Anne Rathbone Bradley
In “Getting Real About Free Trade,” Sam Gregg offers a modest case for free trade. Gregg and I sing from the same sheet of music, and we agree that classical liberalism provides a grounded and realistic framework for navigating the complex realities of political economy. Gregg rightly points out that even the modest case for free trade is compelling because it is grounded in our understanding of the finite and fallen human person. The brilliant and enduring legacy of Adam Smith lies in this revelation. Human beings are the only source of human capital. Smith, the world’s first development economist and advocate for free trade, centered his understanding of commerce in human anthropology. He recognized that people are sometimes good, sometimes bad, sometimes smart, and often stupid. Indeed.
As such, there are no better angels whom we can appoint as our benevolent guardians to run society and promote the common good. But we can appeal to our “sometimes good, sometimes bad” natures accompanied by private property rights to make greater than imaginable contributions to the common good. Moreover, Smith argues this opulence extends to ordinary people, an ahistorical point at the time he made it. Adam Ferguson suggested that social institutions result from individual actions but not human design. Maybe this is what is most upsetting to today’s new right, which bemoans free trade—it is a spontaneous order that they simply cannot redirect at their discretion.
David Ricardo argued for free trade based on comparative advantage, one of the most important and misunderstood ideas in economics. Russ Roberts makes the most straightforward case that comparative advantage frees us from producing things ourselves (direct methods of production) by offering us access to products through trade (roundabout methods of production). In this process, circles of exchange are widened through expansive international commerce. Thus, free trade is unpredictable. Products and jobs are here today and gone tomorrow. We no longer make 8-track tapes, after all. Production sources constantly change as global specialization is further refined; consequentially, individual productivity grows. These are the economic and humanitarian arguments for free trade. The sociality of our natures begs for cooperation not just with our neighbors but with as many strangers as possible. Free trade frees us by emancipating our time.
Mises and Hayek, 20th-century intellectual descendants of Enlightenment thinkers advocating for free trade among free people, adopted the Greek word catallaxy or catallactics to describe the market process. It means “bringing one into the community” or “making a friend from an enemy” and was essential to their critiques of economic calculation under socialist regimes. The logic of that argument applies here. Trade brings strangers together. As opportunity costs change, the patterns of trade will change, and we bring more people into the community of trading partners. This reduces rather than erases the incentives for war and violence among nations.
And yet, as Gregg reflects on Roepke’s free trade “realism,” free trade is not a panacea. There’s no silver bullet for preventing war among nations. The most essential point is that without free trade, violent conflict is inevitable. Free trade is the best antidote to international plunder and violence, the status quo for most of human history. Thus, the modest case for free trade is the robust case for free trade. Free trade delivers relatively less war than we would otherwise experience. That is all we need and can claim, and it’s the robust case for free trade. Without trade, we lose our interdependencies across the globe and become more vulnerable to war and international tyrants.
Gregg agrees that this “realism” doesn’t require that we attenuate our case for the most unrestricted trade possible among nations; it does require that we reconcile ourselves to the enduring realities of human nature and the need to defend institutions of economic freedom both in principle and in practice. As Roepke and historian Christopher Clarke realized, government was the arena where principle and practice met. And in times of crisis, governments are always willing to walk back on free trade, which comes at a high cost. “Governments were fully prepared to subordinate the recognized benefits of ever-expanding trade to what they regarded as more weighty considerations, whether ideological, political, military, ethnic, cultural, or religious in nature.” That’s a long list of exceptions. Winston Churchill rings in our ears as governments never waste a good crisis.
There is nothing new about governments wanting to restrict trade for many reasons. Governments always have and always will look for reasons to grow their power. Limiting trade is an effective means of doing so. However, governments admitting “free trade is good, but we will limit it for a time because of an emergency” forces them to say the quiet part out loud: free trade is good, but the momentary power grab is better. The ethos of free trade mitigates government power. This was not taken for granted in the 18th century by its early proponents but is today.
Gregg further points to those who worry that free trade erodes the nation-state and US hegemony. Smith saw patriotism as natural for human beings as part of our identity stemming from ordinary activities. This does not preclude our love for humanity, but he warned about the limits of our sympathies. Here lie the biggest myths. Modern protectionists fear free trade hollows out the middle class and ships jobs overseas. They claim that for every international transaction, there is a winner and a loser and that this erodes America’s superpower status. Doug Irwin points out that most job losses are due to domestic business cycles, not international trade. If we are worried about our strength as a nation, perhaps we should get our domestic house in order, but I digress.
These myths are fueled by viewing wealth as a zero-sum game. In the past 50 years, political and technological trade barriers have dramatically declined. Simultaneously, the American manufacturing sector remains a powerhouse of output. Rather than the middle class being hollowed out, more people are moving to upper-income quintiles. Trade is not zero-sum when it’s voluntary and free. Americans are richer than they were in 1970, which is partly due to global trade. This is not a threat to America as a nation-state. Global cosmopolitanism does not mean you can’t be proud to be an American, nor does it mean that America is weaker than it otherwise would be. Globalization makes us more resilient. Industrial policy advocates are threatened by global cosmopolitanism because it threatens their ideological perceptions of zero-sum patriotism and thus restricts their power grabs.
Cronyism is the real problem. The free market is not the source of cronyism because it operates on the three P’s: prices, property rights, and profits and losses. The market co-exists with the state and civil society. Resource allocation occurs in all three sectors. The state is unique because it has the power of coercion. Political power and corporate welfare are the real threats to free trade and its high living standards. Domestic producers benefit when we restrict trade in the name of patriotism. In the 1980s, there was panic that Japan, rising from the ashes of WWII, would take over America. That seems silly, upon reflection. But these sentiments have resurfaced today toward China; tomorrow, they will target India. Politicians restricted imports accordingly. This allows us to feel good while doing harm…to Americans!
Here is where Roepke makes an essential contribution. Free market advocates must rethink how we make our arguments and not overstate the case for free trade. It may be that “true free trade has never been tried,” but that misses the point. A little free trade goes a long way toward freeing people and promoting international peace. Moreover, lower prices and better-quality goods and services are perhaps the most potent arguments for free trade as Gregg points out. It liberates our incomes and our time. This year, 113 million people will be added to the global middle class, a remarkable feat. The Smithian point is that this alone might not compel Americans to care about free trade. Americans might not care about Indians becoming more prosperous, especially if they view it as happening at their expense. We need a self-interested case for free trade. A rising global middle class lifts all ships because trade is positive-sum.
The modest case for free trade is the robust case for free trade, and it’s a hill worth dying on. Not so that we can have slightly cheaper bananas and televisions, which is nice, but we can reap the benefits from greater international cooperation and live better lives. Free trade itself is a humanitarian pursuit, a case that cannot be overstated.
Anne Rathbone Bradley is the George and Sally Mayer Fellow for Economic Education and vice president of academic affairs at The Fund for American Studies.