions to international trade and public finance. From a doctrinal and methodological perspective, he kept faith with the classical tradition and defended the use of the historical method in economics as expounded by his compatriots T.E. Cliffe Leslie and John Kells Ingram. Bristow (1987) notes that, ‘Bastable never appeared to recognize the significance of neoclassical innovations,’ and that while Marshall’s Principles was cited in various works, this was never ‘in a context which suggests that anything of analytical significance is contained therein’ (Bristow 1987: 203). Yet Bastable’s students at Trinity College were not precluded from exposure to Marshall’s work. While Bastable kept his commitments to the classical tradition, particularly the work of John Stuart Mill, along with his interest in the historical method, his syllabuses also came to incorporate the work of new authors including neoclassicists. All the same, his basic doctrinal and methodological antipathy to the neoclassical approach is not in doubt. At the methodological level, this shows up in his rather limited writings on the ‘scope and method’ of the discipline. These consist of his Introductory Lecture, delivered in 1884 shortly after he became Whately Professor, entitled ‘An Examination of Some Current Objections to the Study of Political Economy’ and his presidential address to Section F, Economics and Statistics, at the 1894 meeting of the British Association in Oxford, with the title ‘A Comparison between the Position of Economic Science in 1860 and 1894.’ The most interesting parts of the Introductory Lecture are his comments at the end, when he warns his students that there are many competing methods in Economics. These include the deductive, inductive, historical, mathematical, and

experimental methods (Bastable 1884: 24). But on more careful examination these difficulties of different methods greatly diminish, arising as they do for Bastable ‘from the different standpoints their advocates take up,’ and their ‘unfortunate tendency to exaggerate minor differences’ (ibid.: 24). And, so far as the differences are genuine, many of them are differences of logic ‘and should be credited to that science.’ This included the whole deduction versus induction issue (which, to Bastable, was encapsulated by the dispute between J.S. Mill, Whewell and Whately as to the limits of induction), just as the ‘proper place of experiment is also a matter for logicians’ (ibid.: 25), And, when ‘we commence the practical study of Economics, we find help and assistance from advocates of all these methods’ (ibid.: 25). This Bastable illustrated with the writings of Cairnes, Jevons, Leslie and Newmarch on the Californian and Australian gold supplies and their economic effects, where the historical and analytical methods complemented each other. This tolerant, inclusive approach recurs in his 1894 presidential address to Section F, ‘A Comparison Between the Position of Economic Science in 1860 and 1894.’ Here Bastable identified the major causes that had contributed to a ‘changed position of our science’ over this period (Bastable 1894: 128): (i) the influence of foreign writers, mainly those from the German Historical School; (ii) the increasing power of the working classes, and in particular the rise of the trade unions; (iii) the influence of evolutionary thinking, arising from Darwin’s work, which Bastable considered to have been more influential in its impact ‘on the social than even on the biological sciences’ (ibid.: 128). His concern was to adopt a more holistic approach to economics by grounding it in a larger nexus of cognate and relevant subjects. He chided British writers such as Senior and McCulloch for their neglect of foreign economists: this ‘insularity of tone’ was retarding progress in all departments of economics. Its ‘evil effect’ he argued, was to prevent ‘any thorough consideration of the social and political groundwork on which all systems of economy rest’ and to which ‘all economic theories must, if they are to be enduring, pay adequate attention’ (ibid.: 128). This methodological principle he felt was the ‘great and saving merit’ of the German contribution to political economy, just as it was the issue on which ‘our English predecessors most signally failed’ (ibid.: 128). As for the emergence of the trade unions and evolutionary thinking, Bastable used both to call for a political economy which reflected the changing social and economic environment. The mere substitution of ‘working class’ for ‘middle class dogma,’ he argued, does not represent any scientific advance. For Bastable, no interpretation of industrial or other economic phenomena ‘can claim to be adequate unless it takes into account the particular forms of social structure and the special political conditions which have helped to produce them’ (ibid.: 129). Of all the forces for change, it was the evolutionary thinking arising from Darwin’s work which Bastable felt was most profound and far-reaching both in its actual effects and its implications for the future. As a lawyer he was particularly impressed by the way legal studies such as Henry Maine’s Ancient Law had taken on board evolutionary ideas. In contrast he argued that the economists were rather slow in identifying the potential of evolutionary thinking for their

