What about business owners and investors who suffer as a result of trade liberalization? Smith seldom showed much regard for business people, viewing them as useful only because and insofar as they play an important role in enabling the economy to increase outputs of goods and services for consumption by the masses. Yet in making his case against immediate elimination of trade restrictions, Smith uncharacteristically exhibited more concern for business people than for workers. He wrote:
The undertaker of a great manufacture, who, by the home-markets being suddenly laid open to the competition of foreigners, should be obliged to abandon his trade, would no doubt suffer very considerably. That part of his capital which had usually been employed in purchasing materials and in paying his workmen might, without much difficulty, perhaps, find another employment. But that part of it which was fixed in workhouses, and in the instruments of trade, could scarce be disposed of without considerable loss. The equitable regard, therefore, to his interest requires that changes of this kind should never be introduced suddenly, but slowly, gradually, and after a very long warning.
Taken in its entirety, Smith’s case for eliminating some trade restrictions only gradually, instead of with the push of a button, is quite odd. Not only does he immediately backtrack, almost to the point of retraction, when discussing the plight of workers in jobs subject to competition from imports, he suddenly shows sympathy for the very business people whose venal clamoring for monopoly privileges he mercilessly skewers throughout all of The Wealth of Nations.
Perhaps in his expression here of sympathy for protected business people, Smith was being facetious. I’d like to think so, but I don’t. I believe instead that in the above-quoted passage Smith offered an avenue for tariff reduction that he hoped was practical politically. That is, given Smith’s utter hatred of business people who enjoy monopoly privileges, it’s unfathomable that he really felt sympathy for them suffering whatever losses they’d endure as a result of an immediate removal of all trade restrictions. It’s more likely that, being a clear-eyed realist hoping to raise the practical prospects of such removal, Smith figuratively bit his tongue and argued that at least some trade restrictions should be removed only gradually. Smith wasn’t one to allow the perfect to stand in the way of the good.
Whatever his true intention, Smith’s intellectual and ethical case – as opposed to what is perhaps a politically practical case – for a gradual rather than an immediate move to free trade is unconvincing. Or, at any rate, this case doesn’t convince me.
International trade is only one source of economic change. Other sources include changes in demographics as well as advances in technology, in management practices, in communications, in financing, and in logistics and distribution. And these changes occur incessantly in a market that’s as dynamic and as large as that of the US. Happily, there are no serious calls to allow changes from these non-trade sources to be introduced only gradually. I therefore see no reason in economics or in ethics to single out trade as a source of economic changes that can be tolerated or justified only if they are introduced bit by bit.
Like Adam Smith, I’d prefer that trade be liberalized gradually as opposed to not at all. But perhaps unlike him, if I were put in front of a button to eliminate immediately all species of economic protectionism, I’d press it with gusto.