Third Prize ($1,500)
Every student of political economy knows that Adam Smith dealt mercantilist economic ideas a profound intellectual defeat in The Wealth of Nations (1776). The mercantilist had viewed economic interaction as a zero-sum game; that is, the benefit of one party had to come at the expense of the other. Sound economic policy, therefore, involved encouraging a favorable balance of trade (an excess of exports over imports), the acquisition of colonies, and the construction of a powerful navy to secure and maintain access to far-flung markets.
Once Adam Smith and the classical economists had overthrown the mercantilist worldview in the eighteenth century, it was entirely natural that classical liberals would have expected peace to triumph to the extent that the new teaching became accepted. A philosophy that had viewed economic affairs as characterized by inherent conflict was increasingly giving way to one that emphasized mutual gain and the large-scale social cooperation of the international division of labor. As the various peoples and places of the world concentrated on producing those goods for which they enjoyed some advantageor, as David Ricardo observed, even simply where they enjoyed the least disadvantagethe result would be greater wealth and a higher standard of living for everyone, as the entire world reaped the benefits of the particular advantages of a multiplicity of locales.
In the nineteenth century, the great classical liberal Richard Cobden, the textile manufacturer and British politician who became famous through his campaign against the oppressive Corn Laws, developed this idea still further. The states role in the spread of peace and freedom throughout the world was, in his judgment, very minimal. The progress of freedom, he once said, depends more upon the maintenance of peace and the spread of commerce and the diffusion of education than upon the labor of Cabinets or Foreign Offices.
Cobdens philosophy had its roots in the previous century of European intellectual history. During the Enlightenment, thinkers impressed by the elegant regularity of phenomena and the beautiful order that Isaac Newton had described in the physical world looked in the social world for similar law-like relationships. And indeed, as Ludwig von Mises explains, the founders of political economy perceived regularity in the operation of the market. People came to realize with astonishment that human actions were open to investigation from other points of view than that of moral judgment. They were compelled to recognize a regularity which they compared to that with which they were already familiar in the field of the natural sciences.1 The analogies to the natural sciences were readily drawn. As Josiah Tucker put it, The Circulation of Commerce may be conceived to proceed from the Impulse of two distinct Principles of Action in Society, analogous to the Centrifugal and centripetal Powers in the Planetary System. Adam Smith appealed to this very model, describing prices as continually gravitating, if one may say so, toward the natural price.2
Although the rise of what might be called economic thought had long preceded the Enlightenment, the attempt to systematize observations of economic activity into a coherent discipline reflected the intellectual life of the eighteenth and nineteenth centuries at its best. What they found was that prosperity was maximized when the free interaction of individuals was hampered as little as possible, and that ill-considered efforts to improve the economic well-being of certain groups were bound to have deleterious consequences, often exactly contrary to the stated wishes of their proponents. As Mises points out, many of these thinkers found the hand of divine providence in the beautiful order and harmony created by the free market and the division of labor. Enlightenment thinkers viewed the regularity of natural phenomena as an emanation of the decrees of Providence, and when these same figures discovered a like regularity in human action and the economic sphere, they were prepared to interpret it likewise as evidence of the paternal care of the Creator of the universe. Observe the functioning of the market system, some classical liberals put it, and you will discover in it the finger of God.3
The nineteenth-century classical liberal economist and writer Frederic Bastiat described the consequences of this insight in his posthumously published Economic Harmonies:
For if there are general laws that act independently of written laws, and whose action needs merely to be regularized by the latter, we must study these general laws; they can be the object of scientific investigation, and therefore there is such a thing as the science of political economy. If, on the contrary, society is a human invention, if men are only inert matter to which a great genius, as Rousseau says, must impart feeling and will, movement and life, then there is no such science as political economy: there is only an indefinite number of possible and contingent arrangements, and the fate of nations depends on the founding father to whom chance has entrusted their destiny.4
It was this crucial discovery of natural harmonies in the social world, thought to be analogous to those of the physical universe, that led so many thinkers to the conclusion that the economy could run itself, and that forcible intervention into this elegant order would produce more harm than good.
