The case for free trade 290

President Trump is speaking of imposing tariffs on steel and aluminum to boost domestic production.

To explain the case for free trade, we quote from a speech delivered at the (libertarian) Mises Institute a few days ago by Thomas J. DiLorenzo.

It is not an exaggeration to say that trade is the keystone of modern civilization. For 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 trade – such as protectionism – cripple, hobble, and destroy trade, the source of life and prosperity.

Human beings cannot truly be free unless there is a high degree of economic freedom – the freedom to collaborate and coordinate plans with other people from literally all around the world. That is the point of Leonard Read’s famous article, “I Pencil,” which describes how to produce 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 production and marketing of pencils. The same is true, of course, for virtually everything else that is produced.

Without economic freedom – the freedom to earn a living for oneself and one’s family – people 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 trade or 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. …

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 … understood that once one acquiesced in protectionism, then no one’s property will be 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 was the most important means of diminishing the likelihood of war. …

[I]t is not democracy that is a safeguard against war but, as the British (classical) Liberals were to recognize, it is free trade. To Richard Cobden and John Bright, the leaders of the British Manchester School, free trade – both domestically and internationally – was a necessary prerequisite for the preservation of peace. …

As Frederic Bastiat often said, if goods can’t cross borders, armies will. This is a quintessentially American philosophy in that it was the position assumed by 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 world – and trade in any market.” Paine – the philosopher of the American Revolution – believed that free trade would “temper the human mind”, and 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 be rendering nations, as well as individuals, useful to each other. . . . “War can never be in the interest of a trading nation.”

George Washington obviously agreed. “Harmony, liberal intercourse with all Nations, are recommended by policy, humanity and interest,” he stated in his September 19, 1796 Farewell Address. Our commercial policy “should hold an equal and impartial hand; neither seeking nor granting exclusive favours or preferences; consulting the natural course of things; deversifying by gentle means the streams of Commerce, but forcing nothing . . .”

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 and invention and of 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 interferences with the free market, known as mercantilism, that Adam Smith railed against in The Wealth of Nations. … [He] was defending trade on moral as well as economic grounds by enunciating his doctrine of how free trade was part of the system of “natural justice”.  One of the ways he did this was to defend smugglers and the act of smuggling as a means of evading mercantilist restrictions on trade. The smuggler, explained Smith, was engaged in “productive labor” that served his fellow man (i.e., consumers) …

For the same reason, black markets are defensible.

Despite powerful arguments in favor of free trade offered by [Dr. Francois] Quesnay, [Adam] Smith, David Ricardo, and others, England (and other countries of Europe) suffered from protectionist trade policies for the first half of the nineteenth century. But this situation was turned around due to the heroic and brilliant efforts of what came to be known as the “Manchester School,” led by two British businessmen, John Bright and Richard Cobden. Thanks to Bright and Cobden Great Britain achieved complete free trade by 1850.

The British public was plundered by the mercantilist “corn laws” which placed strict import quotas on the importation of food. The laws benefited political supporters of the government who were engaged in farming at the expense of much higher food prices, which was especially harmful to the poor. 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. …

From his home in Mugron, France, Frederic Bastiat single handedly created a free-trade movement in his own country that eventually spread throughout Europe. Bastiat was a gentleman farmer who had inherited the family estate. He was a voracious reader, and spent many years educating himself in classical liberalism and in just about any other field that he could attain information about. After some twenty years of intense intellectual preparation, articles and books began to pour out of Bastiat (in the 1840s). His book, Economic Sophisms, is to this day arguably the best defense of free trade ever published. His second book, Economic Harmonies, quickly followed, while Bastiat published magazine and newspapers all over France. His work was so popular and influential that it was immediately translated into English, Spanish, Italian, and German.

Due to Bastiat’s enormous influence, free-trade associations, modeled after one he had created in France and similar to the one created by his friend, Richard Cobden, in England, began to sprout in Belgium, Italy, Sweden, Prussia, and Germany.

To Bastiat, collectivism in all its forms was immoral as well as economically destructive.

Collectivism constituted “legal plunder,” and to argue against the (natural) right to private property would be similar to arguing that theft and slavery were “moral”. The protection of private property is the only legitimate function of government, Bastiat wrote, which is why trade restrictions – and all other mercantilist schemes – should be condemned. Free trade “is a question of right, of justice, of public order, of property. Because privilege, under whatever form it is manifested, implies the denial or the scorn of property rights.” And “the right to property, once weakened in one form, would soon be attacked in a thousand different forms.”

