Sign the Freedom to Trade Petition

Free Trade Is the Best Policy

The specter of protectionism is rising. It is always a dangerous and foolish policy, but it is especially dangerous at a time of economic crisis, when it threatens to damage the world economy. Protectionism’s peculiar premise is that national prosperity is increased when government grants monopoly power to domestic producers. As centuries of economic reasoning, historical experience, and empirical studies have repeatedly shown, that premise is dead wrong. Protectionism creates poverty, not prosperity. Protectionism doesn’t even “protect" domestic jobs or industries; it destroys them, by harming export industries and industries that rely on imports to make their goods. Raising the local prices of steel by “protecting" local steel companies just raises the cost of producing cars and the many other goods made with steel. Protectionism is a fool’s game.

But the fact that protectionism destroys wealth is not its worst consequence. Protectionism destroys peace. That is justification enough for all people of good will, all friends of civilization, to speak out loudly and forcefully against economic nationalism, an ideology of conflict, based on ignorance and carried into practice by protectionism.

Two hundred and fifty years ago, Montesquieu observed that “Peace is the natural effect of trade. Two nations who differ with each other become reciprocally dependent; for if one has an interest in buying, the other has an interest in selling; and thus their union is founded on their mutual necessities."

Trade’s most valuable product is peace. Trade promotes peace, in part, by uniting different peoples in a common culture of commerce – a daily process of learning others’ languages, social norms, laws, expectations, wants, and talents.

Trade promotes peace by encouraging people to build bonds of mutually beneficial cooperation. Just as trade unites the economic interests of Paris and Lyon, of Boston and Seattle, of Calcutta and Mumbai, trade also unites the economic interests of Paris and Portland, of Boston and Berlin, of Calcutta and Copenhagen – of the peoples of all nations who trade with other.

A great deal of rigorous empirical research supports the proposition that trade promotes peace.

Perhaps the most tragic example of what happens when that insight is ignored is World War II.

International trade collapsed by 70 percent between 1929 and 1932, in no small part because of America’s 1930 Smoot-Hawley tariff and the retaliatory tariffs of other nations. Economist Martin Wolf notes that “this collapse in trade was a huge spur to the search for autarky and Lebensraum, most of all for Germany and Japan."

The most ghastly and deadly wars in human history soon followed.

By reducing war, trade saves lives.

Trade saves lives also by increasing prosperity and extending it to more and more people. The evidence that freer trade promotes prosperity is simply overwhelming. Prosperity enables ordinary men and women to lead longer and healthier lives.

And with longer, healthier lives lived more peacefully, people integrated into the global economy have more time to enjoy the vast array of cultural experiences brought to them by free trade. Culture is enriched by contributions from around the world, made possible by free trade in goods and in ideas.

Without a doubt, free trade increases material prosperity. But its greatest gift is not easily measured with money. That greatest gift is lives that are freer, fuller, and far less likely to be scalded or destroyed by the atrocities of war.

Accordingly, we the undersigned join together in a plea to the governments of all nations to resist the calls of the short-sighted and the greedy to raise higher the barriers to trade. In addition, we call on them to tear down current protectionist barriers to free trade. To each government, we say: let your citizens enjoy not only the fruits of your own fields, factories, and genius, but also those of the entire globe. The rewards will be greater prosperity, richer lives, and enjoyment of the blessings of peace.

CLICK HERE to endorse this petition and add your support.

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The specter of protectionism is rising. It is always a dangerous and foolish policy, but it is especially dangerous at a time of economic crisis, when it threatens to damage the world economy. Protectionism's peculiar premise is that national prosperity is increased when government grants monopoly power to domestic producers. As centuries of economic reasoning, historical experience, and empirical studies have repeatedly shown, that premise is dead wrong. Protectionism creates poverty, not prosperity. Protectionism doesn't even "protect" domestic jobs or industries; it destroys them, by harming export industries and industries that rely on imports to make their goods. Raising the local prices of steel by "protecting" local steel companies just raises the cost of producing cars and the many other goods made with steel. Protectionism is a fool's game...