At least in the economic realm, therefore, the state came to be seen as something artificial, a human contrivance whose activity threatened to interfere with the beneficent workings of the market order. When Cobden plays down its significance in the spread of peace and freedom, therefore, and looks instead to the mutually beneficial and self-regulating activity of ordinary people, he is partaking in a profoundly significant chapter in European intellectual history.
To be sure, there was some exaggeration in Cobdens sweeping claim that free trade would ultimately lead to world peace. He spoke of free trade as drawing men together, thrusting aside the antagonisms of race, and creeds and language, and uniting us in the bonds of eternal peace. It would change the face of the world, so as to introduce a system of government entirely distinct from that which now prevails. Cobden ultimately believed that the desire for mighty empires, as well as for great armies and navies, would die away when man becomes one family, and freely exchanges the fruits of his labor with his brother man.5
If he was claiming that free commerce among nations could prevent the outbreak of war, World War I would provide sufficient refutation, since prior to that conflict the belligerents had indeed enjoyed a considerable volume of trade with each other. Moreover, Cobden certainly underestimated the influence of religion, ideology, and like factors in the outbreak of international conflict. It is not clear what an appreciation of the benefits of the international division of labor could have contributed to preventing, say, the Iran-Iraq War of the 1980s, in which the Iranians threatened to export their Islamic revolution to Iraq and the Iraqi government resolved to resist.
The great Austrian economist Ludwig von Mises was convinced that more than merely institutional change was necessary in order for war to be prevented in the future; ideas and philosophies had to change.
Only one thing can conquer warthe liberal attitude of mind which can see nothing in war but destruction and annihilation, and which can never wish to bring about a war, because it regards war as injurious even to the victors. Where Liberalism prevails, there will never be war. But where there are other opinions concerning the profitability and injuriousness of war, no rules or regulations, however cunningly devised, can make war impossible.6
Professor Richard Ebeling of Hillsdale College agrees with Mises. Free trade cannot prevent war when men no longer believe in peace, he writes. Free trade is premised on the idea that human relationships should be voluntary and based on mutual consent. It is grounded on the understanding that the material, cultural, and spiritual improvements in the circumstances and conditions of man are best served when the members of the global community of mankind specialize their activities in a world-encompassing social system of division of labor. It requires the conviction that the moral condition of individual men and mankind as a whole is fostered the most when people acquire the things of the world that they desire by peaceful exchange rather than by theft and plunder; and when men attempt to change the way their fellow human beings think and live and act by using the methods of reason, persuasion, and example instead of through the use of compulsion, power, terror, and death.7
But even if later classical liberals became skeptical of the more extreme claims that had been made on behalf of free trade, there was a great deal of truth to Cobdens contention. Consider, for instance, the year leading up to the recent conflict with Iraq. Some experts contend that it was precisely this mutually beneficial trade that contributed to the reluctance of Iraqs neighbors to endorse war. Between 2000 and 2002, Iraq signed some eleven free-trade agreements, most with other Middle Eastern countries. Most of the Middle Eastern countries who are opposed to the war on Iraq are motivated by the fear that such a war will harm them economically, observed Nimrod Raphaeli of the Middle East Media Research Institute in Washington.8 Paul Sullivan, who specializes in Middle Eastern issues at the National Defense University in Washington, noted in September 2002 that in addition to popular opposition to a U.S.-led war on Iraq, the economic ties that Iraq had carefully cultivated in the region are bringing many of these countries closer to Iraq.9
An appreciation of the international division of labor and the mutual gains from trade can indeed contribute to a more peaceful world, as people and nations come to understand that prosperity does not depend on aggression and military might. Moreover, as more people realize that the economic rationale behind imperialismnamely, an alleged need to secure markets to dispose of surplus goods that cannot be absorbed by the domestic marketis fundamentally fallacious, such adventures must lose some of their luster as well. A nation may still engage in imperialism after the alleged economic benefits are shown to be chimerical, however, and even as it becomes clear that the acquisition of a far-flung empire may in fact prove to be a net economic liability. If a nation believes that the extension of its influence over other peoples is a matter of national prestige, merely economic arguments will not dissuade it from its aggressive course. If statism or a belligerent nationalism rules mens minds, the appeal to reason may well be in vain. But it is ultimately only through reason that such destructive philosophies can be successfully defeated.