There is no clearer example of how trade restrictions are the enemy of freedom than the American Revolution. In the seventeenth century all European states practiced the policy of mercantilism. England imposed a series of Trade and Navigation Acts on its colonies in America and elsewhere, which embodied three principles: 1) All trade between England and her colonies must be conducted by English (or English-built) vessels owned and manned by English subjects; 2) All European imports into the colonies must “first be laid on the shores of England” before being sent to the colonies so that extra tariffs could be placed on them; and 3) Certain products from the colonies must be exported to England and England only.

In addition, the colonists were prohibited from trading with Asia because of the East India Company’s state-chartered monopoly. There were import duties placed on all colonial imports into England.

After the Seven Years War (known in America as the French-Indian War), England’s massive land holdings (Canada, India, North America to the Mississippi, most of the West Indies) became very expensive to administer and police. Consequently, the Trade and Navigation Acts were made even more oppressive, which imposed severe hardships on the American colonists and helped lead to revolution.

After the American Revolution trade restrictions nearly caused the New England states — which suffered disproportionately from the restrictions — to secede from the Union. In 1807 Thomas Jefferson was president and England was once again at war with France. England declared that it would “secure her seamen wherever found”,  which included U.S. ships. After a British warship captured the USS Chesapeake off Hampton Roads, Virginia, Jefferson imposed a trade embargo that made all international commerce illegal. After Jefferson left office his successor, James Madison, imposed an “Enforcement Act” which allowed war-on-drugs style seizure of goods suspected to be destined for export.

This radicalized the New England secessionists, who had been plotting to secede ever since Jefferson was elected, issued a public declaration reminding the nation that “the U.S. Constitution was a Treaty of Alliance and Confederation” and that the central government was no more than an association of the states. Consequently, “whenever its [i.e., the Constitution’s] provisions were violated, or its original principles departed from by a majority of the states or their people, it is no longer an effective instrument, but that any state is at liberty by the spirit of that contract to withdraw itself from the union.”

The Massachusetts legislature formally condemned the embargo, demanded its repeal by Congress, and declared that it was “not legally binding”. In other words, the Massachusetts legislature “nullified” the law. Madison was forced to end the embargo in March of 1809. …

John Taylor, a noted Anti-Federalist, was a lifelong critic of mercantilism and laid out his criticisms in his 1822 book, Tyranny Unmasked. Like Bastiat, Taylor saw protectionism as an assault on private property that was diametrically opposed to the freedom the American revolutionaries had fought and died for. The tyranny that Taylor sought to “unmask” was the collection of fables and lies that had been devised by mercantilists to promote their system of plunder. If one looks at England’s mercantilist policies, Taylor wrote, “No equal mode of enriching the party of government, and impoverishing the party of people, has ever been discovered.” …

Many of Taylor’s arguments were adopted and expanded upon by the great South Carolinian statesman John C. Calhoun during the struggle over the 1828 “Tariff of Abomination”,  which a South Carolina political convention voted to nullify. The confrontation between South Carolina, which was very heavily import dependent, as was most of the South, and the federal government over the Tariff of Abominations almost led to the state’s secession some thirty years prior to the War for Southern Independence. The federal government backed down and reduced the tariff rate in 1833.

The Northern manufacturers who wanted to impose British-style mercantilism on the U.S. did not give up, however; they formed the American Whig party, which advocated three mercantilist schemes: protectionism, corporate welfare for themselves, and a central bank to pay for it all. From 1832 until 1861 the Whigs, led by Henry Clay and, later, by Abraham Lincoln, fought mightily in the political arena to bring seventeenth-century mercantilism to America.

The Whig party died in 1852, but the Whigs simply began calling themselves Republicans.

We have often praised the Republican Party for its opposition to slavery, but we do not praise it for this:

The tariff was the centerpiece of the Republican party platform of 1860, as it had been when the same collection of Northern economic interests called itself “Whigs” for the previous thirty years.

By 1857 the level of tariffs had been reduced to the lowest level since 1815, according to Frank Taussig in his classic Tariff History of the United States. But when the Republicans controlled the White House and the Southern Democrats left the Congress the Republicans did what, as former Whigs, they had been itching to do for decades: go on a protectionist frenzy. In his First Inaugural Address Lincoln stated that he had no intention to disturb slavery in the Southern states and, even if he did, there would be no constitutional basis for doing so. But when it came to the tariff, he promised a military invasion if tariff revenues were not collected. …

By 1862 the average tariff rate had crept up to 47.06 percent, the highest level ever, even higher than the 1828 Tariff of Abominations. These high rates lasted for decades after the war.