So begins the 'Freedom to Trade Petition', a joint initiative of the International Policy Network, the Atlas Foundation and its Global Initiative for Free Trade, Peace and Prosperity. The Adam Smith Institute has already signed up, and I strongly encourage all of you to do the same. You can add your names to the petition here. Click 'read more' to read the petition in full.

Kevin Dowd on free banking

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A couple of days ago, we recommended that readers of this blog should attend the Libertarian Alliance's Chris R. Tame Memorial Lecture, at which Professor Kevin Dowd spoke about 'Lessons from the Financial Crisis: A Libertarian Perspective'. In case you missed it, the video is now available online via the LA's blog. If you haven't got time to watch the whole thing, Samizdata's Jonathan Pearce has an excellent write-up here.

Sick man of the world?

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According to the IMF's latest forecasts, the recession will last longer in Britain than in any other major economy. They are predicting a 3.8 percent contraction this year, and another 0.2 percent contraction in 2010 – by which time every other major economic area will be growing again, apparently.

So much for Gordon Brown's claim that Britain is best placed to weather the downturn, and Alistair Darling's assertion (on which his pre-budget report figures were based) that the UK's recovery would begin in the third quarter of 2009. Oops.

So what are the implications of the IMF's findings?

First of all, the UK's tax revenues will be weaker than expected, while social spending will be higher (as more businesses close and more people lose their jobs). That means the government is going to borrow even more than it plans, and that Britain's mountain of debt will get even bigger. And with a general election coming up, it's hard to believe that the government won't pursue more bailouts and deficit-financed 'stimulus' packages, so there's really no limit to how bad the public finances could get.

Consequently whoever wins the next election is – to put it bluntly – going to have one hell of a mess to clear up, and will probably have very little choice about the policy agenda they pursue. The words 'structural adjustment' spring to mind.

Another implication is that the government's measures to fix the economy are not working. No surprise there. Their policy prescriptions – which basically amount to just throwing vast sums of money at every problem – would be ineffective at the best of times. Unfortunately, however, the government's modus operandi makes things even worse. By reacting to every headline with a new, half-baked initiative, which may or may not be implemented, politicians create an atmosphere of uncertainty and further undermine confidence.

It's precisely the opposite of what they should be doing.

Best placed

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Where’s the best place to do business in the United States? Texas. So say America’s CEOs, who get to see the effects of state legislation first-hand.

An annual survey from Chief Executive Magazine, entitled The Best and Worst States, asked over 500 CEOs to grade the states. Grades were based on, "proximity to resources, regulation, tax policies, education, quality of living and infrastructure". Providing additional insight to the evaluations, CEOs were also asked to grade each state based on the following criteria: 1) Taxation & Regulation, 2) Workforce Quality, and 3) Living Environment."

JP Donlon, Editor-in-Chief said, "Our survey, year-over-year proves that those states with the worst records continue to practice the same policies that alienate businesses. As the nation’s economic problems continue to snowball and an increasing number of states experience budgetary problems, state governments ought to take a hard look at their taxation and unionization policies if they want to turn the page and attract new businesses and capital to their provinces." As the article further states the GSP (Gross State Product) of Texas grew by 4.2% compared to 1.9% for the national economy.

This survey is a shining example of how the Union works with states competing against each other for business and how those with a lighter touch of taxation and regulation can be successful. One can only hope that the leaders of Michigan, New York and California read this, and rather than coming up with new taxes (as seen recently in New York), conjure up new ways of slashing their way through red tape and lowering their taxes.

While the financial sector, auto manufacturers and others are handed other peoples’ money in receipt of bailout funds, there are many out there who are just asking for an environment that is conducive to undertaking business. Sadly that plea is likely to fall on deaf ears. Politicians are just too busy pandering to the corporate failures holding out their begging bowls to do anything sensible.

