Friday, February 3, 2017

No pain, no gain

I came across this more than decade old argument in defense of Free Trade, an argument with which I agree. Free-Trade Theory No Longer Applies? by Gene Callahan.

It is useful to see the argument made with such economy, particularly in this time when there are so many enemies of Free Trade. I understand and empathize with those who want to pause, or at least slow the pace of globalization in order to let our social and economic systems adjust. Unfortunately, too often, those who want to manage the pace of globalization end up in the same bed as corrupt crony capitalists and totalitarian interests.

I like Callahan's closing argument.
An honest advocate of free trade must admit that there will often be people who are made worse off, at least in the short run, by the freedom to trade internationally. But the same is true of trade within the borders of a country: If you open a restaurant near to and better than mine, my business will suffer.

It might be pleasant to live in a world of unlimited resources, where everyone who wanted to run a restaurant could do so without having to compete for customers’ scarce dollars. But since we don’t, the fact that my situation might worsen because of your business activities is an unavoidable consequence of the freedom to buy from and sell to whomever one wishes. If we try to prevent all such unpleasant outcomes, we will eliminate the market economy and regress to a hand-to-mouth existence.

Those who find that scenario enticing are welcome to retreat to the wilderness and live that way today, without trying to impose their vision on others. The rest of us should realize that freedom necessarily means that we can’t pre-arrange social affairs to guarantee every outcome we desire. The result of voluntary interactions among free people will not always be to the liking of every interested party. The alternative to a market economy is not an economy in which someone can control all outcomes, but a “non-economy,” or, as Mises called it, “planned chaos.”
In order for us to enjoy the benefits of free trade, we have to have freedom and we have to have negative consequences. If we try to prevent negative consequences we undermine freedom and we preclude the benefits. No pain, no gain as the folk wisdom has it.

It is interesting to note that Callahan is writing this in 2004 in response to an editorial by current Senate Minority leader Chuck Schumer. Schumer's position in 2004 was exactly that of Trump today - suspicion of free trade, a desire to manage it, and targeting the Chinese as the primary culprits inflicting pain on the American economy.

If Schumer's beliefs now are the same as they were then, there should be some common ground for he and Trump to work together.

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