How socialist beer destroyed the British Empire

 A long time ago, an internet forum that I was involved with considered how the world would have been different had the settler colonies of the British Empire been able to hold themselves together into some sort of federation. Imagine a 125 million-strong country consisting of Canada, the British Isles and Australasia. A federated Commonwealth might not quite have gotten out of World War 2 as a superpower but it would have been much more of an equal to the United States. 

To a casual observer, in fact, it seems a bit mysterious that the U.K. allowed colonies whose initial settlement came overwhelmingly from Britain (save Canada) to just drift away. Why not give them seats in Parliament and keep the new territories in the fold? 

Well, one thing that surprised me is just how early Britain began allowing the settler colonies to impose their own tariffs. Even before responsible self-government, for example, New South Wales began taxing imports from Great Britain. Up until 1843 imports from the U.K. received preferential access ... but they still paid tariffs. And after 1843, tariffs had to apply equally to imports from everywhere in the Empire. That had the effect of ratcheting up tariffs on British goods, rather than (as London seemed to hope) lowering rates on imports from India. 

One of the things that made Imperial Federation a nonstarter was that the Dominions, by the late-19th-century generally democratic and self-governing (I am going to ignore the abominable Union of South Africa) had little desire to fight the political battles necessary to create a common Imperial economic space. Moreover, the U.K. had pledged to defend them and was seen as unlikely to renege on that commitment. So why pay more for Imperial defense when the U.K. taxpayer was going to pay for most of your defense for you? Even in retrospect that proved to be a pretty good deal: sure, the U.K. failed to defend Australia in any serious way in WW2, but it seems unlikely that an Imperial Federation would have been able to devote more resources to the south Pacific than our far-less-organized British Empire actually managed. 

But how did those Dominions come to have their own trade policies? Well, here it gets strange: London seems to have actively encouraged them to tax imports and set up local industries.

Consider Australia. New South Wales (NSW) started taxing alcohol imports in 1800; alcohol was the obvious thing to tax and most booze was imported, so the tariffs were also, in fact, the first taxes in the country. (Raised to pay for a pair of jails, which seems somehow ironic.) The import taxes rapidly gave rise to import substitution ... directly financed by the government in London. “The introduction of beer into general use among the inhabitants would certainly lessen consumption of spiritous liquors,” wrote the colonial secretary in 1802 (page 7). “I have therefore in conformity with your suggestion taken measures for furnishing the colony with a supply of ten tons of Porter, six bags of hops and two complete sets of brewing materials.”

Sadly, the subsidized importation of brewing equipment by the authorities back in London failed, so the colonial government set up its own brewery in 1804. In 1821, the British Parliament cut the alcohol tax on alcohol distilled in NSW from £0.50 to £0.13 while leaving the tax unchanged on imported spirits. 

You got that right: parliamentarians in London kick-started import substitution in New South Wales. In 1827 they added insult to injury by taking a 5% duty on manufactured imports from places other than Britain and extending it to Britain. 

Er?

Eventually the Australian colonies gained self-government, but by the then the urge to protect was well-established. South Australia separated from NSW in 1836; by 1846 it had ad valorem tariffs on even more goods than NSW. Victoria separated from NSW in 1851; by 1859 it had an organized “Tariff League” and in 1866 there came an openly protectionist Customs Act designed to promote the local manufacture of textiles, hats, leather goods, woodenware, furniture, toys, woollen blankets and rugs, glass and glassware, earthenware and porcelain. (Page 9.) Cigarettes soon followed. 

By this point, Australia was clearly on its own economic policy path. Even had London been able to get its act together about inviting Dominion representatives into the Parliament, the negotiations would have been difficult. It is more surprising that the Australian colonies managed to knit themselves together into the Commonwealth of Australia than that they failed to build lasting economic links to Britain.

One has to wonder if things would have been different had British bureaucrats been more proactive about keep Oz and Albion in the same economic space. More concretely, I have to wonder why those self-same bureaucrats put Australia on the road to economic independence, to the point of passing an Act of Parliament. It seems strange and goes beyond simply wanting to make the Dominions self-financing. (Which they never were, if you count the cost of imperial defense.) 

I understand why once you had local booze, independence was near inevitable. What I don’t understand is why London wanted them to have their own booze. But either way, the first sign of the inevitable end of the British Commonwealth came when that first Ozzie cracked open that first locally-brewed government beer. 

Comments

[Yildo]

I would have attributed the crackdown on spirits to the British moral panic over the Gin Craze, but that happened 50 years before the alcohol tariffs.

[Doug M.]

