When Free Trade First Faltered

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The “first age” of globalization occurred in the roughly 60 years before World War I and combined rapid global trade growth with rising tariff barriers among the United States, Germany, Russia, France, and Japan.
The article links that period to contemporary reemergence of economic nationalism after the Great Recession of 2008–09, arguing that historical parallels illuminate tensions between economic interdependence and nationalism.

Between the 1840s and 1860s, Britain led a mid-century shift toward free trade by overturning the Corn Laws in 1846.
In 1841, Friedrich List published The National System of Political Economy to argue against cosmopolitan free trade and for protectionism to build “infant” industries.
The 1860 Anglo-French (Cobden-Chevalier) commercial treaty included a most-favored-nation clause and helped lock Europe into roughly “about 50 or 60 trade treaties,” creating an early common market.
The first Great Depression spanned 1873–96 and coincided with the resurgence of protectionism and imperial expansion.
By 1880, economic nationalists had the upper hand; in the US the 1890 McKinley Tariff imposed an unprecedented average rate of about 50 percent.
The article traces major infrastructure projects associated with national strategies: the US transcontinental railway completed in 1869, the 1866 transatlantic cable, the opening of the Suez Canal, the German Berlin-to-Baghdad railway under Willhelm II, and Russia’s Trans-Siberian railway construction beginning in the early 1890s.

Transportation and communication advances that reduced costs and time:
- Transoceanic steamship lines lowered transportation costs and travel times.
- The transatlantic cable (laid in 1866) reduced message times between Wall Street and the City of London to minutes.
- The Suez Canal and the US transcontinental railway (completed in 1869) further contracted global distances.
These tools facilitated trade liberalization but also intensified competitive pressures and contributed to deflationary dynamics under the British-led gold standard.

Trade liberalization, low transportation costs, and mass industrialization generated falling prices, tightening profit margins, and distress for many exporters and debt-ridden agrarians and manufacturers.
The deflationary effects of the gold standard exacerbated the downturn leading to the 1873–96 depression.
Policy responses included:
- Rising tariff walls and colonial expansion to secure raw materials and markets.
- Formation of monopolies, cartels, and trusts as protectionism sheltered domestic firms.
- Interimperial searches for markets and resources, trade wars, and military interventions.

Pro-free-trade advocates and thinkers:
- Richard Cobden argued trade liberalization would promote peace by creating economic interdependence.
- British Edwardian free traders and Georgists (inspired by Henry George’s Progress and Poverty, 1879) promoted alternatives to land monopolies and tariff-based policies.
- J. A. Hobson (Imperialism: A Study, 1902) and Norman Angell (warning of the “great illusion” of wartime gains) critiqued monopoly capitalism and imperialism.
Protectionist and nationalist thinkers and actors:
- Friedrich List promoted national systems, high tariffs, and colonial expansion to develop industrial capacity.
- Political actions consistent with Listian ideas included tariff consolidation in Germany under Otto von Bismarck and protectionist policies in Russia under Count Sergei Witte.
Cultural and popular influences:
- The single-tax movement influenced figures such as Leo Tolstoy and Sun Yat-Sen; Lizzie Magie’s 1904 board-game patent aimed to teach Georgist ideas and later evolved into Monopoly.

Parallels highlighted:
- The article compares the 25 years after the Corn Laws (1846 to early 1870s turn to protectionism) to the 25 years after the end of the Cold War, both periods of substantial trade liberalization followed by nationalist pushback.
- It warns that proponents of cosmopolitan economic interdependence historically underestimated the political appeal of nationalism and self-sufficiency.
Implication:
- Historical experience shows international cooperation and sustained organizing by supporters of interdependence can counter nationalist-driven conflict and eventually expand free-trade outcomes, though backlashes are recurrent.

IMF F&D Magazine, "When Free Trade First Faltered," Marc‑William Palen, September 2025

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