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‘I’ve Not Read Adam Smith, But I Know that You – Who Have Read Him – Get Smith Wrong’

Here’s a letter to a new correspondent:

Mr. G__:

I’m sorry that my essay at National Review on Adam Smith and trade policy caused you such anger.

You write that “[i]t is unthinkable Smith would back free trade in the 21st century with its wide inequality in wages.  A man of his intelligence must know that free trade will ruin a country like the US if it trades with places where workers make only a fraction of what US workers make.”

You admit to having not read Smith. Were you to do so you’d find nothing in his work to validate your contention that he would object to the government of a high-wage country allowing its citizens to trade freely with the people of a country where wages are much lower.

Indeed, were Smith still alive I suspect that he would respond to you by asking a question such as this: If high-wage Americans are harmed by trading with non-Americans whose wages are much lower than are Americans’ wages, is Jeff Bezos harmed by trading with nearly everyone with whom he trades? After all, the difference between Bezos’s hourly earnings and those of Amazon employees – and also of Bezos’s chefs, housemaids, tailors, bodyguards, chauffeurs, and pilots – is far larger than is the difference between the hourly earnings of ordinary American workers and those of workers in the poorest countries with which we trade. So if you’re correct, Bezos must daily become ever more impoverished. The fact that he doesn’t become ever more impoverished – the fact that Bezos obviously gains from trading with people whose hourly earnings are a tiny fraction of his own – is strong evidence that you’re not correct to assume that earners of high wages are harmed when they trade with earners of lower wages.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030