From Subsistence to Exchange and Other Essays by Peter Bauer

Ideas That Deserve a Seat at the Debate over Globalization


Princeton University Press • 2000 • 168 pages • $19.95

Recent protests at the World Trade Organization meetings in Seattle, the International Monetary Fund in Washington, D.C., and the Republican and Democratic national conventions, seem to have reinvigorated the critics of globalization. Are economists at a loss to answer those protests?

Sadly, Lord Bauer has not been included in the recent debates over globalization. He offers cogent arguments to temper the anti-Western guilt that permeates the anti-globalization movement. Many economists agree with Bauer as to what promotes economic growth, even if they are reluctant to admit such agreement in public.

This collection of Bauer’s essays gives us his explanation of the primary causes of economic growth. His writings are intellectually significant but likely to be ignored by the general press and anti-Western mouthpieces because what they suppose is the “disease” is actually the “cure”—economic development. The general debate over globalization is really a debate over trade and economic growth in the less-developed countries, and Bauer provides ample evidence and convincing logic showing why trade is good and why economic growth occurs for all the reasons anti-globalists claim it cannot.

Bauer observes that economic growth in the international arena occurs after domestic exchange has been established. Indeed, how are people in one country to establish trade relations with others if they cannot or do not trade amongst themselves? Further, he emphasizes the valuable mechanisms and mores that market exchange provides a society. The anti-globalists never grasp the importance of voluntary exchange, but Bauer shows it to be crucial.

Then Bauer reminds us of the obvious: that the developed countries of today were once underdeveloped. The surplus of resources available to the indigenous people of pre-Columbian North America did not guarantee economic growth. Likewise, the relative lack of natural resources did not impede Great Britain or the Asian Tigers from becoming developed. Rather, the innovative development of relatively free, stable, and resilient market exchange combined with contacts with other similar systems ensured that the lesser-developed and developing countries of the fifteenth and sixteenth centuries are today developed. Today’s lesser-developed countries can attain prosperity in exactly the same manner.

The implicit warning Bauer gives is that obtaining the sacred title of “developed” will not and cannot occur overnight or even within a few years. Rather, the path to development may take generations; another point anti-globalists seem eager to dismiss.

Bauer contends that the coincidence of domestic markets and contact with the developed countries enable growth and development. Trade with the developed world expands choices, but it also increases local knowledge and institutionalizes the market structures that are necessary for growth. Rather than accuse the West of exporting hegemony, Bauer contends that contacts with Western societies motivate and facilitate development, regardless of location on the world map.

Conclusion: market economies offer the quickest route to sustained, environmentally friendly, and equal-opportunity growth. Bauer argues convincingly that assumed and directed guilt has made the West afraid to accept the ramifications of its success. Rather than apologize for their economic success, those who enjoy the benefits of relatively free economies should argue that the path to sustained, eco-friendly growth is to have more contacts with the West and to adopt laissez-faire policies.

Why read this collection? If one questions that what has been good for the West is also good for the rest of the world, Bauer offers argument and evidence to end your confusion: what has been good for the West, and the East, is good for all developing countries. If you bridle against Western “hegemony” and wish that economic growth would occur instantaneously, or only after massive wealth transfers from the West, Bauer offers a strong case for economic freedom. His ideas deserve a seat at the debate over globalization.

Craig Depken is an assistant professor of economics at the University of Texas at Arlington.


June 2001

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December 2014

Unfortunately, educating people about phenomena that are counterintuitