Mises Daily Articles
Bastiat Was Right
Frederic Bastiat was a French economist, a passionate and articulate believer in free enterprise, who lived from 1801 to 1850. But his writings speak to us today, and help explain why the recent conflict with China has ended through diplomacy and peace rather than belligerence and war.
The answer can be summed up in one word: commerce. Glorious, peaceful, prosperity-making, peace-preserving commerce. It was the overwhelming fact that the health of our economies are linked that made the Chinese and US governments realize that both sides have more to gain from good relations than hatred and war.
It was Bastiat who observed the trade-off between trade and war. When goods don’t cross borders, he said, armies will. Without trade, there is less to lose from the mass destruction that war implies. Countries that trade have a mutual stake in the preservation of open, friendly relations. This is one reason that free commercial activities promote peace, and why protectionism and trade sanctions generate war tensions.
History shows that war is good for government. In wartime, government gains massive power over society. It is granted a degree of latitude in its use of emergency powers that would not otherwise be permitted. War allows politicians and bureaucrats with a passion for power to use it to the hilt, through taxation, inflation, and regimentation. War destroys things and then permits governments to profit from rebuilding them. It drains the private sector of capital and entrepreneurial energy, and enriches the parasitical institutions of the State. No free society stays free after war begins.
The mystery isn’t why war exists but rather why, given the nature of government, it isn’t the norm. Bastiat explained that free trade helps quell government’s passion for war. It creates powerful lobbying groups on all sides that demand the preservation of peace and the triumph of diplomacy over hostility. International trade networks create intermediating structures of business relations that work as a barrier to bombs and belligerence.
This observation was further elaborated on by Ludwig von Mises, who responded to the Marxist-Leninist theory that capitalism leads to war. Lenin saw war as the internationalization of the intractable conflict between capital and labor. On the contrary, Mises said, the basis of capitalism is trade and mutual cooperation to the benefit of everyone. Capitalism creates networks of commerce–including capital markets and wide circles of labor and entrepreneurial specialization–that become dependent on each other.
The socialists of today understand this, which is why, since the end of the Cold War, so many of them have joined the war party. They too recognize that freedom, trade, and peace go together, so they’ve decided to oppose all three. Only last year, for example, the website of the World Socialists complained that "The pledge to restart the talks [with China] came after a barrage of lobbying pressure by US companies alarmed over the prospect of losing the billions of dollars in trade and investment opportunities...."
Indeed, commercial ties are the very basis of international friendship, particularly that which thrives between the US and China. Each year, China exports $200 billion in goods to the world, and imports $170 billion, for a total dollar value of commercial world traffic in and out of China of nearly half a trillion.
China’s top trade partner is Japan but next in line is the US. Each year, China exports to the US $81 billion in electrical machinery and equipment, apparel, shoes, toys, games, iron and steel, furniture, leather goods, and a million other things, while importing $13 billion in machinery, fuel, medical equipment, paper product, aircraft, and a million other things.
Our lives–by which I mean the lives of regular people in the US and in China–are made immeasurably better because of the freedom to trade. Our networks of exchange build private-sector prosperity in both countries. Was the "corporate lobby" influential in preventing the tensions over the US spy plane from degenerating into outright conflict? Very possibly, even likely–a fact which we should celebrate, not condemn.
So entrenched are U.S.-China business ties that the warmongers among us have to think creatively to come up with excuses for protectionism and hostility. Lately they have been fulminating about human rights in trade, the supposed existence of forced and child-based labor, the claim that China is spying on the US, and the trade deficit. They say that all these things raise good reasons to curb or cut off commercial relations.
The crucial question to ask about all these complaints is: will less trade make matters better or worse? The typical political dissident in China wants more contact with the outside world, more economic opportunity that trade brings. Commerce opens up societies and gives the powerless greater opportunities to have control over their destinies. Besides, if it were possible to use embargoes and sanctions to shape up foreign countries, Cuba and North Korea would have become paradises of human rights long ago.
Bastiat had a radical goal. In addition to the protection of private property, he wanted "the abolition of war, or rather (what amounts to the same thing), the fostering of the spirit of peace in public opinion, which decides the question of war or peace. War is always the greatest of the upheavals that a people can suffer in its industry, the conduct of its business, the investment of its capital, and even its tastes."
In the recent conflict with China, some Americans (even, I’m sorry to say, many American conservatives) tasted blood. But they didn’t get their way, Deo Gratias. With free trade between the US and China, the opportunities for our governments to go to war are greatly reduced.
It is because peace and freedom go together, and mutually reinforce each other, that we need ever-more trade and commercial relations with all countries everywhere, with no exceptions, ever. May private enterprise continue to save the world from destruction by governments.