[B]y 1860 England itself had moved to complete free trade; France sharply reduced her tariff rates in that very year; and Bastiat’s free-trade movement was spreading throughout Europe. Only the Northern United States was clinging steadfastly to seventeenth-century mercantilism.

After the war the Northern manufacturing interests who financed and controlled the Republican party (i.e., the old Whigs) were firmly in control and they “ushered in a long period of high tariffs. With the tariff of 1897, protection reached an average level of 57 percent.” This political plunder continued for about fifty years after the war, at which time international competition forced tariff rates down moderately. By 1913 the average tariff rate in the U.S. had declined to 29 percent.

But the same clique of Northern manufacturers was begging for “protection” and persisted until they got it when Herbert Hoover signed the Smoot-Hawley tariff of 1929, which increased the average tariff rate on over 800 items back up to 59.1 percent. The Smoot-Hawley tariff spawned an international trade war that resulted in about a 50 percent reduction in total exports from the United States between 1929 and 1932. Poverty and misery was the inevitable result. Even worse, the government responded to these problems of its own creation with a massive increase in government intervention, which only produced even more poverty and misery and deprived Americans of more and more of their freedoms.

The case for President Trump’s tariffs follows immediately in the next post. …

The US and the EU are entirely different 130

There is a profound difference between the US and the EU, and one that will never disappear. The US has a single culture, a single language, a single and powerful global brand, and a single government that commands national allegiance. It has a national history, a national myth, a demos that is the foundation of their democracy. The EU has nothing of the kind. In urging us to embed ourselves more deeply in the EU’s federalising structures, the Americans are urging us down a course they would never dream of going themselves. That is because they are a nation conceived in liberty. They sometimes seem to forget that we are quite fond of liberty, too.

Boris Johnson, the buoyant, brilliant, good-humored Mayor of London, who may be and ought to be a future Conservative prime minister, writes at The Telegraph:

I love America. I believe in the American dream. Indeed, I hold that the story of the past 100 years has been very largely about how America rose to global greatness – and how America has helped to preserve and expand democracy around the world. In two global conflicts, and throughout the Cold War, the United States has fought for the founding ideals of the republic: that government of the people, by the people, for the people should not perish from the earth. So it is on the face of it a bit peculiar that US government officials should believe that Britain must remain within the EU – a system in which democracy is increasingly undermined.

Some time in the next couple of months we are told that President Obama himself is going to arrive in this country, like some deus ex machina, to pronounce on the matter. Air Force One will touch down; a lectern with the presidential seal will be erected. The British people will be told to be good to themselves, to do the right thing. We will be informed by our most important ally that it is in our interests to stay in the EU, no matter how flawed we may feel that organisation to be. Never mind the loss of sovereignty; never mind the expense and the bureaucracy and the uncontrolled immigration. The American view is very clear. Whether in code or en clair, the President will tell us all that UK membership of the EU is right for Britain, right for Europe, and right for America. And why? Because that – or so we will be told – is the only way we can have “influence” in the counsels of the nations.

It is an important argument, and deserves to be taken seriously. I also think it is wholly fallacious – and coming from Uncle Sam, it is a piece of outrageous and exorbitant hypocrisy.

Only it is not coming from Uncle Sam. It is coming from Uncle Sam’s enemy, President Barack Hussein Obama.

There is no country in the world that defends its own sovereignty with such hysterical vigilance as the United States of America. This is a nation born from its glorious refusal to accept overseas control. Almost two and a half centuries ago the American colonists rose up and violently asserted the principle that they – and they alone – should determine the government of America, and not George III or his ministers. To this day the Americans refuse to kneel to almost any kind of international jurisdiction. Alone of Western nations, the US declines to accept that its citizens can be subject to the rulings of the International Criminal Court in The Hague. They have not even signed up to the Convention on the Law of the Sea. Can you imagine the Americans submitting their democracy to the kind of regime that we have in the EU?

Under Obama, the US has not been defending its sovereignty. And Obama would love it if America could be totally ruled by a world communist government. But the rest is true.

Think of NAFTA  – the North Atlantic Free Trade Agreement – that links the US with Canada and Mexico. Suppose it were constituted on the lines of the EU, with a commission and a parliament and a court of justice. Would the Americans knuckle under – to a NAFTA commission and parliament generating about half their domestic law? Would they submit to a NAFTA court of justice – supreme over all US institutions – and largely staffed by Mexicans and Canadians whom the people of the US could neither appoint nor remove? No way. The idea is laughable, and completely alien to American traditions. So why is it essential for Britain to comply with a system that the Americans would themselves reject out of hand? Is it not a blatant case of “Do as I say, but not as I do”?

