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… is from pages 521-522 of Jacob Viner’s 1946 address “The Prospects for Foreign Trade in the Post-War World,” as this speech is reprinted in the 1950 collection, edited by Howard Ellis and Lloyd Metzler, A.E.A. Readings in the Theory of International Trade [2] (original emphasis):
But with greater wealth comes a greater absolute capacity to profit from exchange, domestic or international. Greater wealth tends also to develop the demand for greater variety, and this tends to increase on the average the distance between point of consumption and point of production. Transportation costs, moreover, tend to be smaller in proportion to the value for quality goods than for the staples of low-income consumption, and cost to be less of a factor in determining the direction of consumer expenditures, and thus the cost of carriage from a distant source which is often referred to as a “natural protection” for home industry becomes less of a barrier to import for a rich than for a poor country. While it is by no means certain, therefore, that growth of per-capita wealth tends to lessen even the relative importance of foreign trade, there is no reason whatsoever for questioning that it operates to increase its absolute importance.
DBx: Viner here makes the important point that increased commerce with foreigners is not driven solely by supply-side considerations. That is, increased commerce with foreigners is not driven solely by changes that reduce foreigners’ costs of offering their exports for sale. Increased commerce with foreigners is driven also by demand-side changes – including, very importantly, rising prosperity at home which makes foreign goods and services more affordable and attractive.
Without a doubt, reductions in the costs of both transportation and communications increase foreigners’ eagerness to export. Likewise with reductions in tariffs and other artificial barriers to international trade. But even without any supply-side improvements, the wealthier the people of a country become, the greater will be their ability and desire to consume foreign-supplied goods and services (both directly, as consumers, and indirectly through the use by domestic producers of more imports as inputs).
So to lament increased commerce with foreigners – to lament increased globalization – is to lament not only the fruits of human ingenuity that decrease the costs of transportation and communications, it is also to lament the rising prosperity that enables and encourages consumers worldwide to seek out a wider variety of consumption options.
If protectionists such as Donald Trump, Peter Navarro, Chuck Schumer, and Sherrod Brown really want ordinary Americans to become more prosperous, why do they and other protectionists bemoan one of the most natural economic actions that people take when they in fact become more prosperous? And what is the good of greater prosperity if those who are more prosperous are prevented by the state from using their prosperity in whatever peaceful ways they judge to be most likely to improve their standard of living and well-being?
In summary, trade both promotes economic prosperity and is promoted by it.