Wednesday, January 25, 2017

The Great Early Debates on Free Trade versus Tariffs

Dear Bob,

I have a new article on the website of the Future of Freedom Foundation on, “Economic Ideas: James Mill, David Ricardo and the Triumph of Free Trade.”

At a time when a president of the United States and some other countries around the world are turning away from the economics of free trade, it is, perhaps, worth remembering the gains from freedom of trade and to recall one of classical liberalism’s great triumphs in the nineteenth century, especially in Great Britain: the repeal of trade protectionism and the advent of an era of free trade.

During the Great Britain’s long wars with France, between 1791 and 1815, both countries imposed trade barriers against the other and attempted to enforce naval blockades to prevent each from trading with other nations. In Britain a debate soon arose as to whether or not the British lost much from these respective trade barriers and blockades, since British farmers and manufacturers were more productive and cost-efficient than many of the countries with which they had previously traded.

The response to this was given by a number of “political economists,” especially James Mill (the father of John Stuart Mill) and David Ricardo. They explained what today is called the theory of comparative advantage. An individual or a nation may be significantly more cost-efficient and productive than its potential trading partners, but invariably it is likely to be comparatively most or more efficient at some things relative to others. That individual or nation will be far better off specializing in what they are most efficient and buy from their less efficient trading partners a variety of other goods so to free up their time, resources and labor to focus on what they are, in comparison, best at.

This argument, plus the earlier defenses of freedom of trade by those like Adam Smith, inspired after the end to the wars with France a free trade movement in Great Britain led by Richard Cobden and John Bright. For years they campaigned through debates, meetings and lectures, pamphlets and books, and getting free trade advocates elected to Parliament.

Finally, in the autumn of 1845, Great Britain suffered one of the worst rains in living memory, destroying many of the crops in the British Isles. Famine and starvation faced, especially, the lower income people of Great Britain. The Tory Prime Minister, Sir Robert Peel, bending to the circumstances and under the impact of the free traders’ ideas, pushed for the agricultural trade restrictions known as the Corn Laws to be repealed and Great Britain to be opened unilaterally to a regime of freedom of trade. It set in motion the institutional conditions (along with limited domestic intervention and a relatively low tax environment) for the economic changes that made Great Britain “great” and the dominant economic industrial nation for decades.

It also served as the example of economic freedom’s success that inspired and guided many other nations to move at least in a far more free trade and free enterprise direction for much of the remainder of the nineteenth and into the twentieth centuries.

Economic “greatest” does not come from a president commanding and threatening American industries and businessmen to invest here or there, but by following a policy of “laissez-faire” – leave individuals free to direct and control their own lives in free association with whoever they find it more advantageous and profitable in their own self-interest, and one of the important unintended consequences will be the mutual prosperity and betterment of all.

 http://www.fff.org/explore-freedom/article/james-mill-david-ricardo-triumph-free-trade/

Best,
Richard

1 comment:

  1. ─ Economic "greatest" does not come from a president commanding and threatening American industries and businessmen to invest here or there ─

    "But at least he makes the trains run on time!"

    ─ leave individuals free to direct and control their own lives in free association with whoever they find it more advantageous and profitable in their own self-interest ─

    But you can't leave people alone to live their lives because, like El Señor Presidente Bananero Trumpo said, we're in this 'together'; 'we' should take care of each other, which of course means we should subsidize the inefficiencies of others by paying higher prices, justified by the image of the mythical "American Worker(TM)" whose income, ostensibly, has "stagnated" for decades.

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