It is no exaggeration to say that trade is the keystone of modern civilization. As Murray Rothbard wrote, The market economy is one vast latticework throughout the world, in which each individual, each region, each country, produces what he or it is best at, most relatively efficient in, and exchanges that product for the goods and services of others. Without the division of labor and the trade based upon that division, the entire world would starve. Coerced restraints on tradesuch as protectionismcripple, hobble, and destroy trade, the source of life and prosperity.
Human beings cannot truly be free unless there is a high degree of economic freedomthe freedom to collaborate and coordinate plans with other people from literally all around the world. That is the point of Leonard Reads most famous article, I, Pencil, which describes how producing an item as mundane as an ordinary pencil requires the cooperation and collaboration of thousands of people from all around the world, all of whom possess very specific knowledge that allows them to assist in the manufacture and marketing of pencils. The same is true, of course, for virtually everything else that is produced.
Without economic freedomthe freedom to earn a living for oneself and ones familypeople are destined to become mere wards of the state. Thus, every attempt by the state to interfere with trade is an attempt to deny us our freedom, to impoverish us, and to turn us into modern-day serfs.
Ludwig von Mises believed that exchange is the fundamental social relation which weaves the bond which unites men into society. Man serves in order to be served in any trade relationship in the free market. Mises also distinguished between two types of social cooperation: cooperation by virtue of private contract and coordination, and cooperation by virtue of command and subordination or hegemony. The former type of coordination is symmetrical and mutually advantageous, while the latter is asymmetricalthere is a commander and a commandee, and the commandees are mere pawns in the actions of the commanders. When people become the mere pawns of their rulers they cannot be said to be free. This, of course, is the kind of cooperation that exists at the hands of the state.
Western civilization is the result of achievements of men who have cooperated according to the pattern of contractual coordination Mises wrote. The contractual state is guided by such concepts as natural rights to life, liberty, and property, and government under the rule of law. In contrast, the hegemonic society is one that does not respect natural rights or the rule of law. All that matters are the rules, directives, and regulations issued by dictators, whether they are called kings or congressmen. These directives may change daily, and the wards of the state must obey. As Mises wrote, The wards have one freedom only: to obey without asking questions.
Trade involves the exchange of property titles. Restrictions on free trade are therefore an attack on private property itself and not merely a matter of trade policy. This is why such great classical liberals as Frederic Bastiat spent many years of their lives defending free trade. Bastiat, as much as anyone, understood that once one acquiesced in protectionism, no ones property was safe from myriad other governmental acts of theft. To Bastiat, protectionism and communism were essentially the same philosophy.
It has long been recognized by classical liberals that free trade is the most important means of diminishing the likelihood of war. Nothing is more destructive of human freedom than war. It always leads to a permanent enlargement of the stateand a reduction in human freedomregardless of who wins. On the eve of the French Revolution many philosophers believed that democracy would put an end to war, for wars were thought to be fought merely to aggrandize and enrich the rulers of Europe. The French quickly proved this theory wrong, however, for under the leadership of Napoleon they, in Misess words, adopted the most ruthless methods of boundless expansion and annexation.
Thus it is not democracy that is a safeguard against war but, as the British (classical) Liberals were to recognize, free trade. To Richard Cobden and John Bright, the leaders of the British Manchester School, free tradeboth domestically and internationallywas a necessary prerequisite for the preservation of peace; for in a world of trade and social cooperation, there are no incentives for war and conquest. It is government interference with free trade that is the source of international conflict. Indeed, naval blockades that restrict trade are the ultimate act of war. Throughout history restrictions on trade have proven to be impoverishing and have instigated acts of war motivated by territorial acquisition and plunder.
It is no mere coincidence that the 1999 meeting of the World Trade Organizationacabal of bureaucrats, politicians, and lobbyists that favors government-controlled tradewas marked by a week of riots, protests, and violence. Whenever trade is politicized the result is inevitably conflict that quite often leads, eventually, to military aggression.
Mises summarized the relationship between free trade and peace most eloquently when he noted:
What distinguishes man from animals is the insight into the advantages that can be derived from cooperation under the division of labor. Man curbs his innate instinct of aggression in order to cooperate with other human beings. The more he wants to improve his material well-being, the more he must expand the system of the division of labor. Concomitantly he must more and more restrict the sphere in which he resorts to military action . . . . Such is the laissez-faire philosophy of Manchester.
As Bastiat often said, if goods cant cross borders, armies will. This is a quintessentially American philosophy; it was the position of George Washington, Thomas Jefferson, and Thomas Paine, among others. A foreign policy based on commerce wrote Paine in Common Sense, would secure for America the peace and friendship of the Continent and allow her to shake hands with the worldand trade in any market. Painethe philosopher of the American Revolutionbelieved that free trade would temper the human mind, help people to know and understand each other, and have a civilizing effect on everyone involved in it. Trade was seen as a pacific system, operating to unite mankind by rendering nations, as well as individuals, useful to each other . . . . War can never be in the interest of a trading nation.
George Washington agreed. Harmony, liberal intercourse with all nations, are recommended by policy, humanity, and interest, he stated in his September 17, 1796, Farewell Address. Our commercial policy should hold an equal and impartial hand; neither seeking nor granting exclusive favors or preferences; consulting the natural course of things; diffusing and diversifying by gentle means the streams of commerce, but forcing nothing.
