(Was recommended by r/ask_politics to post here)
Learning about Smith in class right now and was wondering if someone could please help me understand further.
A redditor mentioned the following to me:
(He was denouncing) arbitrary state power and stifling role of guilds and other corporatist entities that restricted the free exchange of goods and services.
The state in Britain tended to make a lot of its money by selling the monopoly right to provide some good or service. Guilds tended to heavily restrict entry and exit into professions and control output.
The liberal argument he was making was that these actions restricted free exchange, stifled innovation, and blocked the creation of new wealth.
Could someone perhaps expand on this idea a bit further please?
Thanks!
I can't say much about all the English guilds in the 18th c. But I can say something about state-granted monopolies, or monopoly patents.
The origin of such things seems to have been a recognition that some industries were useful and needed to be encouraged. If some French glass-makers, say,were interested in coming over and setting up their shops in Tudor England, they would be incurring lots of costs and there would be some risk that, if they established themselves, they would suddenly be faced with competition from others and it would be difficult to make up their expenses. So, they might be granted exclusive rights to making glass for a period of some years. This would make the French an attractive venture for investors ( note that this is before the existence , really, of what you'd call banks) and a useful industry could be established. And the cost to the government would be nothing, at a time when most wealth was land and so most monarchs had to be very careful about gifting it away. It might not be glass: it could be a company wanting to start anything expensive, like a coal mine, and they needed to attract lots of up-front investment. Or someone who had intellectual property- like, a way to dye cloth- and wanted to develop it, but didn't want someone to jump in and copy his methods after he had spent much time and money making it go. In the 16th c. there would usually be some investigation into how the new monopoly would affect the current trades: the French glass makers would not be granted their monopoly until it was determined that what they were doing was not already being done ( this actually happened: they weren't, and got their patent).
However, the system began to be greatly expanded under Elizabeth and her chancellor Burghley. Courtiers could ask for money for advancing a petitioner's patent application, and more patents began to be awarded to those courtiers and their clients for no new industry or invention, just for money to the Crown, or just so the Crown could reward a courtier. A patent could be granted for the right to exclusively judge dyed silk, or sell beer in Bristol. There were some attempts to at least make the awarding of them consistent and systematic, but it was too attractive a source of revue for the Crown- and by the 1620's King Charles really needed a source of revenue, so abuses grew. It began to be recognized that the monopolies were actually quite costly. One historian has noted that as much as 200,000 pounds each year were drawn from the public in order to hand only 1,500 pounds to the king. The granting of monopolies was high on the Committee of Grievances list of abuses of the royal prerogative in 1640, and later in the 17th c. it was thought to have been a major reason for the Civil War.
Efforts to reform the system were complex, not uniform and went in fits and starts, but a patent system more based on protection of intellectual property came into being by the late 16th. c.. By the Adam Smith's 18th c., "monopoly" was a very pejorative term.
Christine MacLeod, Inventing the Industrial Revolution: The English Patent System 1660-1800