The Nationalist Case for Free Trade

LAW & ECONOMICS, Misc, MONEY / Tuesday, September 17th, 2019

By Joseph T. Salerno on the Mises Wire

The founders of classical economics, namely David Hume (1711-1776), Adam Smith (1723-1790), and David Ricardo (1772-1823) and their British followers were fervent advocates of the principle of free trade between nations. Even more so were J.-B. Say (1767-1832), Frederic Bastiat (1801-1850) and their Continental disciples of the liberal school (who for simplicity I will broadly classify as classical economists because of their link to Adam Smith). Despite their devotion to free trade, the classical economists were nationalists. They viewed free trade as one of the most important means for advancing the security, prosperity, and cultural achievements of their own nations. In this sense, they tended to be what Ludwig von Mises described as “peaceful” or “liberal” nationalists,1 who recognized the existence of profound differences among nations and nationalities and loved their own nations above all others, yet discerned that the economic and cultural flourishing of each nation was inextricably linked with the flourishing of all other nations. In recognizing this international harmony of interests, the classical economists were naturally thoroughly cosmopolitan and anti-war.

The cosmopolitanism and pacifism of the classical economists has in the past been misconstrued — often deliberately — by their protectionist opponents as a lack of affection and concern for their nation and its interests. This erroneous interpretation of the classical case for free trade has once again gained currency in the writings of some contemporary libertarians and free-market economists who have embraced the anti-nationalist, globalist agenda. Fortunately, eminent historians of economic thought have previously demolished this gross caricature of the classical position and clarified the rationale of the classical economists in promoting free trade. Let us take a few examples.

Lionel Robbins was a British economist who was heavily influenced by Mises, Hayek, and the founders of the Austrian school early in his career. He was also one of the foremost historians of the classical school of economics, having written several articles and books on the subject. Robbins was emphatic in defending the view that the British classical economists promoted free trade because it improved economic conditions for Great Britain:

To the extent to which [classical economists] repudiated former maxims of economic warfare and assumed mutual advantage in international exchange, it is true that the outlook of Classical Economists seems, and indeed is, more spacious and pacific than that of their antagonists. But there is little evidence that they often went beyond the test of national advantage as a criterion of policy, still less that they were prepared to contemplate the dissolution of national bonds. If you examine the ground on which they recommend free trade, you will find that it is always in terms of a more productive use of national resources. . . . I find no trace anywhere in their writings of the vague cosmopolitanism with which they are often credited by continental writers [such as the protectionist, Friedrich List]. . . . All that I contend is that we get our picture wrong if we suppose that the English Classical Economists would have recommended, because it was good for the world at large, a measure which they thought would be harmful to their own community. It was the consumption of the national economy which they regarded as the end of economic activity.2

In a classic work, published just after World War II, Edmund Silberner surveyed the thought of the leading economists of the nineteenth century, including the British classical and French liberal economists, on the problem of war, its causes and solution.3 Silberner pointed out that the classical economists, whom he called “liberals,” viewed war as “economically and socially harmful” and “not only immoral but stupid” because “it is in effect the natural state of men ignorant of the laws of political economy.”4 Silberner summarized the classical-liberal position on the connection between free trade, prosperity, war, and the science of political economy as follows:

By favoring international accord . . . [free trade] contributes not only to the material prosperity of nations but also to the intellectual and moral progress of mankind as a whole. Of all known economic systems it is therefore . . . the most favorable to each nation as well as to the human race in its entirety. . . . [T]he establishment of commercial freedom will bring about one of the most profound revolutions in history. Free trade will assure to all men the maximum possible of material well-being, which in fact will know no other limits than the natural resources of the globe and the creative work of men. What is more, the influence of free trade will not be restricted to the economic field: freedom of international commerce will also considerably increase the external security of nations. . . . The role assigned by the liberals, in this matter, to political economy is most significant. This science must deal with war because peace is an essential element of public prosperity. Political economy . . . is regarded by the liberals as the science par excellence of peace. The diffusion of economic knowledge thus tends, in their eyes, to prevent wars.5

