05 November 2011

Free Trade Needs Free Labor

One of the seemingly natural reactions to an economic downturn is protectionism. The Great Depression is the classic example where this reaction has had its most significant, and indeed, negative impact on recovery, further weakening exports, imports and trade generally. Many nations now resist this temptation in relation to the free trade of goods; however, free trade has rarely ever been extended to the persons entering the UK from outside the European Union. We ought to question this policy as it too is a barrier to recovery.
It is logically inconsistent to say that goods should be allowed to move freely across borders but labor should not, which ASI notes quite well.  If you want economic freedom in the trade of goods, then it should be natural to desire economic freedom in the trade of labor.  The two things are intertwined.

Now, while some may argue that, theoretically, nation-states and the borders thereof are simply artificial, non-market constructs, the simple fact of the matter is that borders, such as they are, exist.  The legitimacy of these borders notwithstanding, the government guarding and defending the citizens living within those borders is generally expected by its citizens to act in their economic and social interests, which usually means having a selective immigration policy.

A selective immigration policy in the modern state is not illogical—people generally desire to make sure that foreigners don’t compete for their jobs or undermine their culture and social norms.  Since a government is supposed to look after the interests of its citizens, and since foreigners and usually will compete for jobs, it then behooves the government to prevent immigration, especially during a recession.  Decreasing the cost of labor will not solve an economic contraction; it will only eliminate higher-paying jobs.

Economic problems are generally a result of government interference.  They will be solved by undoing the government interference that caused them and waiting for the market to sort itself out.  They will not be solved by an increased labor pool; this will only mask the problem.  The same is true of free trade as well.

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