Current protectionist tendencies are numerous and extensive enough to anticipate the threat of a rise of a new and worldwide protectionism. While populist economic policies in the recent past have concentrated mainly on several regimes in South America, Trump’s ideas regarding “America First” give reason to expect a protectionist experiment on a new and macroeconomic scale. Looking further into the past, there has already been a state entity that had at least an equal leading role in world economy as the United States has today: The Roman Empire domineered trade in the known regions of the globe in an extensive manner. What were the economic and social consequences back then, if Roman emperors decided to resort to policies of protectionism?
Pax Romana/Pax Americana
Perceptions of the modern-day United States as comparable to Imperial Rome have been widespread amongst especially American describers and political commentators. This practice is not restricted to invocations of fears of political or cultural supremacy, but also serves to communicate views concerning the leading role of the U.S. in the world economy.
In this area, there are indeed some striking discoveries to be made when comparing today’s United States and Imperial Rome: not only did both actors provide a reliable and worldwide accepted currency, but also kept tariffs at a low level and – interestingly – accepted a large foreign trade deficit for decennia (in the case of Imperial Rome seemingly even for centuries). Comparisons between Rome and the U.S. don’t come as a surprise considering the fact that the founding fathers of this relatively young nation wilfully included principles of the Roman Republic and ideas of ancient philosophers into its Declaration of Independence.
Buy American is a bad deal
But the tradition of “America First” also can be traced back to the very moment of the conception of the United States, when on the evening of December 16, 1773 tea was thrown from three merchant ships in Boston and with it the tariffs of the British Empire. Dealing with unfavourable foreign trade relations therefore lies at the heart of the American self-conception, and it is correspondingly easy to appeal to it as well as agitate for it. From the 1880s onwards the slogan “Buy American” has foreigners from all over the world plotting by way of their imported products against the interests of good honest American workers and their jobs.
We have as much right to regulate imports as we have to regulate immigration. We have as much right to exclude certain imports, dangerous to our American standards and ideals, as we have the right to exclude certain immigration which is a menace to our American standards and ideals. (William Randolph Hearst, San Francisco Examiner, January 5 1933)
For too long, Americans have been forced to accept trade deals that put the interests of insiders and the Washington elite over the hard-working men and women of this country. As a result, blue-collar towns and cities have watched their factories close and good-paying jobs move overseas, while Americans face a mounting trade deficit and a devastated manufacturing base. (The White House website, statement on America First Foreign Policy)
The roles of the foreigners changed many times from Irish to Chinese, from Japanese to Mexican and sometimes back again. Profiteers of the instigated protectionist measures, studies show, have not been the American workers, but certain regional or specifically oriented industries.
For economists considering modern and developed nation states it seems to be rather obvious by now, that international free trade and globalization bring with them the potential of global growth and welfare on an unprecedented scale (while also comprising considerable risks).
From Chang’an to Ostia
The promises, which diversification and global trade hold as an engine for peace and prosperity were not foreign to the Roman Imperial economy either. Both Xenophon and Platon in his Politeia express similar statements and give reason to believe that the philosophy behind the Roman Imperial economic administration was pervaded by thoughts of liberalisation and free trade. While local subventions of emerging industries as well as moderate internal tariffs of 2, 5 % were the order of the day, the only major intervention of the Roman State under the emperors was the layout of about 100,000 km of streets and also the construction and maintenance of bridges, ports and channels, which constituted a massive and ongoing investment in trade infrastructure.
Other than that, economical steering is very difficult to substantiate. Trade policy therefore must have been very liberal and non-interventionist. This may have created the possibility to establish a considerable magnitude of foreign trade relations, stretching from Scandinavia, Germany and Southern Russia in the north as well as to Arabia, India, Sri Lanka and China in the East. Especially the coverage of Roman-Indian trade may astonish: sources attest a yearly cash flow of 50,000,000 Roman sesterces towards India while receiving luxury goods: pepper, Ivory, silk, scents, exotic animals, corals, lotus, scarce plants from the Himalaya region, clothes, oils, vine, art objects and slaves.
Shiploads from India … can be seen in such masses, that one could suspect, for the people there only bald trees are left and they would have to come here to reclaim their products, if they needed some of them. The entering and departure of ships never stops, so that one does not only have to marvel at the harbour but also at the sea that it suffices, if possible, for all the barge. … What you don’t see here, does not count as existing or having existed. (Roman panegyric Aelius Aristides commenting the east-western trade)
Some historians attest a large foreign trade deficit on grounds of the excessive outward flow of precious metals. Even emperor Tiberius himself is believed to have complained about the loss of money to peoples in remote regions. Still, in the first two centuries A. D. the Roman Empire is considered to be an area of economic growth and substantial welfare for broad layers of its inhabitants. Commerce and trade flourished to a degree unprecedented in human history and helped to enable a period of relative peace and stability for generations, despite a possible foreign trade deficit.
A protectionist Empire?
While it is not easy to decide upon specific moments of Roman history in which economic decline manifested itself, on the long run it is not difficult to identify the measures that went along with the disintegration of Roman economic power. Put under continuous pressure from numerous enemies at every border, Rome had to invest heavily in its military strength up to a point when the military costs reached 75 % of the state budget. New and rigorous taxes were imposed on individuals and cities and overall trade and welfare began to decline under the new circumstances of political instability.
Imperial bureaucratic grasp on the financial disposition of the single citizen started to intensify, and a foreign trade tariff of 25 % began to impair the ability to import goods from foreign lands. These developments went along with a substantial debasement of the Roman currency that lead to Europe-wide inflation which vitiated the structural integrity of the Roman economy in a lasting way.
The inflation in turn made any tax payment in money obsolete, so that state organisations had to resort to payment in kind for presumably at least a decennium. The losses of the Roman economy following these developments are impossible to quantify nowadays. But there is reason to assume they constituted the beginning of the end of a worldwide economically stable period, with standards of living in Europe that were only reached again in the 18th century.
It does not seem that there were any measures taken by the Roman government during nearly three hundred years that were intended to limit free trade. Moreover it seems that a liberal and non-interventionist policy was seen (and proven) to be nearly a guarantee for Rome’s market-oriented, partially rapidly growing and in that sense capitalistic economy. Only when forced by outward circumstances to interfere with markets, trade and tariffs to survive occurring emergency situations, Roman emperors resorted to policies of protectionism.
If anything can be learned from history it might be that knowledge may prevent stupid decisions. The fate of the Roman Empire as a past leading superpower in the western world might illustrate that policies of protectionism, when exacted on a global scale, are prone to produce more harm than good. That is neither a new insight, nor should it come as a surprise to Americans who have to hear the Zombie slogan of “America First” again in 2017. If Trump is successful, after his administration has concluded, they are destined to learn its protectionist measures will not have produced a sustainable benefit for the American economy, not to mention the hard-working men and women it purports to protect.