Globalization and Free Trade

By Ebeling, Richard M. | Freeman, April 2004 | Go to article overview

Globalization and Free Trade


Ebeling, Richard M., Freeman


Freedom of trade is really a very simple concept. Each individual should be at liberty to buy from and sell to whomever he wishes on mutually agreed-upon terms. Whether the partners to this trade live next door to each other or are separated by thousands of miles should make absolutely no difference to the logic of the idea.

For thousands of years most people lived, worked, and died within a small radius of the place where they were born. Households and small communities went about the business of life with a high degree of local self-sufficiency. Of course, there was always a limited amount of what today we would call "international" trade even among the ancient Greeks and Romans. But, for most people, goods produced in faraway lands were unavailable because of the natural difficulties of transportation, or were too expensive.

This began to change during the last 200 years. Railways and steamships made traveling easier and less expensive in the nineteenth century. Modern engineering shortened the distances between different parts of the world as tunnels were built through mountains, bridges spanned wide and powerful rivers, and canals were dug across strips of land connecting continents.

But most important, the nineteenth century saw the triumph of classical-liberal ideas-ideas that emphasized individual liberty, private enterprise, limited government, and free trade. It was the lowering of political barriers separating peoples and regions that enabled the feats of technology and engineering to bring the world closer together, and allowed men on the five inhabited continents to trade with each other.

Now people could purchase resources and raw materials that before had been far beyond their geographical and financial reach, and invest their capital and labor wherever it seemed most profitable and advantageous. Moreover, the growing number of different finished goods manufactured with those resources could be sold to tens of millions of people everywhere around the planet.

Even with the collectivist forces of the twentieth century, which reimposed political barriers to trade through central planning, regulation, and protectionism, the impulse toward the internationalization of production and trade has continued up until our own time. But the two world wars and the reactionary attempts to coercively establish socialist systems on many parts of the globe created perverse imbalances in the extent and speed of economic development in various countries and continents.

Because the United States was exempt in the twentieth century from the direct physical destruction of war that impacted so many other nations, and because experiments with socialist and interventionist ideas were implemented less pervasively in America than in many other parts of the world, U.S. economic development and growth dwarfed the rest of the planet in the immediate decades after 1945. America, therefore, had an absolute and a comparative advantage in a wide variety of agricultural and manufactured goods. The American people consumed a large proportion of the world's output because they produced a huge amount of it.

But over the last six decades more and more of the rest of the world have been catching up. During the late 1940s and 1950s, European and Japanese reconstruction overcame the destruction of World War II. In the 1970s and 1980s a small but growing number of countries in East Asia moved toward more market-oriented economies. …

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