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Advancing Austrian Economics, Liberty, and Peace

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Making Economic Sense
by Murray Rothbard
(Contents by Publication Date)

Chapter 86
"Free Trade" in Perspective

There is no time like a presidential election year for truth to become buried under an avalanche of mendacious propaganda. No sooner did Patrick J. Buchanan enter the presidential race when the Bush Administration, aided by its battalion of apologists in the media, attacked Buchanan as a "protectionist" violating the Bushian devotion to "free trade."

Indeed, the esoterics of international trade have not played such a visible role in national elections for many decades, perhaps since the 19th century. The very idea of Bush Administration dedication to free trade is patently laughable, its absurdity punctuated by the president's Asian trip in tandem with the highly-paid, grossly inefficient, professional Japan-basher Lee Iacocca.

For years, in fact, the administration has been doing its best to keep Japan from selling us high-quality, moderately priced cars, while also trying to force the hapless Japanese to purchase overpriced American lemons that they don't want to buy. This is "free trade"--now rechristened by President Bush "free and fair trade"? Indeed, the entire emphasis on trade deficits between two countries is a nightmarish fallacy already discarded by the sophisticated mercantilists of the 17th century.

In addition to this patent duplicity, however, it is generally overlooked that there is far more to freedom of trade than not obstructing it via tariffs or import quotas. More importantly, genuine freedom of trade must be, in addition, unregulated and unsubsidized. In addition to slapping on tariffs and quotas, the Bush Administration has greatly intensified the regulations on American business that prevent them from competing or producing efficiently, either at home or abroad. Not only that: these intensified regulations are always pointed to as the Administration's proudest if not only achievements: including the quota-imposing Civil Rights Act, the Clean Air Act, and the Americans with Disabilities Act.

But let us shift our focus from the Bush Administration to the neoconservative columnists who infest the media, and who claim to be dedicated enemies of protectionism and advocates of pure and unrestricted freedom of trade. Here are some of the policies about which these "free traders" habitually wax enthusiastic:

1. REGIONAL "FREE TRADE" ZONES, embodied in the U.S.-Canada treaty, and in whatever "fast-track" Mexican treaty the President may come up with. It is blithely assumed that anyone skeptical of such treaties is a blankety-blank protectionist. And yet, such regional blocs can be dangerous. An example is the European Economic Community, highly vaunted by "free traders" as a noble example of a vast regional free-trade area. And yet, the reality is just the opposite.

Externally, the EC can and does use its power to raise general tariffs with nations outside the bloc. But even internally, the result has increased trade restrictions and regulations inside the bloc. Thus, the EC has been building a burgeoning European super-government and bureaucracy in Brussels, that has often increased regulation throughout the area. One pernicious measure of the EC has been to require low-tax countries in Europe to raise their taxes so as to make sure that each country enjoys a "fair and level playing field" with the others. In the same way, minimum wage laws and other pernicious "social" measures have been imposed on relatively freer economies within the EC. Mrs. Thatcher's much-publicized opposition to Britain's entry into the EC was not simply paranoia or blind resistance to a noble "new Europe."

The same evils can befall the United States in any regional trade bloc, and giving the President a blank check to negotiate and virtually impose a treaty is hardly a favorable omen for the future.

The major point is that genuine free trade requires no negotiations, treaties, super-power creations, or presidential jetting abroad. All it requires is for the United States to cut tariffs and quotas, as well as taxes and regulations. Period. And yes,  unilaterally. No other nations or governments need get into the act.

2. FOREIGN AID. The neoconservative and Bushian "free traders" are invariably staunch supporters of massive foreign aid programs for the United States. And yet, since genuine free trade requires unsubsidized trade, these massive programs for export subsidies constitute an enormous interference with free trade that is never acknowledged, let alone defended by these alleged opponents of protectionism.

The arguments for foreign aid keep changing over the years (from "reconstructing" Europe, to stopping Communism, to developing the Third World, to humanitarian relief of famine), but throughout the various twists and turns the essence of the process remains the same: a systematic racket by which money is seized from the American taxpayers, and handed over to the following groups: (a) the U.S. government bureaucracy, for its handling fee; (2) recipient foreign governments, whose wealth and power is strengthened vis-á-vis their own hapless subjects; and (3) last and foremost, the U.S. export firms and industries upon whom the foreign governments necessarily spend their purloined dollars.

Apart from the questionable morality of looting you and me and other American taxpayers in order to subsidize U.S. export firms and their bankers, we must see the enormous distortion of trade that this system entails.

3. CARTELIZED WORLD PAPER MONEY A far greater danger to trade than a couple of tariffs is the seemingly inexorable drive of the entire Keynesian Establishment (from left-Keynesian Democrats to conservative-Keynesian Bushians to neoconservatives) for world collaboration and cartelization of central banks, moving toward what will effectively be world economic government, with a world central bank issuing world fiat paper money. This fulfillment of the long-time Keynesian dream will enable world wide inflation, engineered and controlled by a world central bank.

The European monetary unit would only be the first step in such a scheme. Once again: the distortion of trade to be imposed by world-wide control of money and banking is far more dangerous than a tariff or two, and far less easy to get rid of. 

In gauging the extent of free trade or protectionism among such presidential candidates as Pat Buchanan or President Bush or the neoconservative hero-in-waiting, Jack Kemp, we should consider that, unlike the other two, Buchanan favors the abolition of foreign aid. And while he has never pronounced on the world fiat money scheme, it is certain that as a professed "economic nationalist," he would strongly oppose that as well.

We might also consider Buchanan's reply to George Will's charge of protectionism on the Brinkley TV program: "What you have to do, George, is take off the burdens of taxes, of regulations, from American business and industry, and then the United States can start to compete." Who in the public arena is closer to free trade than that?

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