Having demonstrated the profoundly cosmopolitan and pacific attitudes of the classical economists, Silberner, like Robbins, emphasized that they were first and foremost nationalists. Thus he wrote: “Though hostile to militarism, they make it clear that their attitude is opposed neither to an enlightened patriotism nor to the principle of nationalities.”6 In addition, the classical economists not only saw free trade as the most effective policy for avoiding war but also as the best means of preparing for a war that was impending. According to Silberner, “whatever their differences of view [on the relative effectiveness of free trade as a deterrent to war] they all take it for granted that, if war is truly inevitable, free trade, by enriching the nations, prepares them better for it than does the protective system, which impoverishes them all.”7 Finally, despite their abhorrence of war, the classical economists, “with a few exceptions,” were “opposed or hostile” to surrendering national sovereignty to a “supernational peace organization.”8

In an important recent work, Razeen Sally has investigated the views on international economic order held by classical liberals from Hume and Smith to Wilhelm Röpke and other economists of the twentieth-century German Ordoliberal school.9 In his treatment of Hume and Smith, Razeen argues that both view a person’s discriminative love for his or her nation as psychologically and morally warranted:

[B]oth Hume and Smith strongly believe that human fellow-feeling (or approbation of others)—the famous ‘sympathy’ principle in eighteenth-century moral philosophy—might apply within a nation but hardly at all between nations. Sympathy subsumes a sentiment of patriotism or ‘love of country,’ but does not extend to ‘love of mankind’. . . . Both Hume and Smith opine that this is right and proper, for the public interest is secured when one fixes one’s attention on something limited and proximate, stretching to patriotism or love of country, rather than something vague and uncertain like love of humanity.10

Accordingly Razeen insists that Hume’s and Smith’s advocacy of free trade is based on their belief that it is the policy that best conduces to enhancing the wealth and welfare of their own nation. Sally is emphatic on this point:

. . . Hume and Smith stick to considerations of the nation and the national interest as practical objects of analysis. This is a point of absolutely vital importance. Note that Smith does not expatiate on the wealth of ‘the world’; rather he focuses on the wealth of nations. First and foremost, the interrelation of economic phenomena is examined according to the criterion of national, not global, wealth maximization. . . . In contradistinction to the mercantilists, however, he holds that, under free trade, the national interest corresponds to the global interest. However, as a by-product, such a regime benefits the rest of the world through a better allocation of world resources, not to mention the dynamic gains of technology transfer, competitive emulation, and a widening market that spread across the globe. . . . This then is the context for Smith’s advocacy of unilateral free trade which the nineteenth-century classical economists believe in as well: one or a number of nations adopt free trade independently in their own interest; others, also acting in their self-interest, are likely to follow the example of pioneering free trading nations once the benefits of such a policy become readily apparent. [Emphases in the original.]11

We need not, however, depend only on the interpretation of modern historians of thought on this matter for we have the words of the classical economists themselves. There is no better place to start than a famous statement by one of the first classical economists, David Hume. Hume’s dictum poignantly illustrates how, in the eyes of classical economists, free trade perfectly harmonized nationalism and cosmopolitanism.

I shall therefore venture to acknowledge, that, not only as a man, but as a British subject, I pray for the flourishing of commerce of German, Spain, Italy, and even France itself. I am at least certain, that Great Britain and all those nations, would flourish more did their sovereigns and their ministers adopt such enlarged and benevolent sentiments towards each other.12

As Robbins pointed out,13 Adam Smith “expressly repudiates” the globalist position that places the welfare of one’s own nation on all fours with that of other nations:

France may contain, perhaps, near three times the number of inhabitants which Great Britain contains. In the great society of mankind, therefore, the prosperity of France should appear to be an object of much greater importance than that of Great Britain. The British subject, however, who upon that account should prefer upon all occasions the prosperity of the former to that of the latter country, would not be thought a good citizen of Great Britain. We do not love our country merely as part of the great society of mankind—we love it for its own sake, and independently of any such consideration.14

Ricardo’s closest disciple, J. R. McCulloch (1789-1864), argued that free trade unites all nations and peoples in common interest. “Commerce embracing different nations,” declared McCulloch,

by. . . making every people to a great extent dependent on others . . . forms a powerful principle of union and binds together the universal society of nations by the powerful ties of mutual interest and reciprocal obligation.15