The truth of Cobdens statement that the spread of freedom owes more to other factors than to the work of cabinets and foreign offices is also supported by a study of the rise of freedom in the Western world. That rise of freedom occurred not as a result of the positive action of governments, but precisely because of the absence of a strong central authority in Europe. Following the dissolution of the Roman Empire, no continent-wide empire took its place. (The relatively short-lived empire of Charlemagne was far less expansive in scope than the Roman Empire had been.) Instead of experiencing the hegemony of a universal empire, writes historian Ralph Raico, Europe evolved into a mosaic of kingdoms, principalities, city-states, ecclesiastical domains, and other entities.10 Jean Baechler has argued that it was the decentralized nature of European political life, beginning in the Middle Ages, that contributed to the development of liberty. The multiplicity of jurisdictions meant that the prince risked losing population (and his tax base) if he engaged in excessive taxation or interference in his peoples economic lives.11 The constant expansion of the market, Baechler writes, both in extensiveness and in intensity, was the result of an absence of a political order extending over the whole of Western Europe. The expansion of capitalism owes its origin and raison detre to political anarchy.12
Moreover, the very idea of sovereignty, according to which there must exist a single, sovereign voice, competent and forceful enough to make its will felt throughout society, was essentially alien to medieval political thought and practice. In his classic study of Cardinal Wolsey, Alfred Pollard described the decentralization of power that characterized medieval Englandand, by extension, western Europe at large:
There were the liberties of the church, based on law superior to that of the King; there was the law of nature, graven in the hearts of men and not to be erased by royal writs; and there was the prescription of immemorial local and feudal custom stereotyping a variety of jurisdictions and impeding the operation of a single will. There was no sovereignty capable of eradicating bondage by royal edict or act of parliament, regulating borough franchises, reducing to uniformity the various uses of the church, or enacting a principle of succession to the throne. The laws which ruled mens lives were the customs of their trade, locality, or estate and not the positive law of a legislator; and the whole sum of English parliamentary legislation for the whole Middle Ages is less in bulk than that of the single reign of Henry VIII.13
The great sociologist Robert Nisbet described medieval society as one of the most loosely organized societies in history.14 Political leaders who desired centralization found themselves up against the historic liberties of towns, guilds, universities, the Church, and similar corporate bodies, all of whom guarded their (often hard-fought) liberties with great vigilance, and all of whom would have been baffled at the modern idea that a single sovereign voice, whether of a king or of the people, could on its own authority have redefined or overturned those rights.15
In such a society, where competing legal jurisdictions abounded and no single sovereign voice could be found, the king did not make the law but was himself bound by it. Law was something to be discovered, not made, as with the absolute monarchs and parliaments of the modern age.16
Today, however, we have reached the point at which an institution called the state essentially defines its own powers. This is a far cry from the medieval model, in which the king possessed certain customary rights, but could not define his own powers at will, or overturn the customary rights of the people or of the various subsidiary bodies of society. Almost everywhere in Latin Christendom, writes A.R. Myers, the principle was, at one time or another, accepted by the rulers that, apart from the normal revenues of the prince, no taxes could be imposed without the consent of parliament.17 This point reflects the broader principle that the king could not arbitrarily step beyond the bounds of his customary rights.
How different is the situation today. As Bertrand de Jouvenel observes,
A landlord no longer feels surprised at being compelled to keep a tenant; an employer is no less used to having to raise the wages of his employees in virtue of the decrees of Power. Nowadays it is understood that our subjective rights are precarious and at the good pleasure of authority. But this was an idea which was still new and surprising to the men of the seventeenth century. What they witnessed were the first decisive steps of a revolutionary conception of Power; they saw before their eyes the successful assertion of the right of sovereignty as one which breaks other rights and will soon be regarded as the one foundation of all rights.18
The development of Western liberty, therefore, owes a great deal to the decentralized nature of political life in medieval Europe and to the multiplicity of jurisdictions in which people lived and worked. Indeed the development of Western liberty occurred within a context in which the very idea of sovereignty had not yet fully developed. In the absence of a single sovereign voice whose ever-changing word was law, a great civilization was able to develop.
