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Home | Library | The Debt We Owe to Trade

The Debt We Owe to Trade

October 11, 2008

Tags Free MarketsGlobal EconomyEntrepreneurship

It was the year 1600 and coffee had become wildly popular all over Europe, just as it had been popular all over the Muslim world since its discovery 900 years earlier. The sitting pope was Clement VIII. His advisers urged him to do something to stop the coffee mania then spreading across Christendom. He tasted the coffee, reflected on its properties, and then, to the astonishment of his advisors, blessed it as a Christian beverage.

Long live the pope!

Matters weren't so simple in the Protestant world. The beverage was still a raging controversy in parts of Germany in the 18th century, as J.S. Bach's hilarious "Coffee Cantata" demonstrates.

The story, which is apparently true from all the checking I've done, appears on page 247 of a marvelous book that covers not only the expansion of the coffee trade but all trade of all goods and services from the Stone Age to the present day, and does so in a marvelously intriguing way. The book is A Splendid Exchange: How Trade Shaped the World, by William J. Bernstein. The book is long — 494 pages — but engaging on every page.

After finishing the book, I found myself thinking about its contents constantly. Its subject is so ubiquitous that it is hardly ever closely analyzed. The time period stretches from age to age; the geography covers the planet; and the items covered include spices, coffee, silk, pigs and pork, precious metals, oil, and, really, just about everything else. Bernstein demonstrates thousands of times that the world as we know it would be unrecognizable without trade, and shows that trade has shaped who we are in ways that none of us fully recognizes. The historical detail is amazing. The writing is scholarly but clear and fascinating on every page.

Try to imagine Italian cuisine without the tomato, the highlands around Darjeeling without tea plants, an American table without wheat bread or beef, a café anywhere in the world beyond coffee's birthplace in Yemen, or German cooking without the potato.

Such was the world prior to 1492, before billions of acres of farmland were taken over with species from remote lands. It is not part of natural law. It was a result of deliberation and work. Fantastic economic and physical risks were involved. It is one of the ways in which the garden of this world has been tilled and kept by mankind, inch by square inch.

The Bernstein book helps keep all the controversy about globalization in context. There is absolutely nothing new about globalization. Nothing. The progress of "globalization" has been on its current trajectory for the whole of recorded history. This trade has made the world ever-more prosperous. And why? Because trade has permitted populations across the globe to cooperate to their mutual betterment. Without trade, the human population would shrink and most all of us would die. Even a slight curtailment of trade can bring on economic depression and dramatically shrink our standards of living.

It is one of the great failings of the human race that we tend to regard the wealth that surrounds us as a given, something that is just part of the world that will last forever and requires no work to acquire. Part of the reason we commit this error is our general tendency to contemplate only what we experience in our lifetimes. But the wealth that surrounds us is the fruit of the whole of history, the accumulated capital of the human race from all time. We are born into it; it grows while we live; and then we die. Appreciating the bigger picture entails transcending one’s own, brief interval of experience.

This is precisely what Bernstein's book does. It takes us outside the here and now and helps us understand the big picture, and he does this by looking at the details of goods traded in lands far away in all times. The book is beautifully written and wonderfully interesting on every page. I can't recommend it enough.

My only complaints are minor ones: Bernstein doesn't seem to have a solid theory of trade that goes beyond neoclassical economic conventions. Had he put one up front, he would have been able to go beyond the very good chronicle here to actually forge a solid theory of the social order itself. It is another example of how Smith's "propensity to truck and barter" has misled: instead of seeing trade as an extension of human rationality, a mutually beneficial exchange that extends from the desire to better one's lot in life, he treats the entire subject as if it were an instinct of some sort. But that is a regrettable oversight that in no way diminishes the contribution here.

Theory & History

My second complaint concerns the final chapter, which conforms to a rule often cited by the late Murray Rothbard — that all final chapters of books should just be removed. Bernstein spends the entire book showing how trade can take place without any government management, and then uses the last chapter to argue for government-managed trade in the form of the North American Free Trade Agreement and the World Trade Organization.

You just want to shout, Read your own book, Mr. Bernstein!

In general I would have appreciated a less tentative conclusion, something along the lines of pointing out that trade is what makes it possible for all great and glorious things to take shape in this world, and without which only a few people would be alive, living in caves and eating whatever they could hunt or gather.

The book is even more important than the author knows.


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