The Corner

Sticking Up For Adam Smith

Regarding free trade, a couple of parting thoughts:

a.) On the theory of comparative advantage and the importance of open international markets, even John Maynard Keynes and Milton Friedman, who disagreed about so much else, saw eye to eye-as do virtually all professional economists in the present generation, including, for example, Paul Krugman, on the left, and, on the right, Robert Barro. Economics does indeed represent a contentious field. But on free trade the profession has achieved a broad consensus.

b.) There are plenty examples of nations that achieved economic growth while imposing high tariffs, imposing cumbersome regulations on international trade, and so on. But there are also plenty of examples of nations that produced impressive cultural or economic achievements while violating all the norms of democracy or flouting the rule of law.

What does this mean? Only that history does not permit controlled experiments. We must examine the arguments, weigh the evidence-and use our judgment. Free trade can cause dislocations, and it should never be followed blindly-only a fool, for example, would argue for free trade in fissionable materials. But the overwhelming preponderance of the evidence suggests that free trade remains an ideal worth putting into practice as best we can-and defending on websites.

c.) A peeve: Of all the counterexamples the protectionists could name, Bismarck’s Germany represents one of the weakest. In the first place, Germany under the Second Reich was undergoing rapid industrialization. Any nation that brings large numbers of farm workers-peasants-into an industrial economy will produce high rates of growth regardless of its trade policy. In the second place, just think for a moment about the unification of German states that Bismarck achieved. Before the Iron Chancellor, German-speaking Europe was divided among literally dozens of states. Bismarck put Prussia, Bavaria, Saxony, Hesse, Oldenburg, and many others together. Across a broad swathe of central Europe, in other words, Bismarck established a single market and…free trade.

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