Further confirmation of Cobdens observation that trade, commerce, and education are likely to do more for the spread of peace and freedom than the labor of cabinets and foreign offices can be found well beyond the confines of the West. The interference of Western governments and aid agencies with the economies of the developing world has formed an unfortunate and destructive chapter in the history of the postwar world. Peace and freedom, said the experts, required massive state intervention in the work of economic development, and considerable transfers of wealth from the West to the Third World. The result, however, was not peace but increasing discord, ill will, and even violence in recipient nations. And far from encouraging human freedom, moreover, Western aid and development strategies all too often trapped their unfortunate victims in the mires of statism and regimentation.
The conventional wisdom during the first few decades following World War II held that without significant infusions of Western aid, the worlds less-developed countries (LDCs) would remain forever mired in poverty. Economic development could not be achieved without outside assistance in the form of government-to-government grants. These countries were said to be trapped in a vicious circle of povertytheir low income made impossible the substantial savings necessary to fund the investment and capital accumulation that would ultimately raise incomes.
The great development economist Peter Bauer argued that institutional arrangements and cultural attitudes that have played a far more decisive role in determining the economic fates of the various nations than any lack (or otherwise) of physical assets. He pointed to the West as a prime exampleits development had occurred not because of an aggressive state presence, but thanks to the institutional factors to which we have already alluded: private property, limited government, and the rule of law.
Hernando de Soto lent overwhelming support to this thesis in his investigation of the poor economic performance of his native Peru. In his celebrated study The Other Path, he concluded that insecure and poorly defined property rights were at the root of much of what ailed his country. Moreover, he also showed the suffocating effects of regulation, a factor almost entirely neglected in this literature. He found, for instance, that it took the equivalent of 289 work days, 81 meters of forms, and eight overt bribes to legally establish a small clothing factory.19
By the 1980s, the conventional view was in clear retreat. A 1983 study by the World Bank found that rates of economic growth in developing countries fell as market distortions increased, and eleven years later the World Bank drew the same conclusion in a special report on conditions in Africa. Economists E. Dwight Phaup and Bradley Lewis noted what more and more scholars were beginning to concede: Resource endowment, lucky circumstances, former colonial status, and other similar factors make little difference in the speed with which countries grow economically. But the results of domestic policy choices pervade every economic area.20
Alan Woods, who was appointed to head USAID (United States Agency for International Development) in 1987, echoed these sentiments. In a 1989 report, USAID acknowledged that only a handful of countries that started receiving U.S. assistance in the 1950s and 1960s has ever graduated from dependent status. The following year, a draft paper of the Center for Institutional Reform and the Informal Sector at the University of Maryland conceded that USAID had consistently neglected the role of economic institutions and legal infrastructures. Economist Mancur Olson stated the matter directly, pointing out in 1993 that all economically successful countries possessed relatively secure property and contract rights, while all the unsuccessful ones did not.21 Even a task force during the Clinton administration was forced to concede that despite decades of foreign assistance, most of Africa and parts of Latin America, Asia and the Middle East are economically worse off today than they were 20 years ago.22
By the end of the Cold War, over $2 trillion in inflation-adjusted dollars had been given to the Third World. Tom Bethell rightly notes that this immense fortune may actually have served to retard economic development, since it inevitably functioned as an emollient that masked the destructive consequences of these governments statist policies. It is revealing that South Korea, Taiwan, and Chile, faced with a cutoff in U.S. aid and therefore having little choice, ultimately embraced the free market. Naturally, they prospered.23
For decades, Bauer denied that billions in foreign aid were necessary for Third World development, pointing out that there is not a single instance in history when external donations were required for the economic development of a country. This only stands to reason. Economic achievement depends on peoples attributes, attitudes, motivations, mores and political arrangements . If the conditions for development other than capital are present, the capital required will either be generated locally or be available commercially from abroad to governments or to businesses. If the required conditions are not present, then aid will be ineffective and wasted.24
