In a new piece written for Public Discourse, Samuel Gregg revisits crucial points made by Adam Smith in his classic Inquiry into the Nature and Causes of the Wealth of Nations, in which Smith argues for an embrace of international trade. Unfortunately, many of Smith’s ideas have today been cast aside for stronger cries for economic nationalism. Gregg combats some misconceptions of free, global trade by revealing the dangerous results which would occur if nations chose to only implement ‘neo-mercantilism’ in the name of national interest.
Gregg organizes Smith’s insights into three categories, first addressing how Smith proved that a country’s economy “flowed from the development and extension of the division of labor within and between nations…the wider and deeper the size of the market, the greater the division of labor and the subsequent gains in productivity and growth.” Smith’s understanding of the benefits of international trade has been undermined, however, by ideas encroaching on rights to property and labor. In the wake of growing restrictions, “a retreat from free trade would not only worsen this situation. It would also raise the price of a good number of foreign-made products and services, thereby putting many such goods beyond the reach of lower-income Americans.”
Second, limitations on the market would only serve to dampen healthy competition:
Of course, a nation’s common good cannot be reduced to economic dynamism or GDP growth. Smith himself never made such claims. Nor, however, should we forget something else underscored by Smith: that all forms of economic nationalism are premised on denying freedom to large segments of a country’s population.
Many businesses regularly conflate their economic self-interest with the public good to justify particular favors from the state and government protection from foreign and domestic competitors.
The last facet of free trade studied by Smith grants free trade the inability to completely eradicate war but does explain how global trade aids in moving closer to understanding between nations:
One effect of free trade within and between countries is that it encourages us to look beyond local, regional, and national boundaries and even major political and religious differences. We realize that everyone has a propensity, as Smith wrote, to “truck, barter, and exchange,” something that “is common to all men, and to be found in no other race of animals.” This facilitates our interaction with, and awareness of, people whom we might not otherwise encounter.
Gregg’s article illumines the efficiency of free international trade which Smith supported and refutes rhetoric commonly used to tear it down. Read Gregg’s whole piece, Adam Smith, Economic Nationalism, and the Case for Free Trade.