It is not my intention today to fire even a musket-shot in the new Battle of Britain which is just commencing and which I have pleasure in announcing will in due course be won by Britain, as the Battles of Britain always have been in the past. However, at this early stage, before even the battalions have been deployed, let alone the first salvoes of artillery discharged, there may be use for all of us in analysing calmly the ideas of dependence, independence and interdependence in British economic policy. When it looks like raining, there is much to be said for taking a good umbrella; and unless I am mistaken, there will soon be a veritable downpour of confusion on this topic.
Much discussion in Britain and Europe generally is carried on in terms impregnated with the notions of dependence and independence. ‘Can Britain afford to go it alone?’ runs the rhetorical question; and the frequent references to ‘splendid isolation’ leave no doubt as to the political, not to say nationalist, connotation, of the argument. ‘Will Britain become a dependency of the United States?’ is another question, not new but given a new edge; nor is it confined to Britain, for fears of ‘American domination’, of le défi americain, have been lively and not without their effects on the other side of the Channel too.
The prevalent notions of economic power, economic strength, economic weakness, are shot through with political and indeed physical overtones: they defy economic analysis. Once the childish identification of ‘strength’ and ‘weakness’ with surplus or deficit on the balance of payments is laid aside, it is impossible to give these terms any meaning at all on which analysis can bite.
In short, there is a danger that we may fall prey to one of the most dangerous of political epidemics – that of metaphor. I am using the word in its proper sense of transfer – the importation or transfer of words and ideas from the sphere where they belong to one where they do not. It is my thesis that much of the language of our current debate is unconscious metaphor of the most dangerous kind: the confusion of the economic and the political.
The very phrase ‘British economic policy’ is an emphatic reminder that when we seem to be talking economics we are usually in reality talking politics. The ‘British economy’ is the economy of a nation state. We could, indeed, talk about the economy of Somerset or Siberia or South America; there is nothing absurd or impracticable in taking either a continent or an arbitrary piece of territory and describing or studying the economic activities carried on by those who live in it, any more than in describing and studying its geology or its climate. But when we talk about the economy of Britain, we choose to do so not because Britain is an economic region or a geographical entity but because it is the home of a nation state.
We take as our starting point the existence of the nation occupying that territory, and we proceed from there to consider the economic behaviour and experience of its inhabitants. In doing so, we are not considering their economic behaviour and experience as individuals or as an arbitrary sample of humanity, but because the sum of their behaviour and experience makes up the life of the nation in its economic aspect. It is, as it were, the economic portrait of its physiognomy.
There is something else too: we do this because we assume that, Britain being a nation state, political power can be used to alter its economic life.
There are three main manifestations of political power used in this way. All three are very old though they wear garments of the latest fashion. One is the power to create and manipulate the medium of internal exchange – money. As Croesus found that what he touched was gold, so what the state declares to be money is money. The second power is the power to control the exits and entrances of the country and thus to prohibit goods and persons and money passing in or out, or to permit them entry or exit subject to conditions, such as the payment of a tax. The third power is the power to force its citizens to perform tasks, such as building pyramids or erecting steelworks, which they would not have done of their own accord: it is possible to do this with whips, but it is more usual and causes less outcry to use taxation.
In exercising these powers, and equally in deciding to refrain from using them, the state always (since it can do no other) has political and not economic ends in view. Even when it appears to seek an economic end, it is an end which it has chosen and which it has chosen for its citizens because they are its citizens.
In this country we are accustomed to fight our political battles in terms of socialism and capitalism, a controlled or a free economy, the state versus the individual; but behind all this terminology the careful observer will perceive that on both sides, indeed almost everywhere, a common assumption is silently shared. It is the assumption that the citizen cannot, must not, fix his own goals or choose his own good. This is not surprising. Only exceptionally in human history has that assumption been challenged at all. Much more exceptionally has any society or nation conducted its affairs upon the opposite assumption – that the citizen may, nay must, fix his own goals and choose his own good.
This country was one of those very rare exceptions during one or two generations in the last century, though today only those in extreme old age can remember it personally. Throughout the lifetime of most of us the normal presumption, that the aims of the individual are set by the state, has re-established itself triumphantly. We do not usually notice this, partly because the modern state uses the vocabulary of individual liberty (‘human rights’, etc.), just as the totalitarian state uses the terminology of democracy. Perhaps it is only in Britain, with the memory and afterglow of the exceptional assumption persisting here and there, that it is possible even to talk about it with any chance of being understood.
