Mises Daily

A
A
Home | Library | Trade and the Rise of Freedom

Trade and the Rise of Freedom

January 31, 2000

[This speech was delivered at the Mises Institute's conference on "The History of Liberty."]

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."(1)

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 (of "time and place," as Mises
called it)
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.

Mises believed that trade or exchange is "the fundamental social relation" which "weaves
the
bond which unites men into society."(2) Man "serves in order to be served" in any trade
relationship in the
free market.(3) Mises also
distinguished between two types of social cooperation: cooperation by virtue of
private contract and coordination, and cooperation by virtue of command and subordination or
"hegemony."(4) The former
type of coordination is symmetrical and mutually advantageous, whereas the
latter is asymmetrical -- there is a commander and a commandee, and the commandees are mere
pawns in
the actions of the commanders. When people become the mere pawns of their rulers they cannot
be said
to be free. This, of course, is the kind of "cooperation" that exists at the hands of the state.

Western civilization -- like other advanced civilizations -- is the result of "achievements of
men
who have cooperated according to the pattern of contractual
coordination."(5) The
contractual state is
guided by such concepts as natural rights to life, liberty, and property and government under the
rule of
law. In contrast, the "hegemonic society" is a society that does not respect natural rights or the
rule of
law. All that matters are the rules, directives, and regulations issued by dictators, whether they
are called
"kings" or "congressmen." These directives may change daily, and the wards of the state must
obey. As
Mises wrote: "The wards have one freedom only: to obey without asking
questions."(6)

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, as much
as
anyone, 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. And nothing is more destructive of human freedom than war.
War
always leads to a permanent enlargement of the state -- and a reduction in human freedom --
regardless of
who wins. On the eve of the French Revolution many philosophers believed that democracy
would put an
end to war, for wars were thought to be fought merely to aggrandize and enrich the rulers of
Europe. The
substitution of representative government for royal despotism was supposed to end warfare once
and for
all, for the people are not concerned about territorial acquisition through conquest. The French
quickly
proved this theory wrong, however, for under the leadership of Napoleon they "adopted the most
ruthless
methods of boundless expansion and annexation . . . ."(7)

Thus, it 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. For in a world of trade and social cooperation, there are no incentives
for war
and conquest. It is government interference with free trade that is the source of international
conflict.
Indeed, naval blockades that restrict trade are the ultimate act of war, and have been for
centuries.
Throughout history, restrictions on trade have proven to be impoverishing and have instigated
acts of war
motivated by territorial acquisition and plunder as alternatives to peaceful exchange as the
means of
enhancing living standards.

It is no mere coincidence that the 1999 meeting of the World Trade Organization -- a
cabal of
bureaucrats, politicians, and lobbyists which favors government-controlled trade -- was marked by
a week-long riot, protests, and violence. Whenever trade is politicized the result is inevitably
conflict that quite
often leads, eventually, to military aggression.

Mises summarized the relationship between free trade and peace most eloquently when he
noted:

What distinguishes man from animals is the insight into the advantages that can be derived from cooperation under the division of labor. Man curbs his innate instinct of aggression in order to cooperate with other human beings. The more he wants to improve his material well-being, the more he must expand the system of the division of labor. Concomitantly he must more and more restrict the sphere in which he resorts to military action. ...Such is the laissez-faire philosophy of Manchester.(8)

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."(9) Paine -- the philosopher of the American
Revolution -- believed
that free trade would "temper the human mind," help people to "know and understand each
other," and
have a "civilizing effect" on everyone involved in it.(10) 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."(11)

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.(12)
Our commercial policy "should hold an equal and impartial and; 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 . . ."(13)

THE ETERNAL STRUGGLE BETWEEN FREEDOM AND MERCANTILISM

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.(14)

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. As Rothbard has written:

Mercantilism, which reached its height in the Europe of the seventeenth and eighteenth centuries, was a system of statism which employed economic fallacy to build up a structure of imperial state power, as well as special subsidy and monopolistic privilege to individuals or groups favored by the state. Thus, mercantilism held that exports should be encouraged by the government and imports discouraged.(15)

