The question is not will we manage our economy’s interaction with the global market, but how.
The question is not will we manage our economy’s interaction with the global market, but how.
G radually, conservatives are recognizing the enormity of their error in embracing a strategy of free trade and globalization after the Cold War’s end. The theory held that trade would help to spread liberal democracy around the world, creating an ever-larger free market to fuel rising prosperity. “No nation on Earth has discovered a way to import the world’s goods and services while stopping foreign ideas at the border,” exuded President George H. W. Bush at a Yale University commencement ceremony in 1991. “What some call globalization is in fact the triumph of human liberty across national borders,” said his son a decade later.
In practice, though, globalization has meant subverting America’s relatively free market for the sake of integration with other markets abroad. A “free-trade agreement” is not the removal of government interference but rather the intensively lobbied creation of endless new legal requirements. “Normal trade relations” with China means that what is “normal” in China becomes “normal” for American businesses as well: investments dictated by the economic distortions and political pressure of an authoritarian, communist regime. But the only way to keep the distortions of foreign markets out of the domestic one is to write even more rules.
Writing earlier this week in National Review, Dominic Pino found himself caught between this particular rock and hard place. On one hand, he acknowledges that “borders are meaningful and important, and arch-globalists who want to erase them are misguided.” On the other hand, he worries that “the moment you give the government power to set a boundary in the market is the same moment that interest groups you hadn’t even heard of before will be lining up to tell you where to draw it.” What to do?
Pino has no idea. In his defense, neither do most people who have spent recent decades reciting the conservative priesthood’s various incantations, only to discover them irrelevant to the real world and its problems. Pino has the compulsory reference to the number of chapters and pages in a particular government regulation and the head-scratching example of different regulatory treatment for two similar products. He demonstrates mastery of the public-choice lament that “elected politicians chasing votes and campaign donations are going to listen to” interest groups in formulating public policy. He concludes with the suggestion to “mak[e] the government a little less powerful.”
But what would that mean in practice? Who would decide how to reform government policy, besides the elected politicians chasing votes and campaign donations? And how would we preserve the character of our free market without legal mechanisms to counteract the subsidies and barriers introduced by other nations? Globalization sounds simple enough on a bumper sticker; making it work is another matter altogether.
Conservatives struggle to answer questions like these because the economic orthodoxy that passes for “conservative” in America misunderstands its own authorities. Adam Smith and David Ricardo proved that expanding trade is always a good idea, the story goes, and so policy-makers need only to follow that commandment. This is not true. As I explain in the essay to which Pino was responding, Smith and Ricardo wrote about one very specific kind of trade — the direct exchange of goods for goods — and assumed this would occur in a world where capital remained within national boundaries. Their insights do not apply to the modern global economy that developed over the subsequent 200 years, and blindly applying them has led to much confusion and a good bit of disaster.
Rather than brandish bromides, conservatives have an opportunity to apply their principles to the problems that globalization has presented. We recognize the necessity of sovereign nation-states and the folly of one-world utopianism. We doubt that bureaucrats can craft a sufficiently nuanced set of rules to manage the integration of markets with disparate legal regimes and economic conditions. We are prepared to make trade-offs, rather than search in vain for the nonexistent solution that achieves every goal.
Those principles should lead us to choose our own free market over free international trade. We should impose the boundaries necessary to preserve a well-functioning capitalist system that maintains its own unique character and its balance in interactions with the rest of the world. In accomplishing this, we should choose the type of boundary that is least vulnerable to government dysfunction: clear, simple, universally applicable rules that set the parameters within which free-market competition can flourish — for instance, a global tariff, a market-access charge, or tradeable import credits.
In debating the merits of these versus other approaches, we must remember that they will all have to run through the same democratically elected politicians and their self-interested constituencies. So we can hardly reject an approach on that basis. The question is not will we manage our economy’s interaction with the global market, but how. No invisible hand is coming to wave our problems away.