One of the most damaging errors in any Government’s management of the economy – apart from managing the economy at all – is protectionism, stifling competition and imports to safeguard domestic industry and the Treasury’s revenue. It was, however, an error of which most European governments were guilty in the seventeenth century, and the Scots were feeling the pinch of it.
IN 1603, King James VI of Scotland became James I of England too, and he and his son Charles I held two crowns and summoned two Parliaments, Westminster and Edinburgh, until 1649 when Westminster had Charles summarily executed.
Two years later, the newly republican English Parliament then passed the first Navigation Act, shutting out Dutch competition in the belief that imports made the country poorer.* Scotland was frozen out of England’s single market too, required to use English ports and currency and pay English taxes to access England’s colonial markets.*
Disappointingly, the Restoration saw England’s stranglehold tighten, and when Westminster unilaterally ousted James VII and II in 1688 and handpicked his daughter Mary and her Dutch husband William instead, outraged Scottish statesmen began to whisper of nominating their own Head of State again.
But independence requires an income. So in 1695, with Edinburgh’s blessing, the Company of Scotland raised enormous sums from private donors to found Caledonia, Scotland’s own colony on the Isthmus of Darien.*
* The Act was annulled in 1660 along with all other laws passed in the Interregnum, but immediately reinstated and new provisions introduced to control particular imports. All the Navigation Acts were finally repealed in 1849 in the interests of free trade, encouraged by the groundbreaking economics of Adam Smith – a Scotsman.
* Eighteenth-century ‘mercantilist’ wisdom was that a nation’s wealth was its gold reserves, which were increased by absorbing new colonies, mining their gold, employing (or enslaving) their labour, taxing their trade, and taxing exports to foreign nations. Imports from foreign competitors were discouraged, as they were blamed for taking gold out the country. Crony enterprises such as the East India Company helped the Treasury to keep it all in-house.
* Now the Isthmus of Panama. The colony was located in a natural bay on the eastern (Atlantic) side, washed by the Caribbean Sea, at the southern end of the isthmus near what is now the border with Colombia. The chief settlement was named New Edinburgh; today it is called Puerto Escoces, Scottish Port. Not to be confused with New Caledonia in the South Pacific, an island under French administration 750 miles east of Australia first sighted by Captain Cook in 1774, who was reminded of Scotland.