The Past Speaks

Abstract: This paper uses theoretical insights derived from Evolutionary Economic Geography (EEG) to relate the experience of Liverpool’s timber cluster to ongoing debates about the merits of various types of mercantilist tariff policies. In 1810, the British government introduced a tariff policy designed to create alternative to Britain’s traditional supplies of wood in the Baltic region. The policy consisted of discriminatory duties to incentivize timber importing firms to switch from their traditional suppliers in the Baltic to more Canadian sources of wood. As we show below, this policy, combined with the spatial and material nature of the timber trade, shaped the kinds of knowledge acquired by Liverpool firms during and after the ‘stimulus period’. This knowledge included greater geographical awareness, knowledge of how to manage vertically-integrated international timber enterprise, knowledge of non-European timber, and knowledge of how to cooperate together politically. After the stimulus policy was dismantled starting in 1842, these new sources of knowledge were leveraged by Liverpool timber merchants to preserve their competitive advantage.

On a practical level, this historical research speaks to contemporary concerns about how governments can use tariff policy and other interventions in the economy to encourage the development of competitive capabilities by clusters. Our paper suggests that tariffs and other interventions are more likely to promote competitive advantage by a cluster if there is a so-called “anchor” present. This work therefore speaks to EEG scholars who are increasingly interested in the role of “anchors” in the development of clusters. They theorize that the development of competitive capabilities within a cluster is likely to take place if the local institutions include an “anchor” that serve to share knowledge within the locality. In modern economies, such anchors range from universities to independent record stores (Hauge and Hracs, 2010; Hracs and Jansson, 2016). In the Liverpool timber cluster, the key anchor was the firm of Edward Chaloner, which generously shared its knowledge of tropical woods with other firms in the clusters, thereby helping to make Liverpool into a great centre for trade in mahogany and other New World tropical timbers.