What was that famous Adam Smith quote, the one that made the case for free trade better and more concisely than ever before, or ever since?
It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but buys them from the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a tailor.
What is prudence in the conduct of every private family, can scarcely be a folly in that of a kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage.
But, you know, the "prudent master of a family" does not engage his tailor and buy his shoes on credit, for prolonged periods of time and with no forseeable means of repayment. Debt securities do not represent the produce of our industry. Sometimes the wisdom of crowds is not found in central-bank manipulated markets, but in the messy kinds of preferences expressed by voters in elections.
I'm all for free trade. But what many businesses and economists refer to as free trade, in this real world circa 2006, is not trade at all. Trade implies two parties exchanging value. I'm a long-time, knee-jerk anti-protectionist. But at this moment, I don't know who to be more afraid of: US politicians catering to paleolithic economic xenophobia, or economists who'd describe as "free trade" the United States' growing addiction to goods and services it cannot pay for and the nation's ongoing, humiliating "soft default" on debts public and private via real depreciation of the dollar.
A man standing in line at a soup kitchen is involved in a voluntary transaction between two parties. He may think he's outsmarted the guy with the ladle, working the system, getting something for nothing. But that man in line at the soup kitchen is neither admirable nor prudent, and it is that guy with the ladle who holds the power. The problem with a free lunch is that it may not be there tomorrow. And a free lunch, however long it lasts, is not free trade.
|Steve Randy Waldman — Tuesday June 6, 2006 at 9:31pm||permalink|