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Contest Essay

Peace, Free Trade and the Role of Ideas in the Preservation of Freedom


     
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First Prize ($2,500)

In this age of turmoil in the Middle East, strategic talks with North Korea concerning their nuclear weapons program in China, and the encroaching state (in all of its intrusive forms) at home, concerned minds are seeking answers on how best to “secure the blessings of liberty.” Those who are quick to look to government for the answers to society’s woes would do well to heed the words of nineteenth-century laissez-faire advocate, Richard Cobden: “The progress of freedom 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.”1 Here, Cobden addresses the single greatest problem facing civilization—how to maintain a free and prosperous society. Cobden’s prescription for maintaining the progress of freedom contained three elements, each depending and building upon the other—namely, peace as a prerequisite for freedom and prosperity; free trade as a prerequisite for peace; and, the spread of ideas as the prerequisite for free trade.

Peace as a Prerequisite for Freedom and Progress

Richard Cobden’s insight into the fact that freedom and prosperity can only thrive under peaceful circumstances is predicated on the understanding that, by definition, freedom is the absence of coercion (from other members in society and from domestic and foreign governments). Absent a peaceful milieu individuals in society cannot freely choose the means necessary to achieve their desired ends, i.e., individuals are not free to live their lives the way they wish to. Suppose a man wishes to be a doctor and to live in a nice beachfront home in Malibu and to drive a Jaguar; if he is prohibited by force from attending medical school and freely contracting with a real estate agent and an automobile dealer, he will not be able to achieve his goals. For this reason, all governmental measures that prevent man from peacefully achieving his goals are a subversion of the principles of freedom. Such measures necessarily inhibit economic and social growth.

One such governmental measure that is destructive of freedom and peace is war, though it is putatively held as a necessary means to both. Many hold that war is an instrument of progress, whether in the morally vigorous Hegelian sense, or in the economically beneficial Keynesian sense. However, this view of war as progress has its roots in what French economist Frederic Bastiat referred to as the “broken window fallacy:” a failure to look beyond the short run effects of a given policy on a particular group and to see the long run effects on all groups.2 Of course, those employed in the making and shipment of armaments fair well economically in times of war, but the ultimate effect that war has on the whole economy is to disrupt the market process itself. This occurs because of the synergistic effect of three major results of warfare: (1) the diversion of resources from productive ends (real wealth generation) in the private sector to destructive ends in the prosecution of war, (2) the disruption of international trade, and (3) inflation (as a means of financing war expenditures), which destroys the pricing mechanism, gives rise to many non-productive activities (patterns of consumption not backed by production: a result of new money entering the economy “out of thin air” and not as a result of producing something of value to be exchanged for something of value), and destroys the signaling faculty of the interest rate, setting in motion the business cycle, which must result in a recession to liquidate the misallocated resources from the previous boom. Taking into consideration the effect that war has on the whole economy and not only on the few who benefit in times of war, the term “war progress” is revealed as oxymoronic.

Furthermore, war undermines individual’s freedoms. Just take a look at the history of America’s wars and this truism becomes evident. The Civil War and both World Wars, especially, have fed the Leviathan to mammoth proportions, abolishing America’s founding principles of states’ rights and secession (and ultimately the Constitution), greatly centralizing power in Washington, D.C., bringing with it the welfare state, thousands upon thousands of regulations and bureaucratic micromanaging, and overwhelming intrusions of statism on every front. It is no small wonder why our founding fathers continually exhorted us that America’s foreign policy should be, as Thomas Jefferson stated: “Peace, commerce, honest friendship with all nations; entangling alliances with none.”3 Lest we would harbor any imperialist notions of extending our borders overseas, the ever-prescient James Madison warned us:

Of all the enemies of public liberty, war is, perhaps, the most to be dreaded, because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes; and armies, and debts, and taxes are the known instruments for bringing the many under the domination of the few.4

War can never be a means of securing lasting peace and liberty. War is, by definition, the antithesis of peace and harmony: it is destruction, and it is totally incompatible with a free and prosperous society.