subject, though he does correctly acknowledge both Cairnes and J.S. Mill for recognising the impact of Maine’s work, at least as he puts it ‘in some special points’ of their work (ibid.: 130, fn. 1). But Bastable’s central methodological point was the impact of the new evolutionary framework ‘in bringing out the general similarity of the various sciences dealing with man,’ which ‘again made examination of the bonds joining economics to the related subjects a more prominent object’ (ibid.: 130). Bastable’s training in jurisprudence and political science provided the framework for much of his thinking and he often refers to it. Other likely influences on his methodological thinking were his acquaintance with the continental writers, particularly the members of the German Historical School, the impact of his compatriot Cliffe Leslie and the influence of Ingram in Trinity College Dublin during Bastable’s education and early career. Nor, it may be reasonably surmised, were the vibrant debates on the specifics of Irish conditions and the problems they posed for economic policy during the nineteenth century totally lost on Bastable given his commitment to specificity and historicity, and his insistence ‘that it is the social basis rather than the slighter edifice of half-developed theory that gives life and power to our present work’ (ibid.: 133). But the shift from classical (real cost) to necolassical (subjective) value theory, it has been argued, bypassed international trade, where the idea of ‘real’ costs determining production ‘was retained . . . well into the 1930s’ (Gomes 2003: 92). This argument must be viewed as part of a more extended argument that the ‘classical trade model survived the “marginal revolution” of the 1870s,’ and for three reasons: (i) the fact that Mill had identified and incorporated the role of demand in his analysis of international value; (ii) the transformation of Ricardo’s labour theory of value into Marshall’s ‘real cost’ theory; and (iii) the fact that trade theory was already emphasising the efficient allocation of a given stock of resources and its attendant corollary of rationality as informing the international exchange of commodities, so that it sat comfortably with the new paradigm of exchange which underlay the ‘marginal revolution’ (ibid.: 92). If this was the theoretical background that Bastable encountered as he began to study international trade, there were equally significant shifts occurring in the area of trade policy. When Queen Victoria in 1852 told her uncle, the King of the Belgians, that ‘protection is quite gone,’ she was unquestionably echoing the spirit of the times (Clapham 1967). The British economy had entered a period of sustained growth and prosperity that was to last for twenty years, and which was largely attributed to a free trade policy which facilitated a very favourable international division of labour, certainly when viewed from Britain’s perspective. The essential trade relationship was quite straightforward: Britain’s prosperity was established on the success of its export of manufactured goods based on its superior technology, scale of production and expertise. These exports were in turn paid for in the form of raw materials and food imports from within the empire and outside it. The leading economists of the period were of one voice in acknowledging the contribution of free trade to the mid-Victorian boom (Gomes 2003). The free trade, or ‘low-tariff ’, era of the mid-nineteenth century came in

two stages marked by two major iconic developments: the repeal of the Corn Laws in 1846, and the signing of the Anglo-French (Cobden-Chevalier) commercial treaty in 1860. For a quarter of a century following the repeal of the Corn Laws, the commitment to free trade remained the presiding idea in British economic and political discussion. Advocates of repeal had argued that it would provide the stimulus and example for other countries to reconsider their trade policies in favour of a low-tariff regime. In the short run these sentiments were validated. The Dutch and Belgians repealed their Corn Laws in 1847 and 1850 respectively. But it was the Anglo-French treaty of 1860, together with the tariff reductions implemented by Holland, the Scandinavian countries and the Zollverein that signalled the arrival of a free trade regime in continental Europe. The Cobden-Chevalier treaty represented the high point of British free trade diplomatic achievements in the nineteenth century. By the 1870s, internal and external developments would conspire to undermine this triumph, and usher in a return to protectionism during the 1880s and 90s. The trigger was the onset of the depression in agriculture in 1874 and the more general slowdown which would beset the British economy over the next twenty years. These developments coincided with the emergence of Germany and the United States and the resultant relative decline of Britain’s status within the international economy. This convergence of events led to a crisis of confidence and launched a fundamental debate on the state of the British economy, including a reaction against free trade. Meanwhile protection was on the rise in Europe, beginning with the introduction in 1879 by Germany of a series of levies on iron and steel and a range of agricultural imports. This was quickly followed by the French National Assembly, which in 1881 introduced a number of tariffs, to be followed by others. The era of free trade was over. The debates that followed split both the political establishment and the economists. They came at a time when the economic community was itself in the throes of self-interrogation as to the purpose and nature of economics. The debates between the members of the English Historical School and the economic theorists were in full flight, with Marshall striving to achieve a compromise between the older classical tradition and the newly emergent marginalist mode of analysis with a view to establishing the academic and professional credentials of the discipline. The debate on free trade and the reform of commercial policy established policy battle-lines which largely followed the methodological ones. While the majority of the mainstream economic theorists defended the principles and policy of free trade, the case for protection was very actively presented by another group of academic economists, mostly but not exclusively economic historians. It was the interaction between these two groups that led to the development and refinement of international trade theory and policy from the 1880s, to which Bastable would be an important contributor, particularly in the context of the tariff reform debate of 1903, in which he sided with free trade. Bastable’s status in international trade theory and policy rested on his major work, The Theory of International Trade, first published in 1887, which went

through four editions. This was followed in 1892 by his The Commerce of Nations, which went through eight editions, and a number of articles published in The Economic Journal, The Quarterly Journal of Economics, Hermathena, along with entries in various editions of Palgrave’s Dictionary of Political Economy and the Encyclopaedia Britannica (Black 1945). In one of the many surveys of international trade theory and policy, Angell commented that Ricardo, following his original exposition of international trade theory, had the privilege, ‘rarely enjoyed by the originators of new systems, of marking out virtually all of the main lines in the subsequent development of his own ideas.’ Consequently ‘the task of the later classical and post-classical writers has . . . been, at bottom, one of refinement and elaboration alone’ (Angell 1926: 80). The most significant refinements and elaborations included:

i Mill’s attempt to establish a more exact a priori determination of the ratios of international exchange, by the use of the ‘Equation of International Demand’;

ii Cairnes’s further refinement and extension of international demand through application of the concept of non-competing groups, a concept he had developed in the context of wage determination;

iii The efforts, partly pursued by Mill but principally by Bastable, to analyze the variability in supply and demand schedules;

iv Taussig’s analysis of the determination of the level of prices and money incomes as between countries; and

v Analysis of the effects of tariffs on international trade and prices, especially by Bastable and Marshall.