Peace and Free Trade

by Don Boudreaux on October 18, 2011

in Civil Society, Complexity & Emergence, Cooperation, History, The Profit Motive, Trade

Here’s a letter to the Washington Post:

Reporting on the commendable efforts of the Business Council for Peace to bring young developing-country entrepreneurs to America for training, Thomas Heath appropriately opens with this paragraph: “There’s a line from the late television series ‘The West Wing’ that has stuck with me over the years.  It went something like, ‘Trade between countries prevents wars’” (“Value Added: An exchange program for entrepreneurs,” Oct. 17).

Here, fiction is fact.

In his 2006 book Global Capitalism, Harvard University’s Jeffry Frieden notes that “As one of [FDR's Secretary of State Cordell] Hull’s supporters put it, ‘If soldiers are not to cross international borders, goods must do so.’”*  This wise proponent of Hull’s free-trade proclivities was one Otto Maller, a man otherwise lost to history.

It’s imperative to understand that this positive relationship between peace and free trade that Mr. Maller expressed so succinctly has long been emphasized by free-trade’s most prominent champions – as evidenced, for example, by many of the newly published letters of Frederic Bastiat (1801-1850) that show him to have been as tireless and principled a campaigner for peace as he was for free trade.**

Donald J. Boudreaux

* p. 255.

** F. Bastiat, The Man and the Statesman, Jacques de Guenin, David Hart, & Dennis O’Keefe, eds. (Indianapolis: Liberty Fund, 2011).

(HT to Cato’s David Boaz for alerting me to the Heath column.)

UPDATE: David Hart sends me this 2009 post by Paul Walker, who goes to the source that Jeffry Frieden uses for the above quotation; I see from Paul’s research that Frieden misspelled (and, hence, I misspelled) Otto’s name: he is Otto T. Mallery (not “Maller”).  Paul has more info.

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Nikolai Luzhin, Eastern Promises October 18, 2011 at 11:04 am

why does free trade promote peace?

does trade, resting upon currency manipulation, promote peace?

Methinks1776 October 18, 2011 at 11:16 am

does trade, resting upon currency manipulation, promote peace?

Let’s go ask Switzerland. The Swiss recently announced and commenced a Euro peg in order to devalue the Swiss Franc. I’m tired of China. Let’s bang on about the evil impulses of Swiss aggression for a while.

Krishnan October 18, 2011 at 12:00 pm

And Canada can call the US evil because the loon has appreciated against the US dollar – ah yes, let’s start a trade war and stop trade (as some want) – and prosperity will follow

(there is simply no convincing some!)

Economiser October 18, 2011 at 11:25 am

The population is unlikely to support bombing their customers and/or suppliers. That tends to be bad for business.

Rebecca October 18, 2011 at 12:22 pm

If I may: the clip, with an explanation of how trade promotes peace (by my brother Ocean) can be found at DumbAgent

vikingvista October 18, 2011 at 2:47 pm

Since currency manipulation is now ubiquitous, how would you be able to tell?

Chris Bowyer October 18, 2011 at 11:29 am

The specific quote was “Free trade stops wars.” It came at the tail-end of a great rant by Richard Schiff’s character, Toby Ziegler. And it’s on the YouTubings:

The video made the rounds recently as something like “Toby Ziegler responds to the Occupy Wall Street protesters.”

PaulBob October 18, 2011 at 2:28 pm

IIRC, Great Britain and Germany were each others’ largest trading partners in 1938. Didn’t stop them from declaring war on each other in 1939. IMHO, if the leaders of a nation can safely ignore the opinions of its citizens (as was the case with Nazi Germany) then trade is not enough to prevent war.

Lerxst von Syrinx October 18, 2011 at 6:20 pm

Yes, I suppose if you let a spittle-emitting demagogue take control of a country, it might not work all the time. You ever heard of the expression, “Perfect is the enemy of good”?

Craig October 18, 2011 at 7:30 pm

“IIRC, Great Britain and Germany were each others’ largest trading partners in 1938.”

Oh, I think Great Britain’s largest trading partner had been the United States for many decades by then. I’m too tired to confirm that, though, and I don’t disagree with your dictator-disclaimer.