One of the difficulties of the old argument that LDCs could not enjoy economic progress without foreign aid is that it cannot explain how any country ever developed. Where was the external aid for the first developing countries? In fact, of course, LDCs today are in a far more enviable position from the point of view of development than were Western societies, since they can benefit from the external capital markets and enormous technological knowledge that were unavailable during the Wests rise to economic prosperity. Why had Western societies not been caught in a vicious circle of poverty?25
Since foreign aid inevitably amounts to a government-to-government transfer, ethnic and other tensions are likely to rise as competition for control of the increasingly lucrative coffers of the state apparatus grows correspondingly more intense. The results can be violentBauer cites such substantial Western aid recipients as Burundi, Kampuchea, Ethiopia, Indonesia, Iraq, Nigeria, Pakistan, Tanzania, Uganda, Vietnam and Zaire. Indeed the tensions thus introduced into political life can become positively frightful, including large-scale expulsion and even massacre, tolerated, encouraged or perpetrated by the rulers. By helping to politicize life, aid has contributed to such policies and results. Even when violence does not result, the consequences of the politicization of life are nevertheless all too real, as more and more people devote their energies to efforts to gain political favor (whether through bribery or other means) and less and less time to productive effort in satisfaction of consumer needs.26
Moreover, it is often the policies of recipient governments themselves that are to blame for the poverty of their people. For instance, they expel the most productive groups from their countries, or restrict the inflow and the deployment of private capital or the expansion of certain types of enterprise, both domestic and foreign. This self-inflicted poverty, in turn, is used to justify aid payments from the West. Redistribution from rich to poor countries as an objective of policy brings it about that lower incomes resulting from the policies of Third World governments serve as grounds for taxing Western citizens for the direct benefit of those who brought about these lower incomes.27
This is certainly true in the cases of Taiwan and South Korea, where import-substitution policies were instituted to protect high-cost domestic industries from foreign competition. It was only when, in anticipation of the end of American aid in 1965, the Taiwanese government began to move away from these policies that Taiwans economic miracle would begin to develop. The same is true for South Korea, which also began to encourage an inflow of foreign capital and technology.28
Indeed, it is theoretically unavoidable that import-substitution policies must do considerable damage to a countrys export sector. Since domestic markets are inevitably limited in the LDCs, any hope of economic progress there depends on a healthy export sector. At least three reasons can be cited in support of the claim that import substitution must harm exports. First, the protected good may be an important input in the production process of export-oriented industries. The higher prices that protectionism makes possible, therefore, put export industries at an artificial disadvantage vis-à-vis their competitors in countries that do not engage in such policies. Tariffs on steel may protect some steelworkers jobs, but at the expense of destroying jobs in all industries in which steelartificially overpriced as a result of the tariffis an input. Those industries are now less competitive in international trade. Such policies are all the more insidious because their negative consequences go essentially unnoticed, while their benefits are visible for all to see: everyone sees the jobs in the steel industry that the tariff has protected, but hardly anyone is even aware that the job losses in industries throughout the economy that use steel are attributable to the tariff.
Second, even if the good in question is a final consumption good and not a potential input in the production process of an export-oriented industry, the fact remains that in its artificially privileged position its production is able to bid scarce resources away from export industries, and therefore make inputs that much more expensive for the export sector. And finally, there is the very real possibility of retaliation by other countries against the trade restrictions imposed by the LDC. Such retaliation, naturally, means that the export sectors foreign markets are severely circumscribed or cut off altogether. No wonder exports grew so dramatically in Taiwan and South Korea (between 1962 and 1970, from 13.2 percent of GNP to 31.1 percent and from 5.2 percent to 15 percent, respectively) when import substitution was ended.29
Policy analyst Doug Bandow describes this policy of import substitutionthat is, the use of tariffs and other government action to support domestic industryas one of the most harmful strategies offered to developing countries. Today, he writes, most development economists admit that this policy stifles growth. The worlds most rapidly growing economies, the East Asian states, have eschewed import substitution and have instead concentrated on producing inexpensive exports.30 Import substitution has profoundly distorted the economies of LDCs. The economic landscape in some developing countries, writes the great economist Gottfried Haberler, is littered and disfigured by white elephants, modern factories unsuited to their productive resources, which either stand idle or operate inefficiently at exorbitant costs, with protection from imports or direct subsidies at the expense of the taxpayer and the traditional export sectormainly agriculture.31 That this is not a path to prosperity is about the least one can say about it.
