Second Prize ($1,500)

Free trade is, in one sense, like a nuclear weapon. Which seems strange to say because trade is associated with peace and prosperity, while nuclear weapons are synonymous with apocalypse and terror. But here is how they are alike: they both prevent war by making it more costly. A strong argument exists that the only reason the Cold War never got “hot” between the United States and the Soviet Union was that nuclear weapons made outright conflict unthinkable. Trade, in a similar way, binds the fortunes of people in the world together. It is the best assurance of peace. By forging bonds between customers and suppliers around the world, trade gives citizens a vested interest in the wellbeing of people in other countries—war becomes a matter of mutual assured destruction, if you will. With trade, a war abroad will have fallout at home. But while trade has the deterrent effects of powerful weapons, is far preferable because of its other advantages. Where weapons are expensive, free trade brings prosperity and freedom. Where weapons bring terror, free trade fosters harmony and encourages people to resolve disputes without violence. Richard Cobden, a nineteenth century British industrialist and politician, often argued in favor of trade over armaments to discourage war. His recipe for peace remains as true today as it was more than 150 years ago: “The more any nation traffics abroad upon free and honest principles, the less it will be in danger of wars.” Free trade is indeed the wellspring of peace.

What is trade? It is the natural, voluntary interaction of people for mutual benefit. Trade does not require force. American economist Henry George writes, “Free trade consists simply in letting people buy and sell as they want to buy and sell. It is protection that requires force, for it consists in preventing people from doing what they want to do.”

In order to set up an argument linking free trade to peace, it is useful to first look at the incentives inherent to a world where borders are shut by governments. In such a world the incentive is for war. First of all, protectionism puts a government in conflict with its own people. Consider: In wartime, nations punish their enemies by blockade or trade sanctions. Where a government pursues a protectionist policy, it essentially commits an act of war on its own people. This would be bad enough if the harm inflicted ended with its own citizens, but it doesn’t. A protectionist government harms, in addition to its own people, all citizens of the world who wanted to trade with the besieged. It follows that any government imposing protectionism puts itself in conflict with citizens of many nations. The harmful effects of one protectionist policy circle the world like shock waves. “If a national government hinders the most productive use of its country’s resources, it hurts the interests of all other nations,” writes Ludwig von Mises. “The economic backwardness of a country with rich natural resources injures all those whose conditions could be improved by a more efficient exploitation of this natural wealth.” What is the resulting incentive for the harmed citizens of the world? Mises gives us the answer. “This economic nationalism must result in war whenever those injured believe that they are strong enough to brush away by armed violent action the measures detrimental to their own welfare.”

Protectionism encourages war—and this is a very important point to be made. It encourages countries to make war on the protectionists and it encourages, perhaps most of all, the protectionists to make war on everyone else. That protectionism leads to war becomes obvious if we consider that citizens may, fundamentally, acquire goods from abroad in only one of two ways: trade or conquest. When voluntary exchange is made impossible by artificial restrictions imposed by governments, the only other way nations may access foreign markets is by force. A country insisting on self-sufficiency will have to choose between shortages or war. The reason is clear: around the world, concentrations of population do not in general correlate with the distribution of natural resources, such as wheat, oil, or technical expertise. In a world of protectionism, countries will not have access to resources unless those resources lie within its national boundaries. It is this basic problem with protectionism that makes extending national boundaries, and ultimately war, so appealing. Resource shortages caused by protection have been a problem in Europe for centuries. Mises observes that it was a problem in particular for Germany. “The Germans tried—in vain—to solve it by war and conquest.” Protectionism makes war profitable. But the solution to this perverted state of incentives is simple: free trade. Where borders are open it makes no material difference to the citizens how far national boundaries stretch. Goods and services will still flow freely. Citizens can migrate and sell their labor anywhere when borders are open. To paraphrase Ayn Rand, a protectionist country survives by looting; a free country survives through production and trade.