Click here to see the survey's results in full.

The dunce's cap

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As their time in power draws to a close, many are looking back on the New Labour years wondering whether they lived up to the expectations people had back in 1997. The consensus is ‘no’: they have been a government that has failed to deliver in health, welfare, defence, and public life, but no more so than in education. There has been no progression from the days of ‘Education Education Education’.
 
The subject of university fees threatened to divide the government back in 2004 and is now back on the agenda. A new survey finds that two-thirds of vice-chancellors think that tuition fees need to be raised above the present £3,500 cap, and 10% felt that a cap should be abolished all together.
 
In order to provide the best quality education universities clearly need higher funds. By capping the fees they can charge, the government is both depriving them of resources and stifling any competitive element out of the market, resulting in a poorer overall output.
 
There is clearly the issue that intelligent students from poorer backgrounds should have the same opportunities as the middle-classes. This is a valid point, and certainly education should be one of the more meritocratic aspects of life. However, it would be foolish to think that universities only want wealthy students irrespective of their aptitude. If the government didn’t keep tuition fees artificially low, universities and trusts would be more willing to give grants and aid to those unable but deserving of university places.
 
Furthermore government targets to get more and more students through university are counterproductive. As with most top-down government targets, they are inefficient and ill thought out. The inevitable impact of simply churning thousands of students through university is the fall in the value of a British education – and you don’t need a degree to work that one out!

Blog Review 903

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Jay Leno tries to defend the free market by banning it.

Would you trust a government that intervened in contracts: like, say, Sir Fred's pension or the AIG bonuses. And don't you think that losing that trust in the government's being constrained by law and contract poses a greater problem than the pension or the bonuses?

Although having the Congresscritters obsessing over those bonuses does at least stop them causing damage elsewhere.

We have the evidence. Free market school systems really do improve results.

Now this is a surprise. Arts graduates journalists do not understand financial markets.

There really are times when doing nothing is the best idea.

And finally, blaming the teachers.

Only the illegal are free

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Huddled in the back of a lorry that has just rolled off the ferry at Dover, in a few minutes time you’ll be speeding up the M20 towards London and a new life living and working as an illegal immigrant in the UK. The government won’t know you exist... The lorry driver on the other hand has been thoroughly and electronically examined in fine detail. His whereabouts have been known to the government since he decided to travel abroad. This will be heralded as a success by the eBorders team as they search their database looking for the guilty needles in the haystack.

This article in the Daily Telegraph highlights, what is now fast becoming a common theme of government attempts at security: everyone is potentially guilty and to protect you from yourselves they have to know all they can about you, including where you travel to. And as the eBorders spokesman says, they’ve already discovered that 0.00353% of travellers are in fact wanted criminals. This is heralded as a success; that the rest of us, under governmental threat of being fined have ‘willingly’ shared our data with them. This is us proving to the government that we have nothing to hide, and therefore nothing to fear; self-perpetuating their own rhetoric so that they continue to believe that they are on the correct policy path.

The majority of legislation introduced in relation to the apparent security of our nation, and ourselves, has  contained a comparable threat to our own liberty which has forced us into compliance. Were this a private firm we would have long ago ended the contract and sought others who do not treat us as criminals from the outset. Perhaps the solution open to us is that we should all decide to become illegal immigrants, especially as it no longer seems this country is one that we are allowed to feel at home in.

Liberty and authoritarianism

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David Aaronovitch's latest piece in The Times it so far off the mark that it is worth reading just to remind yourself why you don’t read him. The title is Politicians mess everything up – wrong. Yes, in a democracy stupid errors occur, but our constant carping ignores the greater danger: the rise of authoritarianism. The principal strand of his argument is that, “if you don't have a liberal democracy, everything else goes to hell". To prove this he uses the historical examples of Nazi Germany, Stalin’s Russia and the Rwandan genocide.