The case of Hong Kong, which ignored the terrible advice of the development mainstream, is especially instructive. With no local power sources (such as coal or oil), shortages of land and water, and few raw materials, Hong Kong appeared to be the classic example of a Third World locale that needed substantial injections of foreign assistance from Western governments. Yet without such aid, Hong Kong nevertheless became the envy of the world thanks to the explosion in economic progress and living standards made possible by its largely free economy. At the very time some moralists were urging struggling families in the Western world to pay higher prices for goods from developing countries as a matter of moral obligation, Hong Kong was busily ignoring the implied suggestion that developing countries could get nowhere without special favors and condescension, and eventually created such a successful export sector that Britain and the United States actually began asking that small private-property regime to implement voluntary export restrictions!32 A better example of Richard Cobdens point about the beneficial nature of trade would be difficult to find.
As Cobden might well have predicted, foreign aid, far from promoting freedom, has only entrenched statism and impoverishment. Those countries that have escaped less-developed status have, by and large, spurned state-led development and embraced free trade and the market order.
Cobdens skepticism of the pretensions of the state, which would doubtless have made him a skeptic of the kind of foreign aid programs that have been pursued since World War II, helps to account for his aversion to military interventionism as well. Cobden was no pacifist, and like virtually all classical liberals he believed in defensive wars against invaders. But a foreign policy more ambitious than providing for legitimate defense threatened to bankrupt ones own countryand, it might be added, had the potential to stir up potentially dangerous resentment and ill will elsewhere in the world. In the United States, George Washington wrote in his Farewell Address the words that formed the backbone of early American foreign relations: The great rule of conduct for us in regard to foreign nations isin extending our commercial relationsto have with them as little political connection as possible. It is not without significance that it was these words that Cobden used as the motto of his first book.33
Recall Frederic Bastiats famous essay What Is Seen and What Is Not Seen. There Bastiat had reminded readers to consider a particular economic policy not in terms of its short-run effects on one particular group, but rather in terms of its long-run consequences for society as a whole. The boy who breaks a neighbors window does not stimulate the economy by giving work to the glassmaker. That is only what is seen. What is not seen is what the homeowner would have purchasedbut now has to foregowith the money he now has to spend to repair his window. The testimony of common sense is absolutely correct: destruction leads to impoverishment.
Bastiats insight can be applied to the conduct of foreign policy as well. At the end of World War I, for instance, what was seen was that Germanys constitutional monarchy had been destroyed. This outcome, it was assumed in some circles, would lead to a more peaceful world in the long run, as the expansionist Germany of the Kaiser gave way to the representative and moderate Weimar regime.
The destruction of the Kaiser, then, is what was seen. What was not seen was how the future of Europe might have progressed in the absence of U.S. intervention in World War I. Shortly after the Second World War, no less an authority than George Kennan wondered aloud: Today if one were offered the chance of having back again the Germany of 1913a Germany run by conservative but relatively moderate people, no Nazis and no Communistsa vigorous Germany, full of energy and confidence, able to play a part again in the balancing-off of Russian power in Europe, in many ways it would not sound so bad. In other words, U.S. intervention in World War I, done with the best of intentions, had been an exceedingly costly mistakea mistake of historic proportions.
Not without reason have historians pointed to the punitive Treaty of Versailles, which established peace terms with Germany at the end of World War I, as a major contributing factor to the Second World War. Marshall Foch had said, This is not peace. It is an armistice for twenty years. Hitler appealed to the patriotism and honor of the German people, who detested the Versailles Treaty, in support of his foreign policy. Some historians, therefore, have argued that without U.S. involvement, Britain and France would never have been in a position to impose such peace terms, and that without a Treaty of Versailles, it is much less likely that Hitler could have attracted the support he did. Woodrow Wilson had genuinely wanted to make the world safe for democracy, but he unwittingly contributed to the outbreak of a far more terrible conflict two decades later. Such are the complexity and unpredictability of foreign affairs.
The Vietnam War is another example. It is certainly praiseworthy to want to defend a country in danger of a Communist takeover, as South Vietnam certainly was. Yet this cannot be a serious statemans only consideration when considering the proper course of action. It is hard to see in this case how following Cobdens noninterventionist advice could have produced an outcome worse than what actually happened. The cost in money and lives was staggering, and the U.S. forfeited much of its international prestige by the way the war was conducted. And in 1975, Saigon fell anyway. All of a sudden, Cobdens claim that serving as an example to mankind is the best way to encourage the spread of freedom no longer seems so naïve. It is certainly the only way to win the hearts and minds, so to speak, of weaker countries who inevitably view superpower military intervention with suspicion.