Classical liberals waged an ideological war against mercantilism during the eighteenth and
nineteenth centuries, and scored some major victories for freedom. The French "physiocrats," led
by Dr.
Francois Quesnay, a physician who got interested in economic topics (at a time when "physicians"
bled
their patients with leeches and "surgery" meant the amputation of limbs). The physiocrats were
quite
influential from the 1750s to the 1770s and were among the first laissez faire
thinkers who
contemptuously denigrated mercantilist propaganda and called for complete freedom of domestic
and
international trade. Their position was based on sound economics as well as Lockean notions of
natural
rights. Quesnay wrote that "Every man has a natural right to the free exercize of his faculties
provided he
does not employ them to the injury of himself or others."(16)

When he became Finance Minister of France in 1774, Anne Robert Jacques Turgot, a
precursor
of the Austrian School, decreed freedom of import and export of grain as his first official act.

At around the same time, Adam Smith 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), whereas if he is caught by the government and prosecuted, his
capital is
"absorbed either in the revenue of the state or in that of the revenue-officer," which is an
"unproductive"
use "to the diminution of the general capital of the society. . . "(17)

The Manchester School

Despite powerful arguments in favor of free trade offered by
Quesnay, 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
.(18)

The Irish potato famine of 1845 created great pressures for repeal of the Corn Laws,
which was
finally achieved on June 25, 1846. The elimination of all other import duties followed, and a
70-year
period of British free trade began. Richard Cobden was also influential in pushing through the
Anglo-French treaty of 1860, which lowered French tariffs and helped put that country on the
road to freer trade.

The Great Bastiat

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
pubic 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."(19)

The Struggle Against Mercantilism in
America

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.(20)

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 and
effective
instrument, but that any state is at liberty by the spirit of that contract to withdraw itself from the
union."(21)

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.

There has always been a collection of men in America who wanted to bring the British
mercantilist system here precisely because it was so destructive of freedom. That is, they figured
to be the
"commanders" of the system and its chief beneficiaries. As John Taylor of Caroline observed,
these men
"included Hamilton and the Federalists and later, the politicians of the Era of Good Feelings in
the 1820s
who eventually became Whigs."(22) These men "sought to bring the British system
to America, along with
its national debt, political corruption, and Court party . . ."(23)

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."(24) He wrote of the "indissoluble conexions"
between both "the
freedom of industry and national prosperity" and also "between national distress and protecting
duties,
bounties, exclusive privileges, and heavy taxation."(25) The former produces national happiness,
whereas
the latter produces national misery, according to Taylor. In pointing out the folly of economic
autarky
Taylor asked:

Will Alabama want nothing but cotton, should that State select this species of labour for its staple? Can she eat, drink, and ride her cotton? Can she manufacture it into tools, cheese, fish, rum, wine, sugar, and tea? ...Is not Georgia a market for manufacturers, and Rhode-Island a market for cotton, in consequence of the division of labor?(26)

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 Abominations," 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.(27)

The Whig party died in 1852, but the Whigs simply began calling themselves
Republicans. 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.(28) 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. Unlike Andrew Jackson, he would not back down
to the
South Carolinian tariff nullifiers.

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.

In the nineteenth century newspapers were formally associated with one political party or
another, and many of the Republican party newspapers in 1860 were openly calling for a military
invasion
of Southern ports to keep the South from adopting free trade, which was written into the
Confederate
Constitution of 1861. On March 12, 1861, for example, the New York Post
advocated that the U.S. Navy
"abolish all ports of entry" in the South.(29) On April 2, 1861 the Newark (NJ)
Daily Advertiser
warned
ominously that Southerners had "apparently taken to their bosoms the liberal and popular
doctrine of free
trade" and that free trade "must operate to the serious disadvantage of the North" as "commerce
will be
largely diverted to Southern cities." The "chief instigator" of "the present troubles," South
Carolina, has
all along been "preparing the way for the adoption of free trade" and must be stopped by "the
closing of
the ports" by military force.(30)

As mentioned above, by 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."(31) 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.(32) 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.(33) 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.