Early Australia was always chronically short of money -- as in, cash and specie. The convicts didn't bring any, and the colonial administration basically had payroll and not much more. What little silver there was tended to flow out rapidly to pay for imports. As the population and economy started to expand, the colony suffered accordingly.

Okay, so: you know how cigarettes are a de facto currency in many prisons? Well, early Australia was a vast open air prison. So the colonial soldiers who served as prison guards came up with their own solution: rum. They imported shiploads of the stuff from Bengal -- at one point a group of officers got together and *chartered* a ship. And pint flasks of rum quickly became the standard unit of transaction; you could buy services, livestock, or land, and everyone had a pretty good idea what the prices would be.

Of course, this gave the rum-importing prison guards control of the colony's currency. They used this to become both rich and powerful. The New South Wales Corps -- the regiment of prison guards -- became known as the "Rum Corps". It was effectively a mafia, with a a handful of officers ruling as bosses. They became comfortably more powerful than the official governors; John Hunter, the second governor, found himself stymied by them at every turn and eventually forced to resign.

In 1808 London sent a tough new governor, Captain Bligh -- the Mutiny On The Bounty guy -- to take over the colony. Bligh very quickly came into conflict with the rum mafia. It ended in an armed rebellion -- the "Rum Revolution" -- in which Bligh was overthrown and Australia was run for some time by a Rum Corps-supported rebel government.

The problem wasn't even partially solved until around 1815, when the sagacious Governor Macquarie gave the colony its first local supply of coined money, the famous "Holey Dollar".

-- This was so ingenious it deserves mentioning. Simply importing specie wouldn't work; it would just flow out again to pay for imports. So Macquarie imported a bunch of old Spanish silver dollars, and then /punched holes out of the middle of them/. The doughnut-shaped Holey Dollar was accepted as one coin, and the middle bit was accepted as another. Nobody outside the colony wanted them, so they couldn't be used to buy imports, but they circulated freely inside Australia for many years and jump-started the colony's economy.

Anyway. The use of rum as money explains the early, unsuccessful attempts at import substitution: the government-owned brewery was actually a clumsy and unsuccessful attempt to wrest back control of the colony's money supply.

As to the later reduction of the tax on locally generated alcohol, I'm less sure, but I suspect it was an effort to stamp out the last remnants of the rum trade. By the 1820s most of the original Rum Corps mafia bosses were either dead, in jail, or had successfully made the transition to being respected and honored Founding Fathers, so I'm not sure if the dates match up, but that would be my first guess.

Doug M.

[Doug M.]

The colonial and early Republican United States had similar problems, though not as intense -- most of the colonies developed strong export sectors early on. That's in sharp contrast to Australia, which exported pretty much nothing until the wool trade started to take off after 1820.

Whiskey was occasionally used as a de facto currency in the US, especially during the Revolution. But it never achieved anything like the ubiquity of rum in early Australia.

Doug M.

[Noel Maurer]

It turns out that the British were following the American precedent in other ways: the early American colonies were allowed to tax imports from the U.K.

[Will Baird]

Wouldn't you say the Brits were just repeating their earlier policy, though, Noel?

[Doug M.]

Note that colonial administration was expensive. So allowing import taxes seemed like a two-fer: it kept the money supply from draining back to the mother country (or at least slowed the process down a bit) while also helping to pay for colonial administration.

AFAIK, New France was at least a partial exception -- they weren't eager to tax imports. That's because the great majority of imports to Canada were trade goods for the Indian trade. Perhaps as a result, New France had probably the longest and most severe currency shortage of any settler colony -- from the the 1680s until well after the end of the Seven Years War in 1763. The ingenious French came up with their own unique solution, as memorable in its way as Governor Macquarie's Holey Dollars...

Doug M.

[Noel Maurer]

Will: yes, I would! But I'll admit that I found both the North American story and the details of pre-1901 Australian trade policy surprising and fascinating. I read the article at the links and had to post something.

I am sad that so many of my former go-to blogs are now in decline.

[Will Baird]

Its interesting the policy when repeated didn't produce the same results. Are there subtle differences in the policy itself that might have changed the outcome or were the two circumstances different enough the same policy would not produce the same outcomes or attempts at the same at least?

Sadly, the blogosphere seems to be contracting. It has been in the specialty blogs for some time: many have gone away altogether. The generalist blogs have joined the decline as well. Its kinda Usenet circa 2004. There might be another two to five years left in it though.

[Bernard Guerrero]

Which blog links, now? All I see is the link to the pdf.

[Noel Maurer]

Bernard: not the links in this post; I'm bemoaning the decline of the blogosphere in general.