Is There a Libertarian Case Against Free Trade?
The trends in globalization have led to fearful predictions. Upon closer scrutiny, most of these warnings fall apart. Yet even if the situation were dire, it still would not follow that placing tariffs or restrictions on capital mobility would make Americans richer. Until the critics can come up with some non-protectionist alternative, the just and pragmatic solution is freedom. FULL ARTICLE
Comments (75)
One of my favorite Mises articles on this topic: Capital Exports and Free Trade by J.G. Hülsmann
He makes the point that while free trade could potentially make a country relatively worse off, the non-free trade alternatives would be even worse.
Published: March 13, 2006 8:24 AM
Great articles! We should teach young people that when consuming the popular media, they should keep in mind that the popular media are trying to scare you; it's the only way they can be sure the public is paying attention. The media will do anything to scare viewers and readers into paying attention because it increases their profits. The popular media do not report news, they produce a daily horror show.
Published: March 13, 2006 9:01 AM
As someone who's been rebuked often enough on this site for "opposing free trade," let me say, first of all, that I am absolutely a free-trader, believing as any libertarian worthy of the name does that voluntary exchange is the very essence of the social enterprise.
However, for this enterprise to realize its potential, it had to move beyond the "coincidence of wants" required in the voluntary exchange known as barter, which society long ago did. That is, over time, voluntary exchange resulted in various commodities being used as "media of exchange" -- i.e., money -- gold and silver long predominating in this capacity.
They no longer, do, however, but have instead been replaced by government fiat currencies, which, unlike gold and silver, are not commodities at all but mere promises, with nothing backing them up. Thus, while historian Will Durant was right to say that "Money is the root of all civilization," this most precious social instrument has been corrupted out of all proportion, uprooting civilization in the process.
Thus, there is no such thing as free trade in the world today; there is only (mis)managed trade within and among constantly manipulated currency regimes that are doomed to collapse like the houses of cards that they are. And not until true money returns -- i.e., not until gold and silver reclaim their rightful place in the scheme of things -- will civilization be planted once again in the fertile soil in which it alone can flourish.
Published: March 13, 2006 9:08 AM
It seems to me that we are currently going through a period of dramatic monetary disorder. To analyze data without at least trying to tie in monetary policy as a contributing effect seems inproper. Since a free market would need free market money, are the phenomena being discussed likely to be the same if gold were money? On the Mises web site it seems that the possible effects of monetary policy on the observed data shouldn't be ignored.
Published: March 13, 2006 9:55 AM
I think the problem with "free trade" in the USA, is that all to often it is not really free trade, but mutual regulation, cooperative controll, and monitary manpiulation. Perhaps we should be asking for "unconditional and honest trade". It is very fusterating to support free trade and be categorized in with who have taken it and manipulated it into something dirty.
Also, in all fairness, typically when people talk about free trade - they mean the free movement of goods and not the free movement of labor. Having free trade in goods, but not in labor creates imbalances in the market. (though free movement of goods is better than nothing) Inspite of NAFTA, I am not free to go down to Mexico, and seek opportunities in the Mexican labor market, nor are they free to come up here and seek opportunities in the US market.
If they were, they would act like most people who have immigrated to the US before them (assuming no handout systems coerced at taxpayers expense). They would acquire skills, open up businesses, and take advantage of the additional freedoms here in the US to create wealth and opportunity that didn't exist before.
Free trade without free flow of labor, deprives the US of that counterbalance. It deprives employers who are seeking out cheaper labor the option of bringing labor here vs seeking out cheaper outside the US. Since the US tends to have more economic freedoms than most countries and since labor costs are the highest costs of most industries, the factory system in the US could probably compete very nicely if it had the option of importing more labor.
Finally, the software industry in the US probably isn't a good focus point because it is heavially dependent on copyright controlls. It would be interesting to see stats for just the software services sector.
Published: March 13, 2006 10:00 AM
Good article as usual. I always found it remarkable how PCR and other protectionists have cited alleged or real job losses in manufacturing and some other industries even though first of all
these job losses even if real could perhaps be blamed on some other policy failures (like monetary policy or fiscal policies) and even though secondly it is clear that these job losses actually reflect high increases in manufaturing productivity.
Worldnetdaily's self-described libertarian columnist Vox Day did coincidentally express misgivings about free trade today , citing how NAFTA have failed to improve conditions in Mexico enough to stem the tide of illegal migration to the U.S. and allegedly "significantly reduced" American manufacturing and how the European Union have been turned into a intrusive authority for socialism and regulations.
He mentions the obvious counter-reply, that neither NAFTA nor the EU could be charactarized as
true free trade, but dismisses this by comparing this to commies who claim that the Soviet Union and other historical examples of communist societies weren't true communism. But the obvious difference is that while true free trade are based on solid theoretical ground, the visions of the commies who distance themselves from Stalin sure aren't based on solid theoretical grounds.
Moreover, even had NAFTA been true free trade, it could hardly be expected that it would turn Mexico
into a economic miracle. All it would do is to make it stronger than it otherwise would have been, not necessarily overcome the failure of Mexican policies in other areas.
As for PCR, while he have usually not explicitly favored formal trade barriers and merely implied that by bashing "free trade", he did actually explicitly come out in favor of tariffs in this column.
Published: March 13, 2006 10:41 AM
Even if a corporation cuts a deal with a tyrant and forces a third world populace to make sneakers for 2 cents a day, unconditional free trade could have an answer for this....
For one instance, a rival corporation could arm the peasant/slaves with guns and armery to take over this foolish tyrant, with complete free trade and easy capital mobility (which i think is completely a blessing and PCR is wrong to fear it) more resources will be available to do this.
I'm not suggesting a free trade anarchy in this country will lead to corporate warlords in another country, but the high costs of slavery and revolt will make corporations think twice (since the destruction of capital will be enormous) before they engage in slave labor, but this concern could lead to a rise and call for a (NOOOO!!!) world government by socialists!