It is necessary, therefore, for the same kind of humility that limits state interference into the domestic economy to be applied to international affairs as well. As Cobden put it, Public opinion must undergo a change; our ministers must no longer be held responsible for the everyday political quarrels all over Europe; nor, when an opposition journalist wishes to assail a foreign secretary, must he be suffered to taunt him with the neglect of the honor of Great Britain, if he should prudently abstain from involving her in the dissensions that afflict distant communities.34
Nations possess finite resources, and if the stable and livable societies of the world should devote themselves to nation-building and wars of liberation, not only might they actually wind up making matters worse, but more importantly they risk exhausting or bankrupting themselves in the processand then what would be the worlds fate? Would not the consequences of such professions and promises, asked Gladstone, be either the premature exhaustion of [Englands] means, or a collapse in the day of performance?35
This is what Cobden warned could happen to his own country, which is why he was so anxious to recommend a policy of nonintervention in the affairs of other nations. England, by calmly directing her undivided energies to the purifying of her own internal institutions, to the emancipation of her commerce would, by thus serving as it were for the beacon of other nations, aid more effectually the cause of political progression all over the continent than she could possibly do by plunging herself into the strife of European wars.36 Cobden was speaking here of peoples who shared a common historical and cultural inheritance; how much more would he have objected to plunging his country into the conflicts of still more distant lands, where the people involved may in fact consider secular democracy as something alien and despicable.
Cobdens suggested foreign policy is, at root, profoundly compatible with the advice of early American statesmen. Decades earlier, Henry Clay had offered his countrymen the same warning about reckless foreign intervention that Cobden would issue in Britain:
By the policy to which we have adhered since the days of Washington we have done more for the cause of liberty than arms could effect; we have shown to other nations the way to greatness and happiness . Far better is it for ourselves, for Hungary, and the cause of liberty, that, adhering to our pacific system and avoiding the distant wars of Europe, we should keep our lamp burning brightly on this western shore, as a light to all nations, than to hazard its utter extinction amid the ruins of fallen and falling republics in Europe.
Politicians, Cobden feared, had an interest in keeping the misfortunes of foreigners always before the eyes of their constituents, perhaps to distract attention from their own shortcomings as governors. Cobden warned that our aristocratic politicians make political capital out of the Italians, Poles, Circassians, etc., for purposes of their own, and not with any intention of promoting liberty anywhere. And this game will go on so long as the English public allow them to parade their sympathies for the grievances of foreigners instead of doing the work of liberty at home.37
If peace is to be the lot of mankind in the decades and centuries to come, it will have to be accomplished through the kind of internationalism advocated by Richard Cobden and his intellectual progeny. The pursuit of peace will have to be governed not by slogans and superficiality, but by a profound humility that acknowledges the inevitable limitations on what military intervention can accomplish, and that instead of taking on the fruitless task of eradicating evil everywhere, acknowledges with other statesmen of the past that evil can be limited and confined but never entirely eliminated. Richard Weaver, in his description of the typical American southerner, might have been speaking about the classical liberal statesman when he said that he accepts the irremediability of a certain amount of evil and tries to fence it around instead of trying to stamp it out and thereby spreading it. His is a classical acknowledgment of tragedy and of the limits of power.
Cobden, too, recognized and appreciated these limits. I think, he said, as a corporate body, as a political community, if we can manage to do what is right and true and just to each otherif we can manage to carry out that at home, it will be about as much as we can do.38 Over two centuries ago, Charles Pinckney had spoken in a similar vein of the modest goals for which republican governments should strive: If they are sufficiently active and energetic to rescue us from contempt, and preserve our domestic happiness and security, it is all we can expect from themit is more than almost any other government ensures to its citizens.
Although Cobdens program would doubtless be stigmatized in our day as isolationism, free economic intercourse and cultural exchange with the world can hardly be described as isolation. In his day, in fact, Cobden was appropriately dubbed the International Man. And that, indeed, is what he was. Peace, free trade, and nonintervention: these ideas, Cobden believed, were not simply the ideological commitments of one particular party, but rather the necessary ingredients for the progress and flourishing of civilization.
