The more I think about Steve’s post on Trump and trade the more alarmed I get.*
First things first – I do know who Wilhelm Röpke was; but no, he was not as important as Hayek.
I don’t think of Ricardian trade theory as being a theory of international trade so much as being a theory of trade in general. It explains the benefits of specialisation and exchange without individuals being in different countries. It is generally thought of as a theory of international trade because that was the context of its introduction.
If specialisation and trade makes two individuals better off it doesn’t matter much if those individuals are family, employer-employees, businesses-consumers, strangers, or foreigners. Specialisation and trade benefits both parties to the transaction.
Most people tend to agree with the logic of that proposition until you mention the word “foreigners”. Somehow the mutual benefits of exchange are annulled when foreigners are involved in a transaction. See the slight of hand in Steve’s post:
It is not a tenet of free market economics that losing one’s productive assets is beneficial for the nation, however much it may benefit a particular corporation.
(That is not Steve’s statement, but he did bold it.)
Now that isn’t a tenet of free market economics – because free market economics makes no such statement, or indeed, contra-statement. That sentence is actually incomprehensible.
Let’s break it down: “one’s productive assets” – whose productive assets? The “nation” does not own productive assets. In any event, what is meant by “productive” assets? In a free market “productive” assets are never lost. They either remain in their current usage or they are transferred to some or other usage. Unproductive assets are very often lost, or abandoned, or acquired by entrepreneurs who turn them into productive assets.
Then “beneficial to for nation”. Again it is unclear what this means. We are being invited to imagine that trade between foreigners creates some sort of negative externality that isn’t created when solely trading in the domestic economy. But how? and why? How do we even measure this “benefit to the nation”? Why should a free-market economist ever imagine that a useful unit of analysis is the “nation”? I understand that neoclassical economists think like this (and many of the extensions of the Ricardian theory work along these lines) but it isn’t clear to me why anybody sensible would think like this. The unit of analysis in free-market economics must be the individual (or the actual transaction between individuals).
So a completely incomprehensible statement leads to this loophole to sound logic:
Armed with this distinction we are liberated to adjust policy (within limits) without losing our economic integrity to free markets.
Well, yes. That must be trivially true – but not for the reason stated. But I like those limits to be very, very limited. So, for example, free trade in nuclear weapons is probably not a good idea. Slavery should be banned.
Now I also understand that the real world deviates from what might be described as being a free market. Governments control and regulate trade and do not allow unilateral free trade. Many trade agreements introduce various distortions. If all Trump was arguing was that any US trade deal would have to benefit the US and not just foreigners then it is hard to argue against his position. (In fact, he would find that US trade deals do benefit the US a great deal). Yet, my understanding is that Trump dislikes international trade per se. Mind you, he does (did?) own resorts and assets outside of the US – so he isn’t opposed to all trade with foreigners.
The notion that transactions between consenting adults, including foreigners, may or may not benefit the nation on the say-so (actually tweet) of an elected politician may well be conservative thought (I wouldn’t think so, but who am I to say) but it is certainly not libertarian thought and cannot be free market economics.
*During the election I expressed my disquiet on Trump’s trade views to several Trumpkins only to be told, “No, don’t worry, he is just saying that”. As if that made it all okay. Well, it seems he was serious.