According to Aaronovitch, “we are in a nasty phase of attacking democratic politics and its inevitable representatives, the politicians, for their deficiencies and taking refuge either in populism, legalism or magical thinking." This statement sits oddly in the article, as in his previous paragraph he sets out how the legal system and fellow politicians were complicit in the atrocities mentioned above. The only exception is Aaronovitch’s glib claim that it was not, “strictly legal under the laws of Rwanda for Hutu militias systematically to kill their Tutsi neighbours with gun and machete". The fact that ID cards proved an essential tool in this massacre (something that Aaronovitch is keen on) is entirely neglected.

The populism that Aaronovitch fears comes from three sources:

1) “The casual, jokey bracketing of politicians with fraudsters."
2) “The influence of potty-mouthed right-wing bloggers on some political journalism."
3) “An impatience with foreign workers and other minorities."

In answer to the first point, most politicians are indeed corrupt; perhaps not as corrupt as in some other countries, but nevertheless we need more checks against their power. On the second point, who are these potty-mouthed right wing bloggers? The only ‘potty-mouthed’ bloggers I know of are strong libertarians. No political grouping is more distant from the politics of authoritarianism. Regarding the third point, the protectionism of the left is equally (if not more) culpable of impatience with foreign workers and other minorities. Remember 'British jobs for British workers'.

Aaronovitch’s conclusion, “how depressing it is that there are Grand Conventions in defence of liberty and none in defence of politics". What he fails to appreciate is that as far as political systems are good, they are built upon the protection of the individual: liberty. Historically, democracy has not proven enough of an impediment against authoritarianism. We need more. This is why the sooner parliament becomes more transparent, ID cards scrapped and CCTV camaras taken down, the better.

Sex Sells

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The BBC has an interesting article on the status of the prostitution industry in New Zealand since it was legalized in 2003. The reception of legalization in the past six years has been overwhelmingly positive. The industry has changed quite a lot since 2003, with women receiving more legal protection in terms of their rights as sex workers, and their ability to gain protection from police when they are abused.

Some of the interviewed prostitutes claimed that the brothel conditions are quite good, and that since they now have more options they no longer have to put up with abusive owners or clients. Although the trade is not socially accepted, prostitutes are now treated with respect and feel safer.

Legalization seems to leave both prostitutes and their clients in a better situation. Clients no longer have to go to seedy back alleys to pick up workers and prostitutes are much better protected. Europe [the Dutch excluded] should learn the leson and legalize prostitution. It would help protect some honest hard workers and provide tax revenues for the state.

One cigar at a time

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One unintended consequence of the smoking ban has been the rise of e-cigarettes. Although I have yet to see them in the flesh, with sales in excess of 1,000 every month for the £40 starter-packs, it can only be a matter of time before they are a common sight.

One can picture the scene. A packed restaurant with waiters and waitresses rushed off their feet. From his pocket of a young gentleman produces the e-cigarette and starts to partake. Silence. A young lady screams and faints; the passing chef returns to the kitchen to fetch his sharpest cleaver; the restaurant owner’s finger hits the first of three nines. Calm, the restaurant manager asks the man with his now mortified date to leave.

Deafly silence is broken by an explanation of the product, but confusion and consternation still reigns as the man refuses to be deterred. He continues to smoke while tucking into his poached langoustines. Faux coughs abound, surely it only a matter of minutes before the young gentleman will be hounded from the restaurant by his fellow dinners. However, the mob will grin and bare it tonight: the lady on the next table, a comrade, asks if she could try the e-cigarette. The baying mob has been held at bay, it is a small victory for freedom.

If the owner of any restaurant chooses not to allow smoking they should be free to make their restaurant non-smoking. Though, the alternate should also hold. Private property should be protected from the excessive regulations of an intrusive government. Let people be free to lead their lives in the manner to which they choose. Don’t regulate, nudge or even suggest. It is time to fight back, preferably with cohiba esplendidos rather than e-cigarettes.