However, im thinking, in a libertarian free trade society, if a corporation is found cut deals with tyrants to force slavery in other countries, isn't that unjust and can a rival corporation bring these board of directors to justice? I mean, it's really no different from some guy hiring a thug to take out his wife's lover. The husband would be part of the coercion and murder and brought to justice. I kno that sueing a corporation outside of our jurisdiciton is not valid in a libertarian anarchy, but hey i could be missing something..
a thought?? (or prayer, so we don't have calls for a world gov!)????
Published: March 13, 2006 11:07 AM
I think a libertarian case can be made against free trade, to answer the original question. I'll just draw on an argument from Hoppe:
Free immigration is not libertarian because some permanent residents may not want these visitors.
Now watch!
Free trade is not libertarian because some permanent residents may not want the arrival of these goods because it's competition for them.
There, I did it!
Published: March 13, 2006 11:13 AM
A great piece, and in response to the comments on monetary policy, such issues are undoubtedly a critical element in the status of any trade situation. But that fact doesn't change the fact that free trade, or quasi-free trade, is desirable and beneficial, and its introduction would not change RPM's article. A good article can't focus on all things at all times in all ways.
On unjust situations in a trading partner country, trade may be the only way to crack open the door of liberty in that country. I'd much rather have seen a focus on Wal Mart opening in Iraq over the last 15 years than see the trade sanctions and eventual re-invasion and war. Both they and we would be better off today.
Published: March 13, 2006 11:14 AM
Good piece! It is does a wonderful job of exploding the myths and demagoguery which all protectionist arguments are founded on. I especially liked the point about how free trade is beneficial even when the other guy won't playthe game.
I do object to the title however.
By definition, there is no libertarian argument against free trade. Protectionism involves the use of force by third parties in voluntary contracts. As such it violates the NAP.
Published: March 13, 2006 11:48 AM
"Person" has a good point... pointing out the inconsitencies in Hoppe's anti-immigration agrument.
About Murphy's article though. This is mostly true, granted. However, Austrians/free marketeers seem to miss the adjacent and more urgent issue, namely the effects of a regulated market on the third-party losers of a mutual exchange in a faux-free global and national economy. When the mom&pop shop is squeezed out by Wally World, this represents people and recources that can't be quickly reinvested in a more viable enterprise. If America were an anarcho-cpapitalist commonwealth, this could be so, but the U.S. is a centralized welfare-warfare state. we are regulated (constitutionaly, via the Interstate Commerce Clause) and "protected" from the timely and efficent rechanneling of labor and property.
Thus, when yesterday's proprietor is todays "greeter," the free market professor may say all is well, because it was consental. But the competence to be self-employed won't long be content as a low-ranking corporate prole and that greeter is at this moment building a meth lab (thus stimulating the prohibitionist police state)
What am I saying? the partially free marker is a disaster, this whole market thing only works if it's ENTIRELY FREE. For those who think differently, Spartacus is in the making
Published: March 13, 2006 12:47 PM
Person you didn't quite do it.I may decide to keep immigrant workers off my own private property
for any reason, but the factory owner will think otherwise,(with regard to his property) and there is nothing I can do about it.(In a completely free economy that is).
Published: March 13, 2006 1:30 PM
An easy a priori way to see that arguments for free trade apply unilaterally (are still valid even if other countries do not practice free trade) is to perform a little "black box" thought experiment. Treat other countries as black boxes: from our point of view, we can't "see inside" another country and distinguish between it having an anti-libertarian government (featuring subsidies, trade restrictions, slave labor, etc.) versus it having a libertarian government in which the same external trading behavior is due to the voluntary choices of the residents of that country.
Of course, this doesn't mean we don't care about these other countries, and hope they all become libertarian, but it means that if free trade is in our own best interest in the second case (universal libertarianism), then it is also in our best interest in the first case.
Published: March 13, 2006 1:35 PM
There is a difference between trespass and voluntarily not entering into a transaction. If a free world, land would be owned, and if you randomly decided to move somewhere without prior contractual agreements to occupy certain land, that would be trespass. Yet if you didn't want to buy something at a local store, that wouldn't be protectionism. It would still fall under the critera of the free market.
Published: March 13, 2006 1:41 PM
Person you didn't quite do it.I may decide to keep immigrant workers off my own private property
for any reason, but the factory owner will think otherwise,(with regard to his property) and there is nothing I can do about it.(In a completely free economy that is).
So Hoppe's case against immigration is invalid. That was my point.
Published: March 13, 2006 1:42 PM
CLC,
'"Person" has a good point... pointing out the inconsitencies in Hoppe's anti-immigration agrument.'
I think it requires a highly superficial understanding of Hoppe's position on immigration to conclude his argument is inconsistent.
We should familiarize ourselves with the concepts of forced integration, private property and its inherent right of exclusion, and how this fits in with libertarian ideals before we advocate completely open borders on libertarian grounds.
And we should read Hoppe’s entire argument too.
Published: March 13, 2006 1:50 PM
I don't think I left out any *critical* part of Hoppe's argument. Any private property covenental arrangement that could limit immigration could also limit trade. So any governmental policy attempting to mimic private property arrangements that would arise would also have to include trade restrictions.
Published: March 13, 2006 2:05 PM
"I don't like foreigners living in my country."
Ah, you poor thing, let's have state immigration restrictions to make you feel better.
"I don't like these cheap imports putting me out of a job."
Suck it up, slacker.
Published: March 13, 2006 2:11 PM
Free trade cannot make any particular person poorer than he otherwise would be, at least not if we think of free trade in the conventional sense (one nation allowing free imports/exports within its boundaries). While the trends of free-trade may not favor enriching one particular nation, it is true to say that that nation trying to prevent free trade within it's boundaries would make it poorer than it otherwise would be. Thus, it is silly to say that "free trade can make us poorer", since it is precisely the prevention of free trade -- even in nation's that aren't being enriched the most by it -- that makes nation's poorer.
The only way that you could conceive of free trade making (say) the US worse off, is if you think of "non free-trade" being the US forcing every other nation to act as it had before various global alterations in comparative advantage. This is rather absurd, and the attempt of such a massive world-wide intervention by the US would certainly make it poorer than it otherwise would be.