The Eternal Struggle Between Freedom and Mercantilism
The period of world history from the middle of the fifteenth to the middle of the eighteenth centuries was an era of growth in world trade, technology, and institutions suited to trade. Technological innovations in shipping, such as the three-masted sail, brought the merchants of Europe to the far reaches of America and Asia. This vast expansion of trade greatly facilitated the worldwide division of labor, greater specialization, and the benefits of comparative advantage.
But whenever human freedom advances, as it did with the growth of trade, state power is threatened. So states did all they could then, as now, to restrict trade. It is the system of trade restrictions and other governmental interference with the free market, known as mercantilism, that Adam Smith railed against in The Wealth of Nations. As Rothbard has written:
Mercantilism, which reached its height in the Europe of the seventeenth and eighteenth centuries, was a system of statism which employed economic fallacy to build up a structure of imperial state power, as well as special subsidy and monopolistic privilege to individuals or groups favored by the state. Thus, mercantilism held that exports should be encouraged by the government and imports discouraged.
Classical liberals waged an ideological war against mercantilism during the eighteenth and nineteenth centuries, and scored some major victories for freedom. The French physiocrats, led by the physician and economist François Quesnay, were influential from the 1750s to the 1770s. They were among the first laissez-faire thinkers who denigrated mercantilist propaganda and called for complete freedom of domestic and international trade. Their position was based on sound economics as well as Lockean notions of natural rights. Quesnay wrote, Every man has a natural right to the free exercise of his faculties provided he does not employ them to the injury of himself or others.
When Anne Robert Jacques Turgot, a precursor of the Austrian school, became finance minister of France in 1774, his first official act was to free the import and export of grain. At around the same time, Adam Smith was defending trade on moral as well as economic grounds by identifying it is as part of the system of natural justice. One of the ways he did this was to defend smuggling as a means of evading mercantilist restrictions on trade. The smuggler, explained Smith, was engaged in productive labor that served his fellow man (consumers), whereas if he were caught by the government and prosecuted, his capital would be absorbed either in the revenue of the state or in that of the revenue-officer which is an unproductive use to the diminution of the general capital of the society.
The Manchester School
Despite powerful arguments in favor of free trade offered by Quesnay, Smith, David Ricardo, and others, England (and other countries of Europe) suffered from protectionist trade policies in the first half of the nineteenth century. The British public was plundered by the mercantilist Corn Laws, which placed strict quotas on the importation of grain. By raising food prices, the laws benefited landowning political supporters of the government at the expense of consumers, especially the poor. But this changed thanks to the heroic and brilliant efforts of what came to be known as the Manchester School, led by two British businessmen (and later, statesmen), John Bright and Richard Cobden. Bright and Cobden formed the Anti-Corn Law League in 1839 and turned it into a well-oiled political machine with mass support, distributing literally millions of leaflets, holding conferences and gatherings all around the country, delivering hundreds of speeches, and publishing their own newspaper, The League.
1. Murray Rothbard, Protectionism and the Destruction of Prosperity. Ludwig von Mises Institute.
2. Ludwig von Mises, Human Action: A Treatise on Economics, Scholars Edition (Auburn, Ala.: Mises Institute, 1998 ), p. 195.
4. Ibid., p. 196.
5. Ibid., p. 198.
6. Ibid., p. 199.
7. Ibid., p. 819.
8. Ibid., p. 827.
12. W.B. Allen, ed., George Washington: A Collection (Indianapolis: LibertyClassics, 1988), p. 525.
14. Nathan Rosenberg and L.E. Birdzell, Jr., How the West Grew Rich (New York: Basic Books, 1986), pp. 71-112.
15. Murray Rothbard, Mercantilism: A Lesson for Our Times? in his The Logic of Action II (Cheltenham, England: Edward Elgar, 1997), p. 43.
16. Cited in Henry Higgs, The Physiocrats (New York: Langland Press, 1952), p. 45.
17. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (New York: Oxford University Press, 1976), p. 898.
18. Nick Elliott, John Bright: Voice of Victorian Liberalism, in Burton W. Folsom, Jr., ed., The Industrial Revolution and Free Trade (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1996), p. 28.
19. Frederic Bastiat, Selected Essays on Political Economy, George B. de Huszar, ed. (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1995), p. 111.
20. Samuel Eliot Morison, Henry Steele Commager, and William Leuchtenburg, The Growth of the American Republic (New York: Oxford University Press, 1980), pp. 112-25.
21. James Banner, To the Hartford Convention: The Federalists and the Origins of Party Politics in Massachusetts, 1789-1815 (New York: Alfred A. Knopf, 1970), p. 301.
22. John Taylor, Tyranny Unmasked (Indianapolis: Liberty Fund, 1992), p. xvi.
24. Ibid., p. 11.
25. Ibid., p. 19.
26. Ibid., p. 24.
27. Michael F. Holt, The Rise and Fall of the American Whig Party (New York: Oxford University Press, 1999).
28. Frank Taussig, A Tariff History of the United States (New York: Putnam, 1931), p. 157.
29. Howard Perkins, Northern Editorials on Secession (Gloucester, Mass.: Peter Smith, 1964), p. 600.
30. Ibid., p. 602.
31. Wilson Brown and Jan Hogendom, International Economics (New York: Addison-Wesley, 1994), p. 188.
32. Ibid., p. 192.
33. Ibid., p. 193.
34. Rothbard, Protectionism.