Now McCulloch is not saying that free trade will dissolve peoples and nations into a homogeneous globalist mass or eradicate the desire most individuals have for the flourishing and pre-eminence of the nationality or “people” they identify with. In fact he is saying quite the opposite: that free trade and the mutual benefits it confers on all nations are the only rational means available to sustain one’s own nation and secure its desired advancement and distinction among other nations. In McCulloch’s words:

It has been shown over and over again, that nothing can be more irrational and absurd, than that dread of the progress of others in wealth and civilization that was once so prevalent; that what is for the advantage of one state is for the advantage of all; and that the true glory and real interest of every people will be more certainly advanced by endeavoring to outstrip their neighbors in this career of science and civilization, than by engaging in schemes of conquest and aggression.16

Henri Baudrillart (1821-1892) was an eminent French liberal economist and economic historian and a follower of Bastiat’s. He was an avid free trader and anti-militarist, who objected to standing armies. Baudrillart however maintained that international free trade and division of labor are not only consistent with separate nations and nationality differences but require such separateness and differences. Wrote Baudrillart:

Those who do not consider at all the differences produced among men by climate, race, and institutions, are the very theoreticians of prohibitions who want every nation to be self-sufficient and devote itself to all industries at the same time. . . . By endeavoring to maintain that division of labor which Providence itself has established among men, political economy is obviously not hostile to the spirit of nationality; it bases the alliance of peoples on the difference of characters and faculties; it wants each to excel under the conditions peculiar to it, and each to produce so as to have means of exchange. To generalize and extend trade, it localizes industry.17

It is imperative to emphasize the nationalist basis of the classical case for free trade for two reasons. First, modern libertarians and “classical” liberals who favor open borders and are indifferent to the dissolution of historical nations often invoke the names of Hume, Smith, and Bastiat in support of their position. But as we saw, the liberality, pacifism, and cosmopolitanism of these great thinkers and their nineteenth-century followers is far different from the homogenizing globalism embraced by their modern epigones. Second, without taking a position on the vexed question of immigration, it is important to bear in mind that the classical rationale for the free movement of goods cannot be simply extended to justify the “free movement of labor,” that is, open borders, especially if the result is mass immigration. As nationalists, the classical economists would hardly look on with equanimity as their nation disintegrated.

  • 1. For Mises’s description and defense of liberal nationalism, see Joseph T. Salerno, “ Mises on Nationalism, the Right of Self-Determination, and the Problem of Immigration ,” Mises Wire (March 17, 2017), and the references contained therein.
  • 2. Lionel Robbins, The Theory of Economic Policy in English Classical Political Economy (London: Macmillan & Co. Ltd., 1953), pp. 10-11.
  • 3. Edmund Silberner, The Problem of War in Nineteenth Century Economic Thought, trans. Alexander H. Krappe (Princeton, NJ: Princeton University Press, 1946).
  • 4. Ibid., p. 280.
  • 5. Ibid., pp. 281-82
  • 6. Ibid., p. 282
  • 7. Ibid.
  • 8. Ibid., p. 283.
  • 9. Razeen Sally, Classical Liberalism and International Economic Order: Studies in Theory and Intellectual History (New York: Routledge, 1998.
  • 10. Ibid., pp. 56-57.
  • 11. Ibid., p. 58
  • 12. David Hume, “ Of the Jealousy of Trade ,” in David Hume, Writings on Economics, ed. Eugene Rotwein (Madison, WI: The University of Wisconsin Press, 1970), p. 82.
  • 13. Robbins, The Theory of Economic Policy, p. 10, fn. 5.
  • 14. Adam Smith, The Theory of Moral Sentiments (New Rochelle, NY: Arlington House, 1969), p. 337
  • 15. John R. McCulloch, The Principles of Political Economy, 5 th ed. (New York: Augustus M. Kelley, 1965), p. 92.
  • 16. Ibid., pp. 92-93.
  • 17. Henri Baudrillart quoted in Silberner, The Problem of War in Nineteenth Century Economic Thought, p. 111.

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