And if you're talking about companies outsourcing to other countries, one must note that preventing those US companies from outsourcing makes them (and their shareholders, mostly US citizens) poorer. Or, alternatively, companies may decide that it's not worth it doing business in the US, and relocate, or maybe fewer companies have an incentive to incorporate or go public in the US.
Published: March 13, 2006 2:23 PM
:) That was pretty funny actually.
Published: March 13, 2006 2:27 PM
(Person's comments, i mean.)
Published: March 13, 2006 2:28 PM
If people want American manufacturing to be stonger they should support the reduction of the taxes and regulations in the United States that harm it.
Putting more taxes or restrictions on imports will not improve American manufacturing - in the short term such moves will just benefit certain corporate interests and certain labor unions, and in the long term trade restrictions will not even benefit them.
As for "interest rates" - well government could stop borrowing money (thus, perhaps, making more availble for manufacturing) this would be a rather better move than yet more issuing of credit-money.
The boom-bust cycle (which is caused by credit-money expansion) does not benefit manufacturing over time.
Published: March 13, 2006 2:40 PM
Person, there are -as Hoppe have pointed out- very important differences between goods entering a country and people entering a country.
If I buy foreign goods only I would have to put up with them.
But if I bring in a foreigner, it's not just I who have to put up with the foreigner. He or she would gain the "right" to associate with anyone given today's anti-discrimination laws. Moreover, the foreigner would get the "right" to free health care, education and various other goodies from the welfare state.
Immigration implies forced integration, whereas import of goods do not imply forced integration.
Published: March 13, 2006 3:29 PM
I don't think Hoppe is especially esposing the greatness of an involuntary coersive government, but he says when there happens to be one, shouldn't we subject living under it want it to mimic a voluntary society as much as possible?
How many would voluntarily live next to child molestors? Probably not a lot. I'm not directly comparing immigrants to them, but I am pointing out that most of the current immigrants are far below average in important socio-economic categories, and so who would want to live in a country where these people to receive the same state benefits as the citizens who actually support it?
Published: March 13, 2006 3:45 PM
But if I bring in a foreigner, it's not just I who have to put up with the foreigner. He or she would gain the "right" to associate with anyone given today's anti-discrimination laws. Moreover, the foreigner would get the "right" to free health care, education and various other goodies from the welfare state.
Hoppe's aregument against immigration explicitly includes cases where there are no internal forced integration laws or state welfare benefits. And in any case, you "have to put up with" imports, whether or not you invited them!
Published: March 13, 2006 3:48 PM
How many would voluntarily live next to child molestors? Probably not a lot. I'm not directly comparing immigrants to them, but I am pointing out that most of the current immigrants are far below average in important socio-economic categories, and so who would want to live in a country where these people to receive the same state benefits as the citizens who actually support it?
Yeah, and who would want to live where you can lose your job whenever cheap imports hit the shores?
Published: March 13, 2006 3:49 PM
In sum, you can't have any partially free trade. Even one distortion ruins the system.
I've pointed out in an earlier post that the moment you say it is wrong to sell stolen merchandise, then you reject "free trade" in the libertarian sense.
I will pause to agree with others that if the monetary system is rigged or chaotic you can't calculate prices so you can't trade freely - A price must be in pesos or dollars, or even gold, but trying to contract for goods that will be sold with a different currency than what it is bought in makes things impossible - if profit margins can get thin, then most of the profit or loss will be due to currency fluctuations.
But to return to my original point, maybe Somalia would benefit from buying (literal) slave labor produced goods from Sudan. Some might point out the labor was "stolen". But again, should it matter how one obtained a good one is buying if it is being sold on a "free market"?
If the goods for sale at Wal-Mart are cheaper because of better management and logistics, it is free trade. If it is because they are better at getting the best of the nonneutrality of inflation in China (I.e. the inflation will steal a fraction of the value from the entire population, but if Wal-Mart is nearer the source of the newly manufactured currency units, they will get nearly par), then it isn't free no more than if I shaved a bit off the gold coins I'm using to pay you for something - you will be a few milligrams short.
I've pointed out the second problem with NAFTA which even if it were a one page deal, when it was passed the peso had a far larger value than two years later. If Mexico passed a huge tariff on imports and subsidy on exports in a direct form, they would have been called on it as a violation. Instead they just devalued the peso which had the IDENTICAL effect but without the messy international political problems.
I really dislike anything protectionist, but I also realize that there is a difference between a healthy patient and one who is sick, even if the sickness is self-inflicted. Normally we would recommend rest, instead of working overtime to pay the doctor. Similarly, if we cannot or lack the will to correct the other distortions killing manufacturing, I don't think it is unreasonable to do things to keep things operating until it becomes possible to correct the other distortions. This would be a bit like a doctor refusing to treat a fatal form of cancer because the patient smoked and injured their health in another way.
Or to quote the late Harry Brown again, "Government breaks your legs and says they are being nice when it gives you a crutch". The libertarian approach ought not be to remove the crutch but leave the legs broken. And then to say that a race between someone with healthy legs and the person with broken legs is somehow fair.
It is NEVER free trade when it is between two parties with different fiat currencies. Nor between one party in a country undergoing credit expansion or inflation and another in a country on a gold standard and non fractional reserve banks. Nor between a heavily regulated society and an unregulated one.
The economy and thus trade are part of a system. You can't just take one part of the system in isolation. Adding restrictions on imports or lowering the value of the dollar will help American manufacturing, just as methadone will remove the withdrawl symptoms of heroin. If the philosophy is too strict a rendering of "live free or die", then libertarians ought to commit suicide since they won't be living in a free world no more than businessmen will have to face unfettered but fair competition anytime soon.
But when you aren't going to have things magically fixed tomorrow, what do you do? Pretend and act like they will? Or try to minimize the harm?
Published: March 13, 2006 3:58 PM
It seems the PCR types are simply hyper-utilitarian. In other words, if under a purely free market system anybody is made worse off then the system is to be condemned and replaced my nationalistic merchantilist policies. The net result of this is that the patient is killed by the medicine.