Free Trade as the Prerequisite for Peace

If peace is the necessary milieu for the cultivation of freedom, how does society achieve peace? Because of the reality of scarcity there is a natural conflict that exists in society regarding the allocation of those resources. Georg Hegel and Karl Marx, among others, ignorantly concluded that because of this natural conflict the dialectical result must be the domination and exploitation by the few. However, many laissez-faire economists such as Anne Robert Jacques Turgot, Frederic Bastiat, and Jean Baptiste Say; French Physiocrats, like François Quesnay; Classical School economists, such as Adam Smith and David Ricardo; Austrian School economists, such as Carl Menger and Ludwig von Mises; and those of the British Manchester School, such as Richard Cobden and John Bright, all realized that this natural conflict could be overcome through free trade, i.e., peaceful cooperation through mutually advantageous exchanges under the division of labor could be substituted for coercion. The mutual benefit that is achieved through free trade is the force that promotes peace among human beings in civilization: it is what Ludwig von Mises called the “fundamental social relation”5. These free market economists understood that contrary to German socialist Karl Liebknecht’s statement that, “the basic law of capitalism is you or I, not both you and I,”6 the basic law of capitalism (which is founded on free trade and the private ownership of production) is I, therefore, you. Theory and history vindicate this economic truth.

In primitive civilizations—if you could call them civilizations—man barely subsisted autistically by hunting and gathering. Man only had what he could kill and cook and make for himself, which was not very much. Because of scarcity, the only way that man could increase his lot in life beyond the use of those resources rightfully at his disposal was to plunder his fellow man’s property, to poach his fellow man’s deer or buffalo, etc. This led to constant warfare between men competing for scarce resources. Soon, however, man realized that he could obtain more and avoid the “one-man’s-another-man’s-wolf” Hobbesian conflict by taking advantage of the separate skills of each man in society through trade under the division of labor. From this insight, civilization developed into a barter society and eventually into a money-exchange market (usually with gold or silver as the medium of exchange). With the adoption of free trade under the division of labor high civilization was attained, bringing with it the peaceful progression of everything that modern civilization can boast—mainly, having taken mankind out of the realm of subsistence and into the realm of luxury.

The reason that mankind has achieved such prosperous and peaceful results through free trade is because free trade works according to the objective laws of reality, i.e., it facilitates actions that are in accordance with man’s nature. Man, by nature, is concerned with self-preservation and self-satisfaction—he must be if he wishes to survive. This self-interestedness of man, with an aim at profit (whether monetary or psychic), is an indispensable element in the mechanics of free trade; it is what the great economist Wilhelm Röpke identified as, “the motive power” that turns “the turbines of production” in the economy and, ultimately, brings about a peaceful society.7

Because man seeks to substitute a more favorable state of affairs for a less satisfactory one, he cooperates with those in society who can help bring about the more favorable state of affairs for him. However, there is one condition to getting from others what he wants—he must provide something of value to them. Therefore, man must produce and exchange something of value in order to receive something he values. This is what Mises called the “societal formula: do ut des” (literally, ‘I give that you may give’).8 Adam Smith explained in The Wealth of Nations: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”9 Because no one would make an exchange if they did not think they were going to be in a better position after the exchange, we can state a priori that there is always an ex ante mutual benefit from free trade. It is this mutual benefit that is the praxeological element (i.e., relating to purposive action: employing means to attain ends) that brings about exchange and promotes peace within society. Where trade does not exist there is no mutual benefit to be gained, therefore, the only way to gain is at the expense of other people. What is true for individuals trading within a domestic market is true for nations trading in the world market. Therefore, attempts at national autarky—such as Germany in the 1930s—not only results in an ersatz domestic economy, it also generates bellicosity.

