Wednesday, October 20, 2010

The implications of Free Trade

Sometimes there are just those moments when, whatever you are doing, you find yourself in awe of the shattered visage of what used to be your seemingly self-evident preconceptions. Whats obvious is not always right. In fact, it more often than not seems as if the two have an inverse relationship.
One such moment occurred after reading Vox Day's excellent post on the implications of free trade. The Austrian School of Economics, of which both Vox and I for the most part subscribe to, states that free trade is both necessary for economic liberty and economic prosperity. This seemed to be fairly reasonable, which is why it has remained largely unquestioned. But as the empirical evidence is being garnered, many have raised their voices in pronouncing their skepticism of the merits of free trade.
When the observable facts are in agreement with your assumptions, the logic behind those assumptions goes relatively unquestioned, but as the empirical world obliterates those rationales, then the reasoning behind those beliefs undergo a more rigorous examination. Not only has the empirical evidence gone against free trade theory, but its logical foundation in Ricardo's comparative advantage is flawed.

Moreover, it is not just economic prosperity that suffers from free-trade. Economic freedom takes a ruthless beating as well. Nationalism may have its flaws, but it is an absolutely necessary gambit for a country to preserve its freedom. What many do not understand is if free-trade is implemented in its most pure form, then labor and services can also be traded freely in and out of the Country. This is why traditional Libertarians have espoused open borders.
What Vox's post demonstrates is that not only is this economically unsound, it is disastrous for human freedom. Any student of history will know that immigration can transform a country, for the better or (more often) than worse. There are various reasons that immigration - or at least mass immigration - will usually inflict detrimental results to a country, but the primary reason is what I call the equilibrium principle. To illustrate, if a room has one side that is cold and the other side that is hot, over time heat will naturally flow into the colder areas until the temperature throughout the room is homogeneous. In like manner, the prosperous countries, like the USA, attracts foreigners who don't have it so well in their homeland like a donut shop attract a cop, and in doing so, brings his culture. A conflict ensues as the cultures clash, and the society is transformed, usually leaving less freedoms for the people.
So in keeping with libertarian principles, it makes perfect sense to direct a vigilant eye towards open immigration, and, by extension, free trade.
Over two hundred years ago, the founding fathers understood the importance of tariffs in maintaining a strong industrial base. Events have again confirmed their wisdom, as 50 years of Free Trade has eviscerated the America's manufacturing base. Leaving us and our freedoms more dependent and susceptible to other countries.
Free Trade definitely has its merits, and for some countries, particularly developing ones, it is a good economic policy. However, for a service driven economy such as the USA, it is not only an economic ill, but can be disastrous for human liberty. It has already been proven in real time that universal suffrage is directly incompatible with freedom, more often than not will free trade undergo a similar process. Whats obvious is not always correct.

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