Published: March 13, 2006 4:34 PM
Tz,
Is there a particular point you're trying to make? Do you think the US should increase it's restrictions on trade, or decrease them?
libertarian approach ought not be to remove the crutch but leave the legs broken.
Are you saying that we should continue to use violent aggression to prevent voluntary trades from occuring? That "crutch" is always being paid for by the taxpayers -- one way or another, by inflation, taxation, or debt (which must be paid for eventually by future inflation or taxation) -- so such a crutch is by definition immoral.
I think it's absurd to say that trade between two individuals isn't free if they're from different countries with different currencies, where one currency (say the currency of the person paying money) is decreasing. The party who sells that person a good from a foreign country is voluntarily choosing to accept the trade, and thus that risk (he may also very well demand a premium for it). The trade itself was voluntary. Neither party in this trade initiated aggression against the other to force the trade to happen. What isn't voluntary is the State inflating the money supply, thus impoverishing current owners of wealth in favor of those who get new money first.
Published: March 13, 2006 4:44 PM
David,
On the face of it, your statement “Free trade cannot make any particular person poorer than he otherwise would be, at least not if we think of free trade in the conventional sense ...� is not strictly true as you will probably agree. Some individuals such as domestic manufacturers do benefit from trade barriers, and so they would therefore be hurt by the removal of those trade barriers. I think you meant that the advantage they gain by the trade restrictions are not justified because they are wrongly benefiting from a wealth transfer brought on by coercive state intervention in the market, and so they are unfairly subsidized by the general consumer in the first place.
And if that's what you meant, then i'm with you all the way!
Published: March 13, 2006 5:00 PM
Prisoners using Monopoly money issued by their captors to exchange goods -- cigarettes, candy bars, magazines, etc. -- do so voluntarily. Globalize this process, and you have "free trade."
Published: March 13, 2006 5:19 PM
Ok, First of all, I've read Hoppe's "god that failed" and I like most of it. However, Hoppe, like many non-libertarian conservatives, believes that people should stay put! make goods on their own property but do not venture abroad. Do we have a right not ever see "foreigners" in the street?
Well, some people sell goods and others sell services.
If I don't want to produce widgets at the wadges paid by a neighbor, he should be able to bring help in from wherever there are people willing to produce widgets. and if the migrant worker goes to a store to spend some of his wadges and I see him there, is this forced intergration?
Published: March 13, 2006 6:37 PM
CLC: you have to not just read it (and "like most of it"), but understand it too! Where do you get the idea that "Hoppe believes that people should stay put!"? That's nonsense.
Published: March 13, 2006 7:34 PM
tz,
You make an excellent point as regards Harry Browne's parable. Now, I'm as much an an-cap as anyone on this site. But a sorta-socialist friend of mine once made a salient point: "Yes, we can agree that the libertarian society is the best of all possible worlds. But while we are in this corporate/state dominated world, we have to fight for our rights and privileges, too!"
It reminds me of Rothbard's musings about which group is more dangerous, socialists and unionists or corporatists and elitists. Because of the greater power they wield, he said the corporatists/elitists were the greater threat to individual liberty. Of course, if either group takes over the reins of government, watch out!
Currently, the welfare state and the warfare state are too intertwined for there to be much way to distinguish their constituent parts. Still, if you've got to start somewhere, I would at least have the State stop killing people outright. Then we can work on it not taxing and regulating them to death!
Truth is, you can have both, and it will all likely happen at once. Kind of like the Soviet Union.
Published: March 13, 2006 7:40 PM
Ok, here's one "deviation from laissez-faire": if Americans can steal from foreigners, that's not liberty, but would make Americans richer - at least for the moment.
Likewise, reducing taxes in America makes foreign dictators poorer, as there will be less foreign aid available.
Of course, the famous lesson in, "Economics in one Lesson" would say we need to look at the affects of this theft over all groups and all time before we can make a valid conclusion. And if we steal from foreigners, they won't be very good trade partners in the future, and will probably end up stealing from us. So, even the above is probably not a counter example. But isn't this what most empire builders would give as an argument for using force? Isn't this what the misadventure in Iraq is all about - stealing oil to enrich Americans?
Published: March 13, 2006 9:21 PM
Person:
The immigration topic is different from the free trade argument.
Have you ever heard of the term division of labor or comparative advantage? That is the premise of trade. I find it hard to believe you don't accept those principles because you are on this website.
Voluntary trade will always make both parties better off. In the world we live in, there are many distortions, but we should always try to make trade to better mimic the free market, i.e. less regulation.
In an article I read here earlier, someone opined that if you take protectionism to it's logical conclusion, should you ban trade with other countries? then states? then neighborhoods? Employment would definitely rise, as we all know there was no unemployment in the soviet union, but the standards of living would drop. It is better to lose your job, increase your marginal factor productivity in some other employers eyes, and make a higher wage. The more we trade, the better the standard of living for both trading partners.
Published: March 14, 2006 12:56 AM
I see no parallel at all between Hoppe's immigration discussion and the free trade question. The immigration argument is simple - in a free world, all property is owned. It is not about some idea that "we don't want them here" but rather that they have to go somewhere - to some owned property. This requires the permission of the owner. I'll grant that the extension to the present society is controversial. However, this has no effect on free trade questions. Hoppe will readily grant that if I want the immigrant on my land, and he wants to go there, there is no problem. Same for stuff I buy.
Published: March 14, 2006 3:32 AM
Andy, please. You don't need to convince me of the benefits of free trade and division of labor. I'm pointing out inconsistencies in Hoppe's treatment of the topic and immigration. Are you familiar with this? On immigration, he agrees that it, like free trade, extends division of labor, and enhances material well-being. But he also says that that does not suffice as a reason to support it, because people may prefer a more culturally homogeneous place to live, even if it means a lower material standard of living. That's how human action works; people consider more than just how many widgets they can buy.
The problem I'm trying to point out here, since it has eluded you several times, is that you can say the exact same thing about free trade. Sure, it makes me materially better off, but what if I *want* a lower a standard of living, if it means my dad gets to still be a farmer (i.e., isn't put out of business by cheap imports)? As private communities could discriminate againt immigrants, and enforce covenants against them, so could private communities enforce covenants against imports. Therefore, any argument for immigration restriction now (in a world tainted with intervention) would apply as an argument for trade restriction now.