Jon October 18, 2011 at 3:27 pm

Trade promotes peace in a number of ways aside from the business aspect. Trade exchanges cultures, languages, literature, etc. Even, for example, American trade with China. Business execs go to China and bring back culture (food, language).

Also, trade promotes connections. For example, how much do we really know about Cuba? How many of us have been there or know someone who has been? Cuba is a dark spot. How many of us have been to Canada or know someone who has? How much more do we know about Canadian culture? Canada is a bright spot.

No one is claiming trade stops wars. But trade creates barriers to wars by building connections that are hard to sever.

Jon October 18, 2011 at 3:44 pm

Another thought on trade: where would our world culture be today if people did not trade? If it weren’t for the marketplaces of the Middle Ages, would we have knowledge of Cicero? If it weren’t for the galleons of the Renascence, would we have knowledge of Dante? Traders discovered the world was round. Traders told stories of El Doraldo, the Fountain of Youth, krackens, Davy Jones, mermaids. It was the traders who told of the Americas (for both good and bad). It was trade that brought us the Arabic numeral system we use today.

Trade has changed the face of the world. Trade ended slavery in Britain. Trade lifted the long-held veil of secrecy from China. Trade helped end the Cold War. Trade has lifted millions out of poverty and has the potential to lift many more.

Civilization, everything that we are as Americans and as humans, is based upon Trade, and yet we seek to demonize it.

The one vessel that has done more to end poverty we are now seeking to limit for no reason other than greed. Why deny ourselves the gains from trade? Who knows, maybe a North Korean poet wrote a beautiful True poem. Maybe a Cuban philosopher has wrote some great book? We’ll never know if we refuse to trade.

dithadder October 18, 2011 at 4:31 pm

The Crusader states had this problem where, whenever they were starting to make good money trading with their Muslim neighbors, a fresh Crusade would sail in from Europe.

Jon October 18, 2011 at 4:35 pm

Same with Charlemagne.

Joshua October 18, 2011 at 5:34 pm

This notion appears to have informed Netanyahu’s approach to the peace process, which he has explained in public and been excoriated for among some circles.

He has indicated that he believes until the Israelis and Palestinians have economic ties and share in mutual prosperity, there will be no peace or security. His policy, therefore, when unconstrained by his government, has been one of attempting to foster stronger civic society and private enterprise in the West Bank, and encouraging cross-border (if we may call it a border) economic cooperation, rather than chasing agreements that might win UN approval but would leave the parties on the ground continuing to fight the same old war.

I’m inclined to agree. It is hard to see how any political solution can eradicate terrorism and continued conflict over land, but relatively easy to envision peace and ultimately true nationhood arising out of a mutual recognition of economic benefit.

Nikolai Luzhin, Eastern Promises October 18, 2011 at 6:15 pm

Wall Street Journal on new study that trade has no benefit to US:

The study rated every U.S. county for its manufacturers’ exposure to competition from China, and found that regions most exposed to China tended not only to lose more manufacturing jobs, but also to see overall employment decline. Areas with higher exposure also had larger increases in workers receiving unemployment insurance, food stamps and disability payments.

Competition from China’s imports in sectors such as toys is taking more of an economic toll in the U.S. than thought.

The authors calculate that the cost to the economy from the increased government payments amounts to one- to two-thirds of the gains from trade with China. In other words, a big portion of the ways trade with China has helped the U.S.—such as by providing inexpensive Chinese goods to consumers—has been wiped out. And that estimate doesn’t include any economic losses experienced by people who lost their jobs.

“There are really huge adjustment costs to local communities that were far worse than people had appreciated,” said David Autor of the Massachusetts Institute of Technology, who conducted the study with Gordon Hanson of the University of California, San Diego, and David Dorn of the Center for Monetary and Financial Studies in Madrid. While Mr. Autor, who specializes in labor markets, receives some funding from the National Science Foundation, this research was conducted independently of any interest group.

Ken October 19, 2011 at 1:12 am

Wall Street Journal on new study that trade has no benefit to US – Nick

“The study, conducted by a team of three economists, doesn’t challenge the traditional view that trade is ultimately good for the economy.” – actual quote from article to which Nick links.

Reading fail.


Greg Webb October 19, 2011 at 1:16 am

Excellent catch, Ken! Poor Nikki fails at most things that she tries.

Avi Mulye October 19, 2011 at 4:17 am

One word – Beautiful !!!

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