Authentic Voice of a Classic Liberal

Razzen Sally, a lecturer at London School of Economics, has contributed an article, “Free Trade: old arguments, new threats” in Bombay’s Financial Express (India). A clearer statement of the viability of free trade for the eradication of poverty by the development of prosperity could not be made.

Congratulations to Razzen Sally for writing such erudite good sense in the Smithian mould, and to Financial Express for publishing it.

In a sample paragraph, one of many that could be quoted, we read:

“The core arguments for free trade are as compelling today as they were when Adam Smith set these out over two centuries ago. These I characterise as the trinity of prosperity, freedom and security. The economic case revolves around a specialised international division of labour, unencumbered by artificial restrictions, that allocates resources more efficiently and leads to long-term productivity gains. All-round growth and prosperity are its results. The moral case for free trade centres on individual freedom. It is individual choice and entrepreneurship that drive international commerce and the resulting prosperity creates better life-chances. Finally, free trade contributes to a more secure international political environment. By forging commercial bonds among nations, it fosters better understanding among the peoples of the planet.”

That summarises superbly the vision of free trade. But there is still a long way to go. Modern protectionism is driven by a mixture of motives such as the anti-capitalist suspicions of anti-globalisation militants (including remnants of the old Marxist ‘Left’) and the hostility of those who suspect ‘western’ values affront their deeply felt religious beliefs. This is different from late 19th century protectionism, which primarily centred on crude nationalism.

The danger of the protectionism of the militants is that it denies the benefits of prosperity to those least protected from the horrors of their abject poverty. The dangers of the reactive protectionism of national states faced with the success of India and China (previously it was Japan and the ‘Asian Tigers’) is that it could stall the onward growth in prosperity (and political freedoms) that would benefit tens of millions of Asians and, in an extreme circumstances, it could provoke violent conflicts, including terrorism, among those aggrieved by their predicament, unable to share prosperity and excluded from sharing in political freedoms, and susceptible to domestic political and religious fanaticisms.

Raveen poses the crucial question:

“what about the future of free trade as an idea? It is vital that a rounded political, economic and moral case is presented, in the service of freedom, prosperity and security. In some ways, the post-1945 case for free trade has become too narrow and mechanical. It needs to burst these chains and return to its classical-liberal foundations in Smith and Hume. This throws up two points.

“First, the modern conventional wisdom has it that free trade abroad can be combined with Big Government at home. But free trade is part and parcel of free markets; it is part of a constitutional whole that includes limited government and laissez faire at home. Second, 21st century free trade should rely less on bureaucratic and cumbersome international trade negotiations and more on the 19th-century method of unilateral liberalisation. It spreads internationally by example and emulation. The WTO and other international trade agreements can be helpful auxiliaries, but their importance should not be exaggerated.”

LSE used to be a bastion of traditional classical economics (Lionel Robbins, for example) in the mid-20th century and it is great to read a spokesperson for the same tradition in the 21st century. His second point is particularly apposite for both India and China, both dominated by Big Government, with China further along the road to totalitarian forms of it than India (which is also a democracy).

Raveen’s bold point about spreading free trade by unilateral ‘example and emulation’ is really radical, especially for the major economies (USA and EU). Unilaterally abandoning protection in agriculture can be afforded, political opposition can be resisted and generosity can be justified in the great cause of creating global wealth (which is a creation of mankind) and eliminating absolute poverty (which mankind did not create and cannot eliminate by demonstrations and charity).

Raveen’s article concludes:

“John Stuart Mill remarked that it is “the word in season, which, at a critical moment, does much to decide the result.” It falls to free trade’s friends to spread their word in season with global political currents, anti-protectionist interests (such as exporters, downstream users of imported inputs, globally-integrated multinational firms) and (often unanticipated) events.”

That is the authentic voice of a classical liberal. Do what you can to spread it throughout the Blogosphere. Adam Smith’s legacy is safe in the likes of Raveen Sally’s hands.