Do you get it now? Does anyone get my point?
Published: March 14, 2006 8:12 AM
Of course some people will be worse off under a policy of free trade.
Protectionism is just another redistibutive policy. It takes from one part of the population - those who buy imported goods, and gives to another - manufacturers & their employees. Obviously this group would be worse off under a free-trade policy.
In this case, as with many others, the cost of the protectionist policy is borne by a large number of people, each paying a "small" cost. The benefits accrue to a small number of people, each reaping a "large" benefit. Politics being what it is, those with a lot to loose tend to be far more vocal about the subject.
Is a whole country better off overall under a free-trade policy? Austrian principles say that you can't add the subjective preferences of different people to get a "total", so Austrian economics probably can't give an answer. It's a utiliarian question. Austrian economics can only point out that such policies distort the incentives people face away from actual productive means of attaining goals, towards use of the political means.
Published: March 14, 2006 8:27 AM
A community, by the unanimous consent and contract of its members, may bar immigrants and imports coming onto the member's property. This is no different than an individual choosing to do so or choosing not to do so. However, this community cannot enforce this contract on those who not parties to the contract.
Is there a libertarian case against free trade? In the sense that force must be used to bar it, then the answer is no. However, if unanimous consent can be obtained to forbid it, then it may be barred.
Published: March 14, 2006 9:00 AM
Is there a libertarian case against free trade? In the sense that force must be used to bar it, then the answer is no. However, if unanimous consent can be obtained to forbid it, then it may be barred.
So, take whatever argument Hoppe uses to justify immigration restriction as an "approximation" to the natural order, and apply it to free trade, then bam, libertarian case against free trade.
Published: March 14, 2006 9:23 AM
Person,
I really don't care what Hoppe's position is or is not. A libertarian may not initiate force against others. The stopping of free trade must be voluntary in order to satisfy the libertarian ideal.
Published: March 14, 2006 9:38 AM
"However, if unanimous consent can be obtained to forbid it, then it may be barred."
If nobody wants to do it in the first place, it won't happen. If someone withdraws their consent, then barring it becomes unjustified. There is not, and can never be, a consistent libertarian argument against free trade.
Published: March 14, 2006 9:41 AM
Yancey:
I really don't care what Hoppe's position is or is not.
Okay. I'm just saying how, based on the work of a leading libertarian philosopher, you could make a case against free trade on libertarian grounds.
Ryan:
If nobody wants to do it in the first place, it won't happen. If someone withdraws their consent, then barring it becomes unjustified.
Are you saying the only acceptable covenenantal or property rules are those from which an individual can unilaterally withdraw consent without consequence?
Published: March 14, 2006 9:45 AM
Simon,
Your statement is true:
“Is a whole country better off overall under a free-trade policy? Austrian principles say that you can't add the subjective preferences of different people to get a "total", so Austrian economics probably [definitely] can't give an answer.�
However, under free-trade, economists can say everyone benefits and no one is harmed. And this is something that economists cannot say when the coercion of market intervention is involved. Under free-trade there is necessarily a net social gain; under the hampered market, there may not be.
Published: March 14, 2006 10:29 AM
Person is not arguing against free trade. I think he is a free trade proponent. He is, however, against restricted immigration.
I think he is arguing the point that Hoppe observes in his introduction to “THE CASE FOR FREE TRADE AND RESTRICTED IMMIGRATION�:
“It is frequently maintained that “free trade� belongs to “free immigration� as “protectionism� does to “restricted immigration.� That is, the claim is made that while it is not impossible that someone might combine protectionism with free immigration, or free trade with restricted immigration, these positions are intellectually inconsistent, and thus erroneous. Hence, insofar as people seek to avoid errors, they should be the exception rather than the rule. The facts, to the extent that they have a bearing on the issue, appear to be consistent with this claim. As the 1996 Republican presidential primaries indicated, for instance, most professed free traders are advocates of relatively (even if not totally) free and non-discriminatory immigration policies, while most protectionists are proponents of highly restrictive and selective immigration policies.�
Published: March 14, 2006 10:42 AM
A rising tide no longer raises all boats. Saw a graph that plotted personal income and wages. Income is rising and wages are falling. How can that be? Because the rich people don't work for wages.
I havn't worked in 10 years but my income is rising bcause I have a good pension. The rest of you? Do you who work for a fixed wage find that wages are rising? Net take home?
Published: March 14, 2006 10:45 AM
Ryan,
Insofar as the withdrawer is willing to pay the penalties of breaking his contract, then you are correct- the free trade barriers are no longer valid for that person.
Published: March 14, 2006 11:01 AM
billwald :
I don't think it's even possible to determine an answer to your question, because the only yardstick for measurement is dollars. And they are not constant in any measure.
Also, nearly all such statistics are created by government bureaucrats, so the s/n ratio would seem to be so low as to make a judgement impossible. However, politicians are able to make what they like from them and that seems to me to be their purpose e.g. the notion of core inflation items - chosen by whomever it benefits at the moment.
And one thing seems certain, you can buy a heck of a lot better stuff for less today (e.g. computers, autos, even cheap 99c store stuff ain't all bad). So, in this sense, the tide has risen my boat as I can buy more for less work.
Published: March 14, 2006 2:20 PM
Does anyone get my point?
Person, I got your point days ago, and I fully agree with you.
Published: March 14, 2006 2:26 PM
Er... make that hours ago. Many hours ago.
Published: March 14, 2006 3:08 PM
Roy: causal posts only, please. ;-)
Published: March 14, 2006 6:51 PM
Wow. A lot of ludicrous economic fallacies in this thread.
I'll just tackle one, hoping that one insight will lead to a general understanding.
tz's analogy with the broken leg and the crutch implies some kind of race which ought to be 'fair'. Ludicrous. Life isn't fair, mate. The inequality of our existences and abilities is the whole point of trade. For the question of allowing free trade, the question of how those inequalities came into being matters not. Regardless if the government broke your leg or you were born a cripple or it was broken by mobsters is besides the point: free trade benefits even those poorly abled (law of comparative advantage anyone?).