The mechanics of free trade among nations were explained by nineteenth century Classical economist David Ricardo. His theory of comparative advantage was an attempt to explain how it was that a nation could benefit from trading with an economically inferior nation. His insight was that trade was beneficial because it allows each nation involved in the trade to focus production in those areas that each had a comparative advantage (i.e., lower opportunity cost) in, thus securing a higher combined production among the trading nations. However, these advantages are forfeited whenever governments impose trade restrictions such as tariffs and import quotas. European history in the nineteenth century provides a clear example of the effects that trade restrictions have on economies, as well as the economic benefits from their removal.

In England, Richard Cobden and John Bright led the Anti-Corn-Law League in an effort to repeal England’s Corn Laws (grain tariffs), which were destroying people’s livelihoods by keeping the cost of living high. In February of 1849, they succeeded in getting the Corn Laws repealed. This action was followed by enormous cuts in the number of dutiable imports and the abolishment of England’s Navigation Acts (all leftovers of sixteenth to eighteenth century failed mercantilist policies).10 Jim Powell explained the results of these actions: “From 1846 until the outbreak of World War I, [England’s] industrial output soared 290 percent. Imports were up 701 percent and exports 673 percent. Money wages in England increased about 59 percent for agricultural workers and 61 percent for industrial workers.”11 Seeing the enormous results of England’s laissez-faire trade policies, many other European nations, such as France, Russia, Italy, Spain, Switzerland, Norway, Belgium, and the Netherlands, followed suit. Economic historian David Landes wrote: “To the surprise of adamant protectionists, all nations saw their volume of exports grow. Home industries did not collapse before British competition, but rather changed and grew stronger in the process.”12 As a result of the “goldmine” these nations found in free trade, the nineteenth century became one of the most peaceful centuries in modern history.

One thing that should be mentioned, however, is that just because something appears to be gold does not necessarily mean it is gold. After World War II, governments worldwide established so-called “free trade” organizations such as NAFTA, GATT, and the WTO as an attempt to secure free and open markets. These “free trade” organizations, however, are actually “government-managed trade” organizations; the difference is like apples and oranges. These “free trade” organizations build supranational structures, which “integrate and cartelize government in order to entrench the interventionist mixed economy,” Murray Rothbard astutely observed.13 True free trade is a natural phenomenon that arises out of regard to the benefits that can be achieved through cooperation under the division of labor; it simply requires freedom from government restrictions; it does not require government establishment and management. We need to be careful not to buy into everything the government tries to sell to us as “freedom.” Caveat emptor.

The Diffusion of Ideas as the Prerequisite for Free Trade

The final element in Richard Cobden’s solution to the preservation of freedom, which is also the element that brings about free trade, is the spread of ideas concerning the efficiencies of free trade. Ideas are what Linda and Morris Tannehill called, “the forces which shape our lives and our world!14 They explained: “Society is nothing more than a group of individuals living in the same geographical area at the same time. The values and the actions of each of these individuals are determined by the ideas he holds—by what he believes is right or wrong, beneficial or harmful for himself and others.”15 Therefore, in order for free trade to arise in society, the people within society must be educated as to the efficacy of free trade in bringing about economic progress, societal cooperation, and lasting peace. Without such enlightenment, people—as history has too often proven—are apt to look to government to manage society as a social engineer, carefully tweaking the so-called “market failures” that they believe to be endemic in the nature of capitalism, which is the economic system that facilitates free trade.