It has been written time and again that the common folk don’t make war—it is the kings, politicians and autocrats who wage war at the expense of the people. If so, trade is a solution to war. First, in contrast with protectionism, trade makes war more costly to the common people. Citizens of democracies will be less likely to vote for leaders who wage war. Second, free trade tends to undermine autarky. It spreads liberty and helps create new democracies, thus empowering those citizens to whom war is most costly. In a democracy, common people, not the rulers, ultimately make the country’s choices through the votes they cast. This helps explain why democracies are less likely than autocracies to wage aggressive wars. Historian Spencer Weart, in Never at War, states boldly that “Well-established democracies have never made war on one another.” While a few exceptions are possible depending on your definition of a well-established democracy, it is a powerful statement that, in general, holds. Evidence is all around us. Wars between Canada and the United States, Britain and France or any other of a few dozen democracies that come to mind are unthinkable. Rudolph Rummel, in Power Kills, arrives at similar conclusions, adding “the more a nation is democratic, the less severe its overall foreign violence.” One explanation why democracies don’t fight each other, first suggested by Immanuel Kant, is that citizens reject war because it costs too much. Wars are destructive, people are forced to fight and die, and both victor and vanquished are burdened with war debts after the peace is signed. Free trade makes war less likely for democracies because it adds to the costs of war for the majority of citizens who elect their leaders. The more a country trades abroad, the more its consumers will depend on imports, and the more domestic jobs will depend on exports. By giving majorities of people a material self-interest in peace, war is discouraged. Under current rules of trade, for instance, we can be sure the United States will never wage war on Japan. We can be sure of this if for no other reason than that Americans like to watch their wars on TV—and the Japanese make the TVs. Of course, there are a million other ties that would prevent these countries from fighting—from the trade in automobiles to cross-ownership of capital in thousands of industries.

Yet an argument could still be made that common citizens of democracies do like some wars—perhaps because war means more programming choices in prime time or because it boosts national pride. Adam Smith raised this possibility, writing at a time of great protection, in 1776. For some people the amusement from reading about the war in the newspapers “compensates the small difference between the taxes which they pay on account of the war, and those which they had been accustomed to pay in time of peace.” While this may be true, we must remember that taxes are a relatively small price of wars, particularly when trade between two warring nations is extensive. It seems that if citizens were wont to support wars for their entertainment value this would apply far more readily to countries with which trade is minimal. Where trade links are strong, war threatens citizens with much lower living standards—for many reasons. One interesting argument given the interest in the stock market by a broad base of society in recent years is that with free flows of capital, anyone who holds stocks or mutual funds will likely have investments abroad. These investments are often in foreign companies or in companies that conduct substantial amounts of business abroad. The more we have free trade, the more citizens of a warring nation must worry that a missile launched from home will ultimately impact on their own investments abroad—and their pocketbooks at home. Free trade, because it makes war costly, is the greatest guarantor of peace because it turns concern for ourselves into concern for others. The more a nation trades, the more going to war with another country becomes indistinguishable from going to war with oneself.

We now turn to another powerful benefit of trade: how it undermines tyranny. Undermining tyranny is important for two reasons. First, as mentioned, democracies are less likely than autocracies to make international violence. Second, and perhaps more important, weakening autocratic governments fosters peace within countries by protecting citizens from the violence of their own governments. While international war is horrific, deadlier still are conflicts inside the borders of nations. And deadliest of all are the prolonged, often covered-up wars waged by governments against their own citizens. When considering how free trade brings peace, it is important to focus not just on how it prevents international violence but also how it prevents domestic slaughter. To give an idea how the body counts stacks up, Rudolph Rummel offers some statistics. From 1900 to 1987, the war dead in the world from civil and international conflicts totaled 38,500,000. This giant figure is dwarfed, however, when we look at the mass murder committed by governments on their own people: at least 169 million killed, by Rummel’s count, in the first 87 years of the 20th century. This includes the approximately 21 million people murdered by the government of Nazi Germany and the 55 million of its own citizens the Soviet government killed. Many other governments, including China, Cambodia and Japan have murdered millions or hundreds of thousands. Free trade helps to foster peace by transferring power away from governments into the hands of citizens. Free trade is closely linked with a number of other personal freedoms, including the right to hold private property, that are prerequisites for democracy. How does free trade empower people? Free trade—either at home or abroad—largely implies that people can do what they want. They may coordinate and interact with whom they choose, they may buy what they can afford and sell what is theirs. Control gained by citizens over their own actions is, by corollary, control lost by government. In a pure state of free trade, people may migrate freely between nations. It is not for nothing that totalitarian countries build walls to keep their citizens from leaving and erect barriers to trade. If trade had been free, citizens of the former Soviet Union could have simply left. Millions would have enjoyed more prosperous lives elsewhere; millions would have escaped the slaughter of the totalitarian state. Under open borders, the Soviet government would have had to tailor is policies to appeal to the masses or else run out of people to govern due to mass emigration.