The broken leg, the culprit, the crutch, and the trade restriction are all separate issues. It doesn't matter economically if one led to the other politically.
The same thing can be said for half the posts on this thread. Slave labour, currency fanagling, protectionism, etc. They're all separate issues. No amount of manipulation justifies more of it. You can't correct market distortions with other market distortions.
Haven't you learned anything from this web site?!
Published: March 14, 2006 8:22 PM
As for the original article, no specific grievance (economic phenomenon) can be addressed a priori, but nothing can be understood empirically without prior deductive reasoning, either.
Various plausible hypotheses can be constructed with this reasoning, then the factors can be attributed to one or the other cause. Most of the problems I see today are due to how central banks support the global clearinghouse currency (USD) to fuel their exports. In other words, the world is financing the US spending binge. Although some see this as enriching some countries at the expense of others, in reality these inflationary policies, in concert, are bankrupting everyone who plays this crazy game.
We could easily insulate ourselves from these poor consequences with real money. Free trade (or trade as we know it) isn't the problem, and neither are the economic policies of foreign nations. The problem is the currency we use.
Published: March 14, 2006 8:38 PM
Person,
I think you do a marvellous job here of tirelessly pointing out the errors in the work of Hoppe. That this master of the non sequitur has managed to pass off such a bunch of nonsense as brilliant libertarian thinking over the years is quite staggering. Your debunking of his ouvre and your coruscating wit while you do it are widely appreciated by many of us who lurk. Don't lose heart.
Published: March 15, 2006 5:43 AM
No exchange is voluntary if I can't choose from all the alternatives, or if those alternatives are worse because of intervention. Unless you consider taxes voluntary if you can choose if they should be on your income or on your spending.
Are you saying that we should continue to use violent aggression to prevent voluntary trades from occuring?
Only in the sense that we are already preventing most voluntary trades from occuring (I can't choose to employ children, or buy from someone in this country that is outside of OSHA or EPA control). The choice I'm left with now is to buy from a domestic government-crippled industry that is given a crutch or two that isn't very efficient so produces expensive merchandise, v.s. a heavily subsidized (directly and via credit expansion, and theft of land from farmers, etc.) foreign industry. The rational choice destroys the domestic industry.
Also as Mises points out, in the bust that follows a boom, a perfectly viable business will also collapse because their credit disappears even if they didn't exist only because of the boom - IBM is hurt by the dot-com bust, homebuilders will be hurt when the real-estate bubble collapses.
While our economy is on credit cocaine, and borderline overdosing, we can try to prevent worse damage - we feel so good we think we can jump off a cliff, or give away our house and car as we will win at the lotto or gambling, etc. But maybe we should try to prevent some of the most maiming or fatal effects of the pecuniary psychosis. If that means using force to mitigate misused force - yes. I would fight fire with water, but sometimes you aren't allowed water so you must fight fire with fire or not at all.
Let the crippled industries held hostage by the state die of torture at their hands, or give in a little to the cruel agents so the cripple might recover one day. It is a horrible choice, yet it is also a choice.
Here is a good article on China and the distortions there:
http://www.investorsinsight.com/otb_va_print.aspx?EditionID=292
Now I need to go see if V for Vendetta is playing at midnight anywhere locally.
Published: March 16, 2006 5:38 PM
I read your article (in Lew Rockwell's blog today)with interest, Bob, but I may have inadvertently skipped the part where you explained the big picture, i.e. the forest rather than the trees: At the end of the twentieth century the inhabitants of the USA were, in large part, enjoying a very high standard of living compared to those in China and India - a very large disparity, indeed! So, what happens when those vast hordes in China and India begin to compete with the much higher paid people in the USA? What else but a leveling of the standard of living?
Published: March 16, 2006 7:08 PM
George,
To get an answer to “So, what happens when those vast hordes in China and India begin to compete with the much higher paid people in the USA? What else but a leveling of the standard of living?� I’d recommend reading Robert’s other article “Who Benefits From Free Trade, and How� that he links to in the above article which is here: http://www.mises.org/story/1429
Also, adding my own two cents worth, it is crucial to understand precisely what it is that provides one nation with a higher standard of living than what another nation enjoys. The answer is not protectionism, despite what we are often told. The only thing that raises living standards is increased labor productivity. Increased labor productivity is a result of savings and consequent investment in labor enhancing tools of production: capital. If Americans are paid a higher wage it is because they are more productive. If they are more productive it is because someone saved and invested in capital in the past.
Therefore, do not look toward protectionism: tariffs, import quotas, and restrictions on outsourcing to improve the lot of Americans. Look instead towards less state intervention in the American economy, lower taxation, less regulation, less hampering of the market by the state in general, to improve living standards. By such policies, resources are freed up and instead of being wasted on consumption spending by the state, individuals can save and invest them in capital. Individuals with the state off their backs are more inclined and more able to direct wealth back into capital, and therefore in the long run, increase both labor’s productivity and labor’s living standards.
Published: March 16, 2006 11:48 PM
Radical Sceptic: Thanks a lot. I enjoy knowing that my posts are being appreciated. I actually don't harbor any particular grudge against Hoppe; I just find the arguments I discuss here to be in serious error. And of course feel free to mock the pro-trade/anti-immigration argument with my "you poor thing"/"suck it up" sketch. Although I'm sure British English users might use different terms. :-)
Published: March 17, 2006 10:37 AM
Paul, from Robert's other article: "To understand what would prevent the outsourcing at some point, keep in mind that 'cheap' foreign labor would no longer be so cheap after nominal wages changed..." but then he errs by stating: "Yes, the actual dollar amount of the average American's salary might be lower, but his standard of living would be higher because of all the new, cheap imports due to outsourcing." But, if wages level, then standards of living would also level because those imports would no longer be 'cheap.'
