The secret history of classical economist and trade theorist, David Ricardo

President Donald Trump’s ‘outright vandalism’ of the global economic system, as Ann Pettifor put it, has got many commentators reaching for their economics’ textbooks.

If only today’s politicians could appreciate the win-win benefits of global trade – and particularly the immensely powerful, 200-year-old theory of classical economist David Ricardo – all would be well. It’s basic Econ 101, the argument goes. Ricardo was a hero of liberal thinking, an opponent of slavery, who showed that freer international trade can benefit rich and poor alike. At least, that’s the orthodox story.

The dismal science

Economics is sometimes called ‘the dismal science’, but as some of its defenders such as Harvard’s Jason Furman argue, that should be a badge of honour.

The jibe ‘dismal science’ stems from a racist essay published in 1849 that criticizes economics for its role in helping abolish slavery in the British Empire. The person who coined the term, Thomas Carlyle, was angry that people of different skin colours were, he wrote, ‘on a footing of perfect equality, and subject to no law but that of supply and demand according to the Dismal Science.’

The defenders of orthodox economics, however, often leave the history there. They fail to note the other ways in which – as historian David Olusoga writes – ‘events and phenomena that we think we know and understand contain within them lost or camouflaged connections to Africa, slavery and black history.’

This is particularly true in relation to David Ricardo and his most famous story, often repeated in support of hyper-globalization and free trade: the win-win exchange of English cloth and Portuguese wine.

Matthew Watson, Professor of Political Economy at Warwick University, describes the commonly taught version of Ricardo’s theory as a ‘mathematical facade’ behind which the ‘explicitly oppressive social relations’ are disappeared.

Was Ricardo an opponent of slavery?

Despite this, David Ricardo has a reputation as an opponent of slavery. How does that add up?

Writing at a time when Britain had outlawed the slave trade but not slavery itself, Ricardo once said that he ‘ardently desired’ that the ‘grievous stain [of slavery] would be removed from the national character’. Summing up the conventional wisdom, Melvyn Bragg host of BBC Radio 4’s In Our Time, described the classical economist in 2021 as ‘an abolitionist, not just against the slave trade but slavery per se’.

However, Ricardo only criticised slavery once in his entire career. At other times, he seemed intensely relaxed about it. As an MP, he said he had ‘no hostility’ to West Indian plantation owners and sympathised with slave owners’ ‘sufferings’. In his Principles of Political Economy – written during a boom in the number of enslaved people in US southern states – Ricardo quoted a passage about the ‘happy’ future state of free trade when ‘the raw cotton of Carolina, will be exchanged for the wares of Birmingham’. These are not the words of an abolitionist. Therefore, perhaps, it is not surprising that he ignored the true history of England and Portugal’s trade.

Ricardo’s one anti-slavery comment – on which his reputation as an abolitionist hangs – came as he was pushing a bill through parliament to open the British market to sugar grown in India. Those with a financial interest in the Indian trade were hypocritically attacking Caribbean sugar producers’ working conditions. It was not a consistent and principled stand against slavery.

Ricardo and the East India Company

Trade agreements are all over the news recently. The UK government – caught post-Brexit as a midsized economic power in a world of increasingly hostile trading blocs – has recently signed new trade deals – or as we should think of them treaties – with the EU, the USA, and India.

India is another example of the historical misremembering of Ricardo. In the early 1800s, when the classical economist was writing, British cotton exports to its colonies in the Indian subcontinent were in the process of wrecking what had been the world’s richest area of textile manufacturing. Harvard historian Sven Beckert calls the destruction of India’s textile centre ‘the world’s most rapid and cataclysmic deindustrialization’.

When challenged about the impact of British exports in India, Ricardo denied that ‘great injury’ had been done to Indian manufacturing and argued – in line with his theories – that ‘both countries were ultimately benefited’ by the trade. The facts didn’t back up his assertion, but he made up for that in conviction.

That British-India trade was win-win, Ricardo said, was ‘so clear and self-evident, that he wondered any man could doubt it.’ He conveniently ignored the political power of the British East India Company – the heavily-armed, private corporation – which was transforming the sub-continent into a producer of raw materials such as cotton, indigo, and opium.

David Ricardo even owned £1,000 – equivalent to £160,000 today – of stock in the East India Company.

This is not, as some might argue, about applying a twenty-first century ethical lens on past times. Adam Smith – whose writing inspired Ricardo to become a political economist – was a fierce critic of the East India Company and, at times, of British imperialism. Smith wrote that owners of East India stock have ‘a share, though not in the plunder, yet in the appointment of the plunderers of India.’

In The Wealth of Nations, Smith criticised the ‘strange absurdity’ of the East India Company which acted as both traders and ‘sovereigns of the countries which they have conquered’. The company ‘intimidated’ the British parliament, he said, to the detriment of the ‘great body of the people’. Part of Smith’s aim – often twisted beyond recognition by later thinkers in his age and ours – was to free trade from corporate or merchant capture so all could benefit.

Why it matters today

But Ricardo was the fountainhead for international trade thinking. He pushed economics to embrace highly abstract models and downplay the role of facts and empirical evidence: a problem known as the ‘Ricardian Vice’.

Ricardo’s venerated theory – as opponents have argued – has often supported a trading system that locked poorer countries in the Global South into exporting raw materials and kept them poor. Those countries who have done best out of hyper-globalization – such as China – have often done so by violating Western economic orthodoxies.

Economics is a vast subject which has – pushed by world events and movements such as Rethinking Economics – evolved in the last decade to look more at the real world. New quantified estimates of the impact of the slave trade on Africa and Europe have been produced.

But more needs to be done. The work of finding and uncovering the ‘lost or camouflaged connections’ between its great figures, ideas, and the broader reality of global history continues. The work of decolonizing economics is being advanced by a new generation of economic thinkers.

A more accurate picture of the costs and benefits of unregulated global trade – and all that comes with it – is urgently needed to help us chart a better future.

Nat’s book Ricardo’s Dream: How Economists Forgot the Real World and Led Us Astray is available from all good online and in person bookshops. Follow him on Bluesky or visit his website to find out more.