CONCLUSIONS

Since the seventeenth century all the great classical liberals have defended free trade and
opposed
trade restrictions. Trade restrictions are an attack on the institution of private property, interfere
with the
international division of labor that is the source of our prosperity, and are nothing less than an
act of theft.
As Murray Rothbard remarked:

"The impetus for protectionism comes not from preposterous theories, but from the quest for coerced special privilege and restraint of trade at the expense of efficient competitors and consumers. In the host of special interests using the political process to repress and loot the rest of us, the protectionists are among the most venerable. It is high time that we get them, once and for all, off our backs, and treat them with the righteous indignation they so richly deserve."

(34)

---------------

Thomas DiLorenzo is professor of economics at Loyola College in Maryland.

Footnotes

1.
Murray Rothbard, "Protectionism and the Destruction of
Prosperity," found on
mises.org/article.aspx?title=protectionism&month=1.

2.
Ludwig von Mises, Human Action: A Treatise on
Economics
, Scholar's Edition,
(Auburn, Ala: Mises Institute, 1998), p. 195.

3.
Ibid.

4.
Ibid., p. 196.

5.
Ibid., p. 198.

6.
Ibid., p. 199

7.
Ibid, p. 819.

8.
Ibid., p. 827.

9.
Thomas Paine, Common Sense, p. 20, in Philip S. Foner,
Complete Writings of Thomas
Paine
(New York: 1954).

10.
Ibid.

11.
Ibid.

12.
W.B. Allen, editor, George Washington: A Collection
(Indianapolis: LibertyClassics,
1988), p. 525.

13.
Ibid.

14.
Nathan Rosenberg and L.E. Birdzell, Jr., How the West Grew
Rich
(New York:
BasicBooks, 1986), pp. 71-112.

15.
Murray Rothbard, "Mercantilism: A Lesson for Our Times?" in his
book, The Logic of
Action II (
Cheltanham, UK: Edward Elgar, 1997), p. 43,

16.
Cited in Henry Higgs, The Physiocrats (New York:
Langland Press, 1952), p. 45.

17.
Adam Smith, An Inquiry into the Nature and Causes of the
Wealth of Nations
(New
York: Oxford University Press, 1976), p. 898.

18.
Nick Elliott, "John Bright: Voice of Victorian Liberalism," in Burton
W. Folsom, Jr.,
editor, The Industrial Revolution and Free Trade (Irvington, NY: Foundation for
Economic Education, 1996), p. 28.

19.
Frederic Bastiat, Selected Essays on Political Economy,
George B. de Huszar, ed.
(Irvington, NY: Foundation for Economic Education, 1995), p. 111.

20.
Samuel Eliot Morison, Henry Steele Commager, and William
Leuchtenburg, The
Growth of the American Republic
(New York: Oxford University Press, 1980), pp.
112-125.

21.
James Banner, To the Hartford Convention: The Federalists
and the Origins of Party
Politics in Massachusetts, 1789-1815
(New York: Alfred A. Knopf, 1970), p. 301.

22.
John Taylor, Tyranny Unmasked (Indianapolis: Liberty
Fund, 1992), p. xvi.

23.
Ibid.

24.
Ibid., p. 11.

25.
Ibid., p. 19.

26.
Ibid., p. 24.

27.
Michael F. Holt, The Rise and Fall of the American Whig
Party
(New York: Oxford
University Press, 19990.

28.
Frank Taussig, A Tariff History of the United States
(New York: Putnam, 1931), p.
157.

29.
Howard Perkins, Northern Editorials on Secession
(Gloucester, MA: Peter Smith,
1964)p. 600.

30.
Ibid., p. 602.

31.
Wilson Brown and Jan Hogendorn, International Economics
(New York: Addison-Wesley, 1994), p. 188.

32.
Ibid. p. 192.

33.
Ibid., p. 193.

34.
Rothbard, "Protectionism."


Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.

Follow Mises Institute