Published: March 17, 2006 3:54 PM
Hi George,
All other things remaining equal, i think you're right that there would come a time when the standard of living of the American would not continue to climb as quickly as it would during the initial stages after the introduction of complete free trade, however in comparison to standards of living in the US under trade restrictions such as we have right now, we would necessarily see an overall increase in the American standard of living due to the mentioned increase in productivity and lowered costs.
I also noticed today that Reisman's article dovetails somewhat to our discussion when he mentions that when someone can do the same job as you for less, it frees you to fulfill other needs in the market which increases overall production and therefore wealth and living standards. I thing you'll like the article it is "Production versus Consumption".
Published: March 17, 2006 4:55 PM
Contrary to your opinion, I think that only when the disparity levels off will the American standard of living stop decreasing.
Published: March 17, 2006 8:31 PM
You are suggesting that increasing people’s liberty to trade with whomever they wish will lead to a decrease in their living standards. The corollary to this is that restricting trade further could potentially increase living standards further. On that basis, try this little experiment in your mind. Extend this principle you are advocating to the borders of each state of these United States. Then extend the principle to the borders of counties, then cities, then neighborhoods, and then finally households. Disallow all trade. If on each increase in the restriction of trade you can see how this would necessarily improve the nation's overall living standard, then lay it out for me and we can discuss it. If you suspect it would have the opposite affect, then international trade is simply the same principle on a grander scale. It must also increase our wealth and living standards.
The benefits of trade do not respect geographic, language, cultural or skin color differences. If free trade improves overall social welfare at all, it does so always in all conditions.
Published: March 18, 2006 2:17 AM
“You are suggesting that increasing people’s liberty to trade with whomever they wish will lead to a decrease in their living standards.� I have not suggested that at all. “If free trade improves overall social welfare at all, it does so always in all conditions.� Since the condition in question is not listed in your scenario, I’ll repeat it: At the end of the twentieth century the inhabitants of the USA were, in large part, enjoying a very high standard of living compared to those in China and India - a very large disparity, indeed! So, what happens when those vast hordes in China and India begin to compete with the much higher paid people in the USA? If wages level, then standards of living would also level because imports would no longer be 'cheap.’ When the standards of living reach parity, then the American standard of living will stop decreasing.
Published: March 18, 2006 3:29 AM
See the exchange below this article.
Published: March 24, 2006 1:20 AM
My libertarian anti-WalMart comment goes into some of this.
http://blog.mises.org/archives/004822.asp#comments
Thieves can have a very high standard of living. If ours depends on stealing the savings of the chinese through inflation, on stealing their property's worth through allowing pollution without recourse, and with actual theft of farmland from farmers to build factories cheaply, then either "free trade" includes the ability to buy and sell stolen merchandise yet have good title, or we are not the beneficiaries of better production, but a better fencing operation for stolen merchandise.
Put differently, If we invaded China with our army, imposed a poll tax (inflation), kicked out farmers to build bases, and generally burned and pillaged and wasted the countryside, then transfered the wealth here, the words used to describe such an act would not be approving. Yet when done in the economic sphere, they are not merely excused but lauded.
Published: March 24, 2006 9:19 AM
TZ,When discussing what I consider to be the oncoming economic depression in the USA caused by the rapid entry of China & India to full-scale industrialization, I'm not considering value judgments such as whether or not a standard of living is the result of any violation of the priciples of free trade.
I think that if one takes conditions as they presently are, then it is apparent that the timelines will proceed thusly: 1) For three reasons (vast populations, very low standards of living, & rapid industrialization) the very low prices of goods and services from China & India will incrementally increase, along with their standards of living, but only at a very slow rate. 2) For two reasons (comparatively small population & very high standard of living) USA wages, and hence the standard of living, will incrementally decrease at a very fast rate.
Although the point at which the two timelines reach parity is not magical, it is, I think, a convenient place to consider that at parity the USA standard of living might start to increase. My guess is that the duration of this depression will be at least several years.
Published: March 24, 2006 3:53 PM
Soviet Russia rapidly industrialized in the 1920s and 30s - consider the Lenin Steel works. China has had a vast population forever. If you don't think about WW1 or WW2, the 20th century would have been very different, but in 1900-1910 no one was thinking the unthinkable. Yes, a depression, but chaos will destroy the predictability. Japan was supposed to crash, but they muddled through. A new "black death" can change quite a few things.
Whom the gods would destroy they first make them think they can predict the future (usually "it's different this time"). That goes for contrarians too - the world can stay irrational longer than you can stay alive.
Published: March 24, 2006 9:18 PM
tz --
Soviet Russia rapidly industrialized in the 1920s and 30s - consider the Lenin Steel works.
It would've been fully industrialized before 30s if not for the revolution -- the process was already in full swing before 1914, and by that time already created the class of industrial workers who became the recruitment base for the bol'sheviks. (Peasants were strongly anti-communist, and paid for that dearly during the collectivization of farms).
Actually, there's one thing we can predict with near certainity - the stupidity of the "masses" which will be led by some crooks to self-destruction.
Published: March 24, 2006 11:05 PM
tz & averros, acually I'm not trying to make a prediction, but rather to elaborate on a particular condition. This has led me to realize that the free market credo, "everyone benefits," is not applicable in all free market conditions.
Published: March 25, 2006 1:53 AM
Robert:
Just for the record, a case can be made against free trade, though not one based on libertarian principles.
At the heart of the case against free trade is a single question: what is a man? More specifically: what is it about men, about us, about human creatures, that is most important?
You say that the most important consideration about us is our rationality, which means: given a choice between A (less) or B (more) we choose B. This in your opinion has vast and on the whole beneficial consequences under the right circumstances.
The case against free trade (and against the libertarian project in general) turns on a different vision of man, a different imago homini. Not to mince words or resort to euphemisms, this different vision looks at men from the perspective of evolution, and draws a different conclusion. We are primates, it says, with three requirements. (1) We have to form ourselves into groups of “them and us.� (2) Once we have formed ourselves in groups of “them and us,�, we have to compete against other groups for resources, and (3) we have to compete within our own group for altitude, i.e. prestige, confidence --- in the end (this being a vision based on evolution) more or higher quality sexual partners.
