23 January 2011

Thoughts on Free Trade

Vox Day offers this interesting tidbit:

One of the interesting things that readily becomes apparent when reading Rothbard's An Economic Perspective on the History of Economic Thought is that virtually everything the free traders - and I was once one of them - believe about economic history is wrong. They have various theoretical problems too, to be sure, but history provides an easier means of undermining the primary intellectual engine for totalitarian globalism than comparatively esoteric economic theory. Of course, the weakness of the free trade case is very easily seen in the way that they immediately retreat from their previous analogies and arguments as soon as their weaknesses are demonstrated.

Proponents of free trade are generally wrong because the analogies they use are inherently flawed.  As best as I can tell, most of them don’t seem to recognize when their analogy goes awry.  However, once you recognize it, it becomes pretty glaring.
Proponents of free trade argue that because two individuals trade freely with one another within the same country, than likewise a corporation should be able to trade freely with an individual from another country.  The mistake in the analogy is that corporations are not comparable to individuals.  For legal purposes, they most certainly are, but it must be remembered that the state saying something is a certain way does not, in fact, make it so.

In fact, a corporation is in no way comparable to an individual.  The only reason why the state declares this to be the case is solely for the purpose of limiting liability.  Or, as I like to call it, granting special benefits to a privileged group of people. 

Unsurprisingly, businesses are granted this special benefit because of each business’s unique ability to serve as a tax collector for the state.  Thus, businesses are only given this special privilege because they can add power to the state.

That observation aside, one of the biggest issues of the free trade debate stems from the confusion over terms.  Most people understand free trade to mean that they can conduct trade with whomever they want on whatever terms they want.  This understanding is correct.  However, ardent free-traders change the meaning of the term in the middle of the debate.  The focus shifts from trade among individuals to trade among nations, which are not in any way equivalent.

The problem is that, ultimately, only individuals can trade with one another, as obvious as this point seems.  Sure, Cisco may “buy” something, but in reality it is just one person placing the buy order on behalf of his employers.  Likewise, China doesn’t buy anything from America.  Chinese individuals buy things from American individuals.  This being the case, is it really necessary to have trade agreements?

The answer is no.  If individuals can freely trade with one another, than there is no need for “trade policy.”  Practically speaking, individuals can already trade freely with one another even if they are from different countries, making trade policies superfluous.  Thus, “trade policy” is a method by which the state attempts to grant privileges to favored entities.  This is seen by the way that trade agreements refer solely to businesses and nations, both of which are artificial constructs that the state uses to further its own power.

In a perfect world, there would be no state, and man would naturally trade freely with one another.  Even in the current world, if the state were to butt out of regulating trade in its entirety (including getting rid of the legal entity known as the corporation), than individuals would trade freely with one another, and decisions would be based on the profitability of transactions, meaning that trade agreements would be largely unnecessary.

No comments:

Post a Comment