Arbitrary impediments to free commerce among the citizens of the world, namely politically drawn national borders, have become increasingly permeable in recent years.  The trend has been called globalization, but should be separated from the very real erosion of national sovereingty in favor of broader regional or international governance.  While still falling far short of actual free trade, the free-er trade that we have come to know has brought about changes that have upset many.  But what should be kept in mind is that the free market is the best way of distributing scarce resources and is inherently moral.

This world is faced with scarcity of all items of value (value is inextricably linked to scarcity after all).  The free market approach to distributing those scarce goods is built upon every person making decisions in their own self interest, i.e. selfishness.  Our country’s markets have largely remained more independent of government intervention than other major countries for many scores of years and the result is that we have captured a very large percentage of the scarce resources this world has to offer.  Because resources are scarce and we control the lion’s share the only way that poor countries can increase their standard of living is at our expense, whether through direct distribution of tax dollars from us to other countries or via individuals in those other countries offering better value in the marketplace and beating out incumbent merchants in the wealthy countries.

The true beauty of free markets is that they are both unquestionably fair and ruthlessly efficient.  Fairness is achieved because resources are distributed through merit, rather than by political dictates.  Those who work the hardest and hone the most desirable talents reap the greatest rewards.  That merit based system promotes upward social and economic mobility by visibly incentivizing hard work and innovation.  Conversely, it can quickly and painfully punish complacency and lethargy.

One of my favorite quotes is from Shakespeare’s Julius Caesar where Caesar states that Cassius “has a lean and hungry look.”  That lean and hungry look is emblematic of who wins out in a free market: those who want it the most.  Our country has become rotund and satisfied.  Every American, from the impoverished to the rich, enjoys a lifestyle that is measurably superior to many others throughout the world.  While “poor” welfare recipients in America chat on their cell phones standing in line at the grocery store before they purchase generous amounts of food there are tribal residents in other countries who walk for miles to fetch water or firewood.  While homeless alcoholics drink themselves into a stupor in government provided housing with 24 hour medical care in Seattle children starve to death elsewhere.  As bad as you might think you’re lot in life is, yours is far better than that enjoyed by millions around the world.  Those individuals really do have a lean and hungry look - and they will eat our lunch if given the opportunity.  Caesar had good reason to fear Cassius, who was conspiring with Brutus to kill him, and Americans have good reason to fear open competition with the poor in the developing world.

While our country has become unquestionably the richest in the world we’ve sought to counter the overt moral injustice that exists as a direct result of our prosperity.  Unfortunately those efforts have typically come via avenues like low interest loans to corrupt governments, haphazard private contributions, and direct government assistance with strings attached.  The fruits of this benevolence have been marginal at best.  The most obvious way to effectively help the poor is to include them in free trade.

The results of increased free trade are demonstrable and there are a litany of countries that can be viewed as beneficiaries, such as China.  This should please and excite us since we, as a country, have sought to lift others up.  But, whether the governments of the wealthy countries take money from their citizens against their will and transfer it to the poor countries or the free market effects a comparable transfer of wealth one thing is constant: the poor countries benefit at the expense of the rich.  At least the free market system justifiably rewards those who deserve it.

As with many things, making the just, moral decision to help others by opening markets sounds good to everyone on paper, but lose their luster when the prosperous realize that they must now compete with the lean and hungry.  A recent Financial Times poll suggests that large numbers of Europeans and Americans are opposing free trade.  Clearly, many workers are distraught over job losses in many sectors to developing nations.  Although their despair is understandable, I argue that their involuntary sacrifice is for the best of society as a whole, and in many cases, for the newly unemployed themselves.

First of all, it should be made clear that workers whose jobs are outsourced are not the victims.  They choose, individually and collectively, to demand wages that are no longer competitive.  Employers merely make the rational decision to minimize their cost basis in order to remain competitive.  The alternative is to foolishly retain high wage workers and be gradually driven out of business by competitors who seek to minimize cost.  We can’t honestly condemn the employers because our own similar choices as consumers force their hands as we relentlessly pursue the best value products available.  The decision by our governments, both state and federal, to impose minimum wages only compounds the problem because the compulsory wages do not simultaneously increase the actual value of the labor.  Minimum wage laws just take away the rights of both the employer and the employee to negotiate a mutually agreeable wage.

What is frequently forgotten, or never understood to begin with, is that the upheaval caused by the free market can actually help the affected.  Having a job is comfortable.  You know you’ll be able to pay for your next meal.  There are often many benefits, including accrued vacation time and medical insurance.  There are numerous reasons not to leave.  The most prominent is often uncertainty about what would follow.  This situation creates an underutilization of resources.  People choose to stay in jobs that they may be under- or over-qualified for or that they may simply dislike for fear of leaving and ending up in worse shape.  But free markets create what is commonly called churn.  People lose their jobs to others who offer a better value to the employer.  Even though this creates an immediate hardship, it also enables the unemployed to seek out opportunities that they might otherwise have avoided due to uncertainty.  The Enron meltdown enabled some employees to pursue such opportunities.

One other moral benefit of the free market is tolerance.  Because the free market is the best way to distribute resources, which means there is as little waste as possible, it also results in the greatest prosperity.  As Brink Lindsey notes in his new book “The Age of Abundance: How Prosperity Transformed America’s Politics and Culture,” prosperity has benefits other than the material ones we’ve come to know.

“American capitalism is derided for its superficial banality, yet it has unleashed profound, convulsive social change,” he writes. “Condemned as mindless materialism, it has burst loose a flood tide of spiritual yearning. The civil rights movement and the sexual revolution, environmentalism and feminism, the fitness and health-care boom and the opening of the gay closet, the withering of censorship and the rise of a ‘creative class’ of ‘knowledge workers’ — all are the progeny of widespread prosperity.”

The societal progress we’ve enjoyed in the past half century or so was previously unimaginable because most in society were concerned first and foremost with where their next meal would come from.  Capitalism has afforded us the ability to look beyond immediate individual survival towards greater issues.

Free trade inarguably promotes social justice.  Managed trade can distort the otherwise virtuous results, but even this controlled trade yields far better, more morally just results than any other method of distributing resources.  The pains associated with removing constraints on trade can be painful, but ultimately the pain gives way to increased prosperity for all who earn it.  Instead of offering hostility we should embrace the unpredictable, powerful ability of the free market to spread both affluence and morality.

Related content:

This entry was posted by Brian on Thursday, July 26th, 2007 at 8:27 pm and is filed under Economy, Rants. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site. Please note the copyright policy.