In order to think about implications of these two different visions, go to a small town somewhere in America about to receive its first Walmart --- sometime in the not too distant past.
You see the coming of Walmart as good. Its arrival gives people the chance to choose B instead of A (more instead of less) and thereby free up resources for other goals, wants and purposes.
I see its arrival as bad, as disruptive. The town pre-Walmart is coalesced into groups of “them and us.� One such group consists of local merchants with retail stores. These merchants have independence, prestige, confidence and authority. They are in a position to be a civilizing force within the community. They may not be, but if there is going to be a force for civilization they are it. (To keep matters simple, think of civilization in terms of Hayek’s four creations of human action but not of human design: language, morals, money and law.)
The job of civilization requires wisdom (needed to handle the endless problems involved with maintaining the traditions of civilization through the generations). Plus also of course wisdom is needed in knowing how to steer a course between freedom and license, preservation and innovation, duty to oneself and duty to others, to the community, etc.
Wisdom takes time to acquire both for the individual and the community. Where there is economic efficiency, elites come under pressure and lose something crucial --- their leisure. Without leisure, they lack the time and space needed to acquire wisdom, and without wisdom, they cannot maintain the traditions of civilization. Soon the community is barbaric (i.e., running on raw, unchanneled instinct, e.g., sex without romance, power without vision....).
So, what happens after when Sam Walton comes to town and sets up his operation?
People have cheaper lawn mowers but the independence of the local elite is destroyed. An elite of sorts is still around post-Walmart but one with no leisure and hence no wisdom. A vacuum emerges into which moves “the coldest of cold monsters,� the state.
Why?
The only real constraint on the state comes from people linked together in non-state structures with independent sources of power, prestige, confidence and authority. Destroy these independent structures and you destroy the bars of the cage that keep the monster locked up, no matter how many constitutional provisions you enact. (In fact, a constitution without independent sources of power and authority is soon turned into a weapon of the state, as has happened to ours here in the USA).
Your libertarian philosophy, if it has any influence at all, goes in the direction of helping the interests of the state, which is why in places where there has been for a while something resembling a free market there is soon a vast and ugly state.
Published: March 25, 2006 3:45 PM
Paul Johnson --
Your libertarian philosophy, if it has any influence at all, goes in the direction of helping the interests of the state, which is why in places where there has been for a while something resembling a free market there is soon a vast and ugly state.
And just because the State is sticking its fingers wherever it can we should welcome the same State forcing people not to do better than others? Quite reasonable, yeah, sure.
Sorry. Sam Walton is one of the true elite - a person who can and do something new and better than others could.
A company of small-town merchants is not an elite, no matter how you slice it. They lack both originality and ability to do better than others (of course, they're better than the proletariat and bums, but not by far).
Now, what your course of action advocates is strangling the true elite (the ones which could eventually gather enough force to get rid of the State) in order to benefit mediocrity, which is only capable of bleating when the state comes to "fill the vacuum". And, because members of the true elite really want to make things happen - only a credible threat of violence (or even only actual violence) is going to stop them.
It is not like those "local elites" are crowded out by the State because their more efficient competitors disposess them - these sheep are welcoming the State to come and shield them from the competition from the people who are better than they are. So the elite sheepie bleat for someone to do some stick-waving and door-bashing for them.
No matter which angle one chooses to look at a modern social-democrat, one cannot help but to behold a bol'shevik. An advocate of habitual violence as a solution for jealousy.
And, no, all that ethological detour about the ways apes form bands is not relevant; people are a lot more than apes. The fact that apes live like that and that biologically people are close relatives to apes - does not means that it is the best way for people to live.
It is like pointing to a tribe of Bushmen and stating that this is what a civilization is meant to be.
But, on the second thought, a honest democrat may indeed consider back-to-caves to be desireable. A lot of New Agey types certainly do so.
Published: March 25, 2006 5:49 PM
The reason for the USA trade deficit is insufficient production of wealth here as a direct result of outsourcing. Now, when one of the foriegn central banks decides to start replacing it's accumulation of US$, then other central banks may follow suit; resulting in a severe USA economic inflation and/or depression. This will probably be explained by most free-market theorists as an "economic correction" rather than as a particular economic condition not outlined in any free-market textbook.
Published: March 28, 2006 7:14 PM
China poised to pass U.S. in manufactured goods exports [excerpt]
China exported $713 billion worth of manufactured goods in 2005, a catalog that predictably included such low-tech products as footwear and textiles and apparel, but more importantly also featured higher-tech goods such as office equipment and telecommunications equipment. Indeed, among China's six largest manufacturing export sectors in 2005, export growth among higher-tech goods -- which included electrical machinery, non-electronics machinery and chemicals in addition to office and telecommunications equipment - -was greater in percentage terms than for textiles and apparel. Exports of textiles and apparel grew 21% to $115.3 billion while export growth ranged from 26% to 29% among higher-tech goods; exports of higher-tech goods totaled $360 billion. The picture that emerges is a global competition in trade in manufactures dominated by the EU, China, and the U.S., with Japan in a strong fourth position, followed by South Korea, and with [these] 'big five' together accounting for two-thirds of global exports of manufactures. - Industry Week
Published: March 30, 2006 12:48 PM
You argue that the recent slump in manufacturing is largely due to a "drop in domestic demand because of the recession." Is this recession the result of inflating the supply of fiat currency? If so, is a fiat currency that is easily inflatable really good? (You argued in "Trade Deficits and Fiat Currencies" that depreciation of the dollar is good because it cheats China on their investment in US bonds.)
You argue that "cheap imports and outsourcing are" not "destroying US jobs, so much as…a drop in foreign demand is hurting US exporters." Is a drop in foreign demand the result of China buying our debt to keep the dollar strong in the global economy? (You argue in "The Alleged China Threat" that China trades Yuan for Dollar in order to keep its stockpile of Dollars artificially strong.)
Doesn't arguing against NAFTA critics as if they were arguing against genuine free trade, give NAFTA the appearance of genuine free trade?
Published: June 8, 2007 9:59 PM