It makes me very sad to see people who consider themselves either patriotic Americans, anti-imperialists, or both, to be advocating “free trade” and the “Gold Standard.” If you examine history, you’ll see that both policies were historically used by the British Empire to Imperially subjugate foreign nations and even their own people.
The leading causes of the American Revolution were outrageous acts of Parliament, as anyone who has attended an American grade school should know. Among those Acts were the Currency Act of 1751, the Currency Act of 1764, and the Stamp Act of 1765. Let’s consider what these acts did.
Before 1751, the 13 American colonies issued their own paper currencies. For example, in Pennsylvania, the government of Pennsylvania acted as a bank, issuing loans directly to farmers or merchants for business activities. These loans carried interest, and when the government of Pennsylvania issued these loans wisely, they of course returned a profit, which could then be spent on public goods like roads and bridges without requiring taxation. The same process is used today by private banks, but the interest of course returns to the banks owners and management, instead of being used to pay for public goods.
By the currency act of 1751, the American colonies were forbidden to issue paper currency. Instead, the colonies were forced to use British Pound Sterling, the currency of the private/national Central Bank of Great Britain, the Bank of England, or hard currency like Gold and Silver.
For starters, this Act greatly restricted the amount of money available for use in the colonies, resulting in a contraction of economic activity, a depression which seeded the discontent which later erupted into the American Revolution. The Great Depression of 1929 was likewise caused by a Central Bank assisted contraction in the money supply, as even Ben Bernanke has admitted.
Why would Britain wish to pass such an act? Some talk of how “British merchants” were harmed by the “inflationary” nature of the American currency, but this makes little sense. If British merchants were being harmed by American currency, why did they not privately demand to be paid in another way? Why was the intervention of Parliament needed?
Consider that in this time period, the American colonies at the time had almost no production of precious metals, and they had very little gold and silver circulating. Imagine the position of an American businessman when Britain forced America onto the Gold Standard in 1751; in order to pay a debt, either public or private, the American would have to get their hands on either hard currency or Pound Sterling. This means that to pay off any debt, this business must either;
A. export to Great Britain to obtain Pound Sterling in trade
B. borrow Pound Sterling at interest to pay off an existing debt.
C. borrow precious metals, either from Britain or abroad
D. export abroad (which was often illegal) to obtain hard currency
This was precisely the point of the Currency Act and the Gold Standard; forcing American businessmen to have to export to and borrow from Great Britain in order to conduct business with lawful currency. This is how Colonialism works; the economy of the colony is forced into an economically subservient role to the ‘Mother Country.’ The largest beneficiary of this policy was the British Central Bank, the Bank of England, which would then receive a ‘cut’ of most of American economic activity, although Britain as a whole would benefit from the artificially low prices of American imports.
Now, many people are told in American public schools that the “Stamp Act,” a minor British tax, was a major cause of the American revolution. You are now in a position to understand why. The British stamp act was a direct tax on any printed material in the American colonies. A direct tax which was required to be paid in Pounds Sterling or Gold or Silver. This meant that if an American simply wished to have a legal document or read a newspaper, he was required to gain British or hard currency through export, either directly or indirectly. Now, you can see why colonists were violently opposed to a relatively minor tax. The implication was that Americans would be directly taxed in British currency just to live their daily lives, and for most Americans, this would required going into debt to borrow British currency. In other words, for most Americans, going into debt would become the prerequisite for economic activity.
Americans violently opposed this attempt by Britain to impose debt slavery on them in the event known as the Revolutionary War. The colonists used their own fiat currency, the Continental, to fight and win the war. Britain, knowing exactly what was at stake, used printing presses on offshore British warships to counterfeit the new American currency. On account of British counterfeiting and the economic havoc caused by the war, a great many Continentals were in circulation at the end of the war; far more than the new Continental American government could redeem in hard currency. It is here that two major factions emerged; on the one hand, a faction including Jefferson and Madison, who wished to maintain an honest currency, and the Hamiltonians, who wished to emulate the British Imperial system of a Central Bank issuing “gold backed” currency on fractional reserve. With angry war veterans demanding payment of their Continentals on the steps of the Capitol, the Hamiltonian faction won, creating the first U.S. Central Bank, which took the hard currency of the nation and issued out a paper currency far beyond its real reserves, using these to pay off its Continental-denominated debts. Perhaps Andrew Jackson, whose campaign slogan was “Jackson and no Bank,” makes more sense historically.
Now consider free-trade. During the 18th and 19th centuries, Britain had the most advanced industrial technology in the world. When Britain demanded that a subject nation adopt “free trade,” what it really meant was the removal of import duties against British finished manufactured goods. The head-start the British economy had in the industrial revolution, combined with intellectual property laws, all but guaranteed that colonies, like India for example, could not catch up in terms of industrialization. Without being able to develop industrially, British colonies were forced to export only what they currently were able to produce, which was either labor or raw materials. The goal of free trade was to keep less advanced economies as permanently backwards, raw material exporting colonies in service of British industry.
Today, of course, nationalism plays far less of a role in the global economy. “Free trade” today serves not the interest of first-world nations so much as it does the interest of major corporations. A third-world nation which has free-trade imposed upon it by military coercion, coup or IMF loans, basically ensures that advanced production will NOT be developed internally; instead, foreign corporations will import their proprietary technology and exploit the third world nations labor and national resources. If another nation becomes a more attractive site for production, the major corporations will simply move, taking their proprietary technology and capital infrastructure with them, leaving no lasting benefit for the previous host nation. This type of deindustrialization and stagnation is largely what America itself has seen over the past 30 years.
On this Memorial Day, we should reflect that the reason we Americans are relatively prosperous and not British subjects is because the colonists before us resisted the imposition of the British fractional “Gold Standard,” and paid for their resistance with a fiat currency. After defeating the British Empire, Americans resisted British imports with high tariffs and import duties, allowing America’s once unrivaled industrial production and thriving middle classes.
Hopefully, Americans will soon rise up and oppose the American Empire’s current Opium War in Afghanistan, and the despoilation of our lands at the hand of foreign and domestic corporations, like British Petroleum, which rivals the predation of the British East India and British Hudson Bay Corporation of days gone by. If Americans don’t demand policies which benefit Americans, certainly history proves that no one else will.