1. Ludwig von Mises, Social Science and Natural Science, in Money, Method, and the Market Process: Essays by Ludwig von Mises, ed. Richard M. Ebeling (Boston: Kluwer, 1990).
2. Roy Porter, The Creation of the Modern World: The Untold Story of the British Enlightenment (New York: W.W. Norton, 2000), p. 387.
3. Ludwig von Mises, Human Action: A Treatise on Economics (New Haven: Yale University Press, 1949), p. 240.
4. Frederic Bastiat, Economic Harmonies, ed. George B. de Huszar (Irvington-on-Hudson, NY: Foundation for Economic Education, 1997). Emphasis in original.
5. Quoted in John Chodes, Richard Cobden: Creator of the Free Market, in The Industrial Revolution and Free Trade, ed. Burton W. Folsom (Irvington-on-Hudson, NY: Foundation for Economic Education, 1996), pp. 4142.
6. Ludwig von Mises, The Theory of Money and Credit (New Haven, Conn: Yale University Press,  1953), p. 395.
10. Ralph Raico, The Theory of Economic Development and the European Miracle: The Vindication of P.T. Bauer, manuscript in possession of the author; a shorter version appeared in The Collapse of Development Planning, ed. Peter J. Boettke (New York: New York University Press, 1993).
11. Jean Baechler, The Origins of Capitalism (New York: St. Martins Press, 1976), ch. 7.
14. Robert Nisbet, The Quest for Community: A Study in the Ethics of Order and Freedom (San Francisco: Institute for Contemporary Studies, 1990 ), p. 99.
15. Bertrand de Jouvenel, Sovereignty: An Inquiry into the Political Good, trans. Daniel J. Mahoney and David DesRosiers (Indianapolis: Liberty Fund, 1997 ), p. 208.
16. On the many legal jurisdictions that existed during the Middle Ages, the classic study is Harold J. Berman, Law and Revolution: The Formation of the Western Legal Tradition (Cambridge: Harvard University Press, 1983); on the pre-modern notion of law as discovered rather than made, see de Jouvenel, Sovereignty, passim; Bruno Leoni, Freedom and the Law (Indianapolis: Liberty Fund, 1991 ), esp. pp. 83ff.
17. A.R. Myers, Parliaments and Estates in Europe to 1789 (New York: Harcourt, Brace, Jovanovich, 1975), p. 29.
18. de Jouvenel, Sovereignty, p. 226.
19. Alan Rufus Waters, Economic Growth and the Property Rights Regime, in The Revolution in Development Economics, eds. James A. Dorn, Steve H. Hanke, and Alan A. Waters (Washington, D.C.: Cato Institute, 1998), p. 123.
21. Tom Bethell, The Noblest Triumph: Property and Prosperity through the Ages (New York: St. Martins, 1998), p. 201.
23. Bethell, The Noblest Triumph, pp. 19091. On foreign aid as an emollient, see, for example, Waters, Economic Growth and the Property Rights Regime, p. 118.
24. Peter T. Bauer, Equality, the Third World and Economic Delusion (Cambridge: Harvard University Press, 1983), p. 100.
26. Ibid., p. 104; George B.N. Ayittey, The Failure of Development Planning in Africa, in The Collapse of Development Planning, ed. Peter J. Boettke (New York: New York University Press, 1993), p. 173.
27. Bauer, Equality, the Third World and Economic Delusion, p. 118.
28. Melvyn Krauss, Development Without Aid: Growth, Poverty and Government (New York: McGraw-Hill, 1983), p. 160.
31. Gottfried Haberler, International Trade and Economic Development (San Francisco: International Center for Economic Growth, 1988), p. 77.
32. Robert A. Peterson, Lessons in Liberty: Hong Kong, Crown Jewel of Capitalism, in The Industrial Revolution and Free Trade, p. 109.
33. Ralph Raico, The Case for an America First Foreign Policy, in The Failure of Americas Foreign Wars, eds. Richard M. Ebeling and Jacob G. Hornberger (Fairfax, VA: Future of Freedom Foundation, 1996), p. 22.
34. Richard Cobden, Commerce is the Great Panacea, posted at http://www.independent.org.
36. Cobden, Commerce is the Great Panacea.
|Thomas E. Woods Jr. is Senior Fellow in American history at the Ludwig von Mises Institute.|