As a Rule, Freedom and Free Trade Work

by Don Boudreaux on May 13, 2004

in Trade

The current hysteria over “outsourcing” – that is, importing services – often features opponents of free trade posing as defenders of workers who’ve lost their jobs even though these workers “played by the rules.” Sen. John Edwards, for example, during his bid for the Democratic presidential nomination, repeatedly spoke of people who “played by the rules” but who nevertheless got pink slips because of trade with foreigners. The assumption is that playing by the rules should be sufficient to protect you from losing your job.

Appealing to rules is powerful. Everyone understands that breaking agreed-upon rules is wrong.

But there is no rule in a free society that says if you play by the rules – if you work hard, get an education, and are a person of integrity – that you’re guaranteed never to lose your job. Put differently, the fact that honest, decent, hard-working people sometimes lose their jobs is not evidence of unfairness, wrong-doing, mischief, or poor policy.

If government ever tried to enforce a rule that guaranteed that no rule-follower would ever lose his or her job, government would have to (try to) freeze in place the current pattern of economic activity. Consumers would be prevented from changing their patterns of spending; new technology would be outlawed; pursuit of greater efficiencies would be prohibited; demographic changes would be fiercely regulated by government. Nothing that threatens to significantly reduce demand for the output of any existing industry would be tolerated – for any such reduction in demand entails a scaling back of production in that industry and, hence, possible job losses in that industry.

Economic growth would stop; indeed, it would shift quickly into rapid reverse, for any economy saddled with this sort of government regulation would collapse.

One set of real rules in a market-oriented, free society is the following: each worker gets to enjoy a standard of living that is incredibly high by historical standards and that likely will continue growing over time; each worker may spend and invest his earnings pretty much as he sees fit and seek out ever-better deals for spending and investing his earnings. Entrepreneurs and investors may produce and offer for sale pretty much whatever they want. If, and for as long as, consumers pay handsomely enough for firm A’s product, firm A prospers. If and when consumers chose to reduce the amounts they spend on firm A’s product’s, firm A reduces its output (perhaps even going out of business). We tolerate — indeed, we celebrate — economic change because, in market societies, that change is another name for economic growth that brings greater and more-widespread prosperity.

To protect workers “who play by the rules” against job loss would require that government break nearly all of the rules of civil, free, and prosperous society.

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