The Concise Oxford Dictionary of Politics (101 page)

One who benefits from a collective activity without participating in it. In Mancur Olson's classic formulation (
The Logic of Collective Action
, 1965), the incentive to free ride exists for every rational, self-interested member of any organization where collective action is required to secure a common good. The fact that a goal is common means that ‘no one in the group is excluded from the benefit or satisfaction brought about by its achievement’. Each member therefore faces an incentive not to incur his or her share of the costs. Furthermore, if the organization is sufficiently large, the individual knows that his or her costless enjoyment will not affect the motivations of other members to alter their behaviour, because the withdrawal of his or her involvement ‘will not noticeably increase the burden for any other one dues payer’. Provision of the good is threatened, however, if each and every member reasons in this way. Organizations thus face strong incentives to devise rules (regulating membership and admissible activity) to prevent free riding, both on instrumental grounds and on grounds of fairness. Taxation of citizens by states for the provision of
public goods
, and trade union monopolies (‘closed shops’) are two well-known illustrations of such institutional devices.
SW 

 
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The absence of barriers to international trade. Up to the nineteenth century, under the system of
mercantilism
, Europeans faced two main kinds of barriers to trade: first, there were duties, quotas, and prohibitions restricting the entry of goods to each customs area; second, controls on participation in particular trades imposed by corporations like the British or Dutch East India Companies. In 1813 the British East India Company was deprived of its monopoly over trade between Britain and India. Following a prolonged public campaign, the repeal of the Corn Laws in 1846 opened the British market to cheap foreign grain.
The exemplary force of these events was all the greater because they appeared to be applications of the cogent and appealing liberal economic theories of Adam
Smith
and David Ricardo . Moreover rapid growth in international trade, coinciding with increasing wealth and an extended period of general peace in Europe, at first appeared to confirm these theories. Ricardo had argued in his theory of comparative advantage that free trade between nations would bring gains to both parties to an exchange, even when one was the more efficient producer of every good they traded. This was because trade encouraged even an unproductive national economy to devote resources to those branches of production in which they would be least inefficiently employed.
But Ricardo never promised that the gains from trade would be evenly distributed, and a nationalist critique of free trade pioneered by Alexander
Hamilton
in the United States and Friedrich List in Germany gathered strength towards the end of the century. It even gained ground among traditionally liberal British businessmen, now buffeted by the trade cycle and threatened by new centres of manufacturing industry in continental Europe and North America.
The campaign for tariff reform in Britain was only one facet of a general drift away from free trade. By the 1930s not just the practice but even the ideology of free trade had been largely abandoned because it was held to provide disproportionate gains to established industrial economies and to lack a satisfactory mechanism for the realization of their potential comparative advantage by newly developing economies. In its place came bilateral systems of exchange within currency areas, the British system of
imperial preference
within the sterling area being only one example.
Because bilateralism coincided with a sharp fall in the volume of international trade and was held by powerful members of the Roosevelt administration to have contributed indirectly to the outbreak of the Second World War, the allied powers reinstated a limited form of free trade within a dollar exchange system in the later 1940s. Under the
GATT
(General Agreement on Tariffs and Trade) of 1947, successive rounds of multilateral trade negotiations (MTNs) outlawed quantitative restrictions on trade, such as quotas, and achieved greatly reduced tariffs on the principal classes of manufactured goods traded between leading industrialized economies. But although this contributed to a sharp increase in levels of trade and prosperity during the 1950s and 1960s, it steadily became more and more evident that many non-tariff barriers, including complex administrative procedures, ingeniously drafted health and safety regulations, and nationalistic public procurement policies, still impeded free exchange of goods and services. Moreover the GATT had permitted a number of exceptions to its general principles from the outset. Trade in temperate-zone agricultural goods was not covered, nor in textiles and clothing, and both became subject to extremely restrictive regimes devised by the United States, Japan, and the European Community to protect their own producers. The GATT also allowed discrimination in favour of each other by groups of countries pledged to the formation of a
free trade area
or customs union, such as the
European Community
.
Add to this the extent to which goods such as automotive components, oil, or aluminium are traded internationally within large multinational corporations at administered rather than market prices, together with the renewed prevalence of smuggling (especially of precious metals and illegal drugs), and it becomes hard to discern clearly any causal relation between prosperity and the imperfect contemporary implementation of liberal free trade theory. Be this as it may, the most impressive rates of economic growth achieved in recent years have without exception been achieved by export-oriented countries like Japan, Taiwan, or South Korea, that have relied very heavily on market access provided by this system of managed liberalism; and this has confirmed free trade once again as the effectively unchallenged ideal type of international commerce.
CJ 

 
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A group of countries, such as the North American Free Trade Area (Canada, Mexico, and the United States), pledged to remove barriers to mutual trade, though not to movements of labour or capital. Each member continues to determine its own commercial relations with non-members, so that a free trade area is distinguished from a
customs union
by the need to prevent the most liberal of its members from providing an open door for imports. This is done by agreeing rules of origin, which set the terms on which goods manufactured outside the area may move from one state to another within it.
CJ 

 
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A division in Parliament on which no formal party line applies, when MPs are free to vote as they see fit. Generally confined to moral issues, such as abortion and capital punishment.

 
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