The terms ‘dependence’, ‘interdependence’ and ‘independence’ in an economic context presuppose the statist assumption; for they are all terms which apply to states, and have no proper meaning where individuals fix their own goals and choose their own good. One party to an exchange of goods or services is neither dependent on the other nor independent of him, so long as the exchange is free. ‘Free’ in this context has a very precise meaning. It means not under duress of organised human agency, which, in normal circumstances is the agency of the state. Unfree does not mean that in the circumstances one party or the other has no other option which he regards as more acceptable: in that sense all human action is unfree. Moreover, it is not necessary that the exchange be free on both sides: the fact that the sailor who offers tobacco or the Russian who produces oil is driven to do so by fear of the rope-end or Siberia does not make the choice of the other party to the exchange any less free. The question of economic dependence, independence and the rest does not therefore arise where the individual is to enjoy the freedom to exchange goods and services in accordance with his choice.
These are simple and basic assertions; but they are widely – almost universally – repudiated, and those who make them are liable to be stoned and driven out of the gates. It is treated as a self-evident verity that countries where cocoa or bananas are produced and exported to countries where the people work in mines or on mass-production lines are ‘dependent’ on these latter countries, a relationship described as economic imperialism or exploitation. The idea that some citizens of this country might sell their own property, consisting of shares in oil wells in Trinidad or in an aero-engine firm in Derby, to the citizens of another country such as Japan or the United States, has in my personal recollection roused the British House of Commons to a state bordering on frenzy. When the governments of other countries force their subjects to build ships instead of doing things more sensible, agreeable or profitable, the suggestion that those ships might be bought by a Briton who happened to think he had a use for them would ensure an unpleasant and perhaps dangerous reception in Belfast or Glasgow.
In each case we have effortlessly and automatically substituted the state for individuals. An American who buys bananas or employs people to plant and tend bananas or lends them money to plant and tend bananas until harvest time is mentally replaced by the United States, complete with President, Congress and fleets of aircraft carriers; and so are the American shareholders who buy shares which they reckon are worth the offering price. In the distorting mirror of statism the free exchange of private property – use of capital for a share in future profits – has become a little Stars-and-Stripes (or it may be a little Rising Sun) planted like a standard in the heart of another homeland.
Yet even when the substitution of the state for individuals has been achieved, the notion of ‘dependence’, ‘independence’ and the rest may be, and normally is, irrational. The revolutionary president of a banana republic may intend to force its citizens to behave and live in ways which they would not have chosen. His power to do so is almost certainly limited not by the imposition of a foreign political will upon his own, but by the brute force of things as they are: his country grows bananas but has no minerals; the value of his vote at the United Nations is less than the cost to the American taxpayer of a white-elephant development project; the situation of his country is not convenient for blackmailing by the threat of a Russian or Chinese base. This may all be bad luck; but it is not ‘economic dependence’ or political subordination.
Again, some half dozen nations or so, having regard (let us say) to the agricultural vote, may each decide to make their citizens pay, through one aperture or another, to maintain a larger labour force on the land than they would otherwise have chosen to do. This means they will limit the freedom of their citizens to trade with the citizens of other countries. From this it must follow that the range of options open to the citizens of those other countries is also limited and distorted. Yet those countries have not thereby lost their independence, any more than if some of their respective products had for other reasons become less saleable.
Still, though every state can bend its citizens to its will, this can sometimes be more conveniently and comfortably accomplished with the collaboration of other states, rather on the lines of the Holy Alliance formed in 1815 between Russia, Prussia and Austria. The Communist countries do not, of course, permit the free exchange of their domestic money with other currencies: import and export is not regulated by the market at all. On the other hand, in the West, the direction which governments exercise over their subjects through control of domestic money would threaten to break down unless they collaborated with one another to maintain fixed rates of exchange. It can therefore be admitted that states may find themselves in this sense interdependent, if they are determined to intervene in the life of their citizens in ways which more or less call for co-operation between governments.
Even this, however, is something quite different from dependence. The term dependence only acquires a meaning when the political decisions of one state are specifically controlled or limited by those of another or of others. Where the basic powers to create and control money, to regulate ingress and egress to and from a territory, and to influence by taxation the economic behaviour of its citizens are exercised from outside that territory, then and only then is it possible to speak of dependence. When the interests of the Lancashire cotton industry brought pressure to bear through the Government of the United Kingdom upon the British Government of India to restrict the development of Indian cotton manufacture, that was a manifestation of India’s economic dependence. It was not so when the UK prohibited cotton imports, either generally or from India, beyond a specified quota, or subjected them to an impost.
In order for an economy to be dependent, two conditions must be fulfilled: it must be the policy of its government to intervene continuously and on a substantial scale in the economic life of its citizens; and in addition, its government must be obliged to accept in advance and permanently, in those areas where intervention is intended, an authority external to the economy itself. The one sure guarantee of economic independence for a country is that its citizens are free to select their own economic ends and choose their own good, and that the institutions of that country are designed to secure them in this freedom, by using neither the power of taxation nor control of the frontiers nor the creation of money as a means to deprive them of it Sure enough, if one looks around the world, the verification is there to be seen, and not a trace is to be found of any relationship between mere size and independence. It is no fault of mine if such a model differs as remotely as possible from a Britain in membership of the European Economic Community.