A free trade in ideas lets citizens import cultural products of their choice, including movies, books and other literature that weakens tyranny by spreading messages of democracy and freedom. Free trade on an internal scale allows citizens to circulate these materials amongst themselves and organize their labor into activities that promote democracy. While free trade, or an even wider definition of capitalism, doesn’t guarantee democracy, trade is closely linked to democracy. Nobel laureate Milton Friedman writes that “I know of no example in time or place of a society that has been marked by a large measure of political freedom, and that has not also used something comparable to a free market to organize the bulk of its economic activity.” Free trade and democracy are, it seems, on a continuum and they move together. Any amount of free trade detracts from the power of the government and increases the power of common citizens. The greater the extent of this power shift, the greater a country moves from tyranny to a state of democracy, a state that is most friendly to peace at home and abroad.

We have shown how trade gives people freedom and creates incentives for peace. Still, a student of history might look at the ceaseless legacy of war from ancient times to modern day and wonder if mankind is fundamentally evil. He might throw up his arms in frustration and ask, what good will trade do when it is clear we can’t get along? One of the greatest gifts of trade is that it teaches us to do just that. It teaches us to get along. And, while this essay doesn’t attempt to make any pronouncements on the fundamental goodness of human nature, it is encouraging that where citizens live in greatest peace is where they interact on their own terms; where they are at war is where government representation replaces civil interaction. The fundamental reason why democracies don’t fight, writes Rummel, is that they come from an “exchange culture.” This is a culture that develops “wherever there is the art of bargaining and exchange over goods, services, and ideas.” The exchange culture, by definition, breeds cooperation. “Businesses of all sorts compete to sell their wares. There are the disputes, the broken contracts and agreements, the misunderstandings, the fraud and abuse,” writes Rummel. But the give and take of trade trains people to resolve conflicts in peace every day. Indeed, Rummel suggests one way to look at international relations between individuals is as interacting in a state of anarchy. Despite no world government in the true sense of the word, people still manage to cooperate and get along—in fact they do it exceedingly well. Trade is so important to peace, we can see it encouraging peace in capitalist countries that aren’t yet democracies. Governments such as Chile and Taiwan before they became democracies, were not as peaceful as democracies, but still far less prone to aggression than autocracies. The reason is that their cultures are based on the principle of free exchange. Free trade creates a world community of individuals working in harmony. Common citizens replace power-driven politicians and war-driven militaries as de facto ambassadors. One added bonus is that, while we may always have politicians, in a world where an exchange culture reigns, they will be selected from within this exchange culture, bringing to their jobs the very inclinations to bargain and compromise that work so well in creating peace in civil society.

Different people have different solutions to war; none are as logical as free trade. The war hawks have pursued a policy of mutual assured destruction, arguing that bigger weapons make better deterrents. Others have argued for disarmament. While the causes of war are undoubtedly varied, protectionism clearly invites conflict. To this, free trade is a remedy. While diplomacy is important, there can be no better diplomacy than that which exists between common citizens of the world every day in a thousand spheres of life. The more free trade we have, the more the invisible hand of the market helps us to, while working for our own advancement, create a world of peace. The wellbeing of others becomes our own. There is no reason why, in a world of perfect free trade, people worldwide shouldn’t get along as well as the citizens of the happiest, most prosperous democracies. For in a word of free trade it matters little where borders are drawn. “Make love, not war,” was a slogan once bandied about as an answer to war. It was a catchy phrase—and an appealing message given the two options. But it wasn’t too practical. The real solution to war, if condensed to the size of a placard, would instead read, “Make trade, not war.”