Lessons of the Red Flag Act

In Britain, the birthplace of the Industrial Revolution, the automobile industry ironically failed to develop. The reason was job protection. Public opinion spread that if automobiles advanced, the existing horse carriage business would be hit, threatening the jobs of coachmen. Politicians created regulations to protect the jobs of coachmen. This was the “Red Flag Act,” known in Korean as the “Jeokgi Ordinance.”

The Red Flag Act, enacted in 1865, contained the following provisions. First, each automobile had to have three operators: a driver, an engineer, and a flag-bearer. The flag-bearer had to walk 55 meters ahead of the automobile carrying a red flag during the day and a red lantern at night to lead the vehicle. Second, the maximum speed was limited to 3.2 km/h in urban areas and 6.4 km/h outside cities.

Just imagining the absurd sight of a flag-bearer riding ahead in a horse carriage, waving a flag to warn others of the danger of an automobile coming behind, is enough to make one laugh. It is astonishing how far politicians went in forcing people to use automobiles that had to move more slowly than horse carriages.

Given that steam automobiles at the time could travel at speeds of over 30 km/h, this was clearly a measure designed thoroughly to protect horse carriages. When innovation occurs and an industrial paradigm shifts, the normal course is to accept it and adapt. But regulations meant to protect existing businesses and preserve their jobs are nothing more than legal acceptance of special interest groups’ demands. Since automobiles were regulated by the standards of the horse carriage era, the practical side effects were severe.

In 1878, the British Parliament introduced a revised law. It relaxed the regulation by requiring notice only 18 meters ahead. At the same time, it added a clause forbidding the emission of smoke or steam that might frighten horses. It was a regulation for the safety of both horses and people, and one that even took the environment into account. In effect, it demanded something like the level of today’s commercial electric vehicles, so it could be called an environmentally friendly regulation. It seems that emphasizing safety and the environment was effective even then as a justification for regulation. Though it was presented as deregulation, in reality it completely blocked automobiles.

Automobiles in other countries gradually became more convenient, and Britain could no longer leave its backward and inconvenient reality unattended. In the end, it lifted the regulations and accepted the new mode of innovation, but by then the timing had already been missed.

The Red Flag Act, created out of concern that coachmen would lose their jobs, was repealed in 1896. Only after there were no longer any coachmen’s interests left to protect did the law disappear as well. Nothing remained for Britain. The jobs of coachmen vanished, and it was already too late for Britain’s automobile industry to catch up with other countries.

Britain was the first country to commercialize the automobile, yet it ended up becoming the country that voluntarily abandoned the automobile industry, the core industry of the Industrial Revolution. In France, Germany, and the United States, the automobile industry flourished, while Britain gradually entered a path of industrial decline.

Those who supported the Red Flag Act probably felt wronged, believing they had good intentions in trying to protect jobs but failed because of companies pursuing only profit. They may also have argued that if other countries had enforced the Red Flag Act as well, the jobs of coachmen would not have disappeared overnight because of the sudden rise of automobiles, and that they could have succeeded in preserving those jobs for quite a long time.

But one cannot understand an open world while trapped in the zero-sum mindset that someone’s gain must be someone else’s loss. Attempts to protect one’s own livelihood by confining consumers within regulatory barriers and forcing them to bear the sacrifice cannot succeed in the long run. Before long, the fence collapses, and only a devastated reality remains.

What should come first is the effort to take the lead in industry through innovation. If there are politicians who say they will begin by creating regulations to protect someone’s interests, that country’s future is not bright.

Sung-no Choi, Vice President, Center for Free Enterprise

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Original title: 붉은 깃발법이 남긴 교훈

Author: Sung-no Choi

Date: 2017-03-17

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=27&idx=23152