In times past, such sophistries and misunderstandings regarding the workings of the market in general, and free trade in particular, have vitiated the great economic and social successes that were and continue to be latent in the miracle of human cooperation. If mankind wants to scale the heights of its potentialities and to live in a free and prosperous world, passive acceptance of government management cannot be the way to go about it—a resort to reason must be. Without a consistent understanding of the laws of economics and, ultimately, those of the nature of man, we are bound to fall prey to the politically expedient sophisms continually thrown at us everyday from the media and public officials. On this issue Ludwig von Mises explained in Human Action:

The main objective of praxeology and economics is to substitute consistent correct ideologies for the contradictory tenets of popular eclecticism. There is no other means of preventing social disintegration and of safeguarding the steady improvement of human conditions than those provided by reason. Men must try to think through all the problems involved up to the point beyond which a human mind cannot proceed farther. They must never acquiesce in any solutions conveyed by older generations, they must always question anew every theory and every theorem, they must never relax in their endeavors to brush away fallacies and to find the best possible cognition. They must fight error by unmasking spurious doctrines and by expounding truth.16

To this effort, we must abolish the myth that war is an instrument of progress; we must abolish the myth that free trade only benefits an economically superior nation; we must abolish the notion that government intervention in the market is necessary to bridle the assumed exploitive excesses of capitalism, and; ultimately, we must undermine the overwhelming faith in government as a panacea for all of society’s problems. Richard Cobden was correct in understanding that this can only be done through the “diffusion of education.”

Conclusion

A little over forty years ago, the great American lyricist, Alan Jay Lerner, penned these words in the Lerner-Loewe Broadway musical, Camelot, as a fitting tribute given by King Arthur to the remains of his beloved dream of men working in cooperation with each other around a round table: “Don’t let it be forgot that once there was a spot for one brief shining moment that was known as Camelot.”17 This play, based off of T. H. White’s, The Once and Future King, is an impassioned example of how great dreams and great nations can be brought to rubble in the midst of power-seeking warmongers and destroyers of human cooperation. No one is spared from the horrible residues their actions leave behind. Unless America comes to realize that freedom and prosperity are the fruits of a well-developed tree, fertilized by ideas that promote free trade and replenished by a peaceful respect for the individual rights of mankind, her mark on history is destined to be the same as Camelot’s: “one brief shining moment.” The only difference—applause won’t be heard after the curtain has fallen.

End Notes

1. “The Columbia World of Quotations.” Bartleby.com: Great Books Online. Bartleby.com, Inc. 2003. 25 April 2003.

2. Bastiat, Frederic. “That Which is Seen, and That Which is Not Seen.” Frederic Bastiat (1801-1850). 1 November 2002.

3. “First Inaugural Address.” Speech by Thomas Jefferson. Page by Page Books, 2001. 25 April 2003.

4. “The Most Dreaded Enemy of Liberty.” (Compilation of quotes by James Madison) The Future of Freedom Foundation. 2002. August 1993.

5. Mises, Ludwig von. Human Action: A Treatise on Economics. 3rd ed. Chicago: Contemporary, 1966, p.194.

6. McCraw, Thomas K. American Business, 1920-2000: How it Worked. Wheeling: Harlan, 2000, p. 3.

7. Röpke, Wilhelm. A Humane Economy: The Social Framework of the Free Market. Wilmington: ISI, 1998, p. 121.

8. Mises, Ludwig von. Human Action: A Treatise on Economics. 3rd ed. Chicago: Contemporary, 1966, p.194.

9. Smith, Adam. The Wealth of Nations. New York: Bantam Dell, 2003, pp. 23-24.

10. Powell, Jim. The Triumph of Liberty: A 2000-Year History, Told Through the Lives of Freedom’s Greatest Champions. New York: Free Press, 2000, pp. 127

11. Ibid, p. 128.

12. Ibid, p. 128.

13. Rothbard, Murray N. Making Economic Sense. Auburn: Ludwig von Mises Institute, 1995, p. 308.

14. Tannehill, Linda and Morris. The Market For Liberty. San Francisco: Fox & Wilkes, 1993, p. 163.

15. Ibid, p. 162.

16. Mises, Ludwig von. Human Action: A Treatise on Economics. 3rd ed. Chicago: Contemporary, 1966, p.185.

17. Lerner, Alan Jay. Camelot. New York: Chappell, 1961, p. 114.


Kevin Page is a junior in economics at Louisiana State University.






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