Of course it is. As for this precious “influence”, so dearly bought, I am not sure that it is all it is cracked up to be – or that Britain’s EU membership is really so valuable to Washington. Since the very foundation of the Common Market, the Washington establishment has supported the idea of European integration. The notable state department figure George W Ball worked on drafting the Schuman plan in 1950. He was a pallbearer at the funeral of Jean Monnet, the architect of the European project.

The Americans see the EU as a way of tidying up a continent whose conflicts have claimed huge numbers of American lives; as a bulwark against Russia, and they have always conceived it to be in American interests for the UK – their number one henchperson, their fidus Achates – to be deeply engaged. Symmetrically, it has been a Foreign Office superstition that we are more important to Washington if we can plausibly claim to have “influence” in Brussels. But with every year that passes that influence diminishes.

It is not just that we are being ever more frequently outvoted in the council of ministers, and our officials ever more heavily outnumbered in the Commission. The whole concept of “pooling sovereignty” is a fraud and a cheat. We are not really sharing control with other EU governments: the problem is rather that all governments have lost control to the unelected federal machine. We don’t know who they are, or what language they speak, and we certainly don’t know what we can do to remove them at an election.

When Americans look at the process of European integration, they make a fundamental category error. With a forgivable narcissism, they assume that we Europeans are evolving – rather haltingly – so as to become just like them: a United States of Europe, a single federal polity. That is indeed what the eurozone countries are trying to build; but it is not right for many EU countries, and it certainly isn’t right for Britain.

There is a profound difference between the US and the EU, and one that will never disappear. The US has a single culture, a single language, a single and powerful global brand, and a single government that commands national allegiance. It has a national history, a national myth, a demos that is the foundation of their democracy. The EU has nothing of the kind. In urging us to embed ourselves more deeply in the EU’s federalising structures, the Americans are urging us down a course they would never dream of going themselves. That is because they are a nation conceived in liberty. They sometimes seem to forget that we are quite fond of liberty, too.

That last sentence of Mr. Johnson’s is typical British understatement.

At least three of the most important thinkers of the Enlightenment whose ideas inspired the Founders to ground the United States of America in liberty were British: Hobbes, Locke, and Paine. From the Glorious Revolution of 1688 on, Britain, though in form a constitutional monarchy, was a free democracy, with suffrage spreading eventually to all citizens – until it entered the European Economic Union, which evolved into the European Union. That fatal step took democratic self-government away from the United Kingdom.

There is to be a referendum in June on whether or not a majority of Britons want to stay in the undemocratic EU or leave it. It is time for Britain to reclaim self-determination, and Americans, of all the peoples on earth, could surely be expected to applaud the British for doing so.

Posted under Britain, Europe, United States by Jillian Becker on Tuesday, March 15, 2016

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Prosperity is the prey of government 11

High taxes do nothing for the prosperity of a nation. Never have, never will.

High-taxing governments immiserate the people.

Unless the lame-duck Democratic majority in Congress suddenly decides otherwise in the next few days, taxes will go up steeply next year.

And Thomas Paine is indignant about it.

Or put it this way: if Thomas Paine had written today this passage from part of his introduction to The Rights of Man, it would be just as apt as it was when it was first published some 220 years ago:

From the rapid progress which America makes in every species of improvement, it is rational to conclude that, if the governments of Asia, Africa, and Europe had begun on a principle similar to that of America, or had not been very early corrupted therefrom, those countries must by this time have been in a far superior condition to what they are. Age after age has passed away, for no other purpose than to behold their wretchedness. Could we suppose a spectator who knew nothing of the world, and who was put into it merely to make his observations, he would take a great part of the old world to be new, just struggling with the difficulties and hardships of an infant settlement. He could not suppose that the hordes of miserable poor with which old countries abound could be any other than those who had not yet had time to provide for themselves. Little would he think they were the consequence of what in such countries they call government.

If, from the more wretched parts of the old world, we look at those which are in an advanced stage of improvement we still find the greedy hand of government thrusting itself into every corner and crevice of industry, and grasping the spoil of the multitude. Invention is continually exercised to furnish new pretences for revenue and taxation. It watches prosperity as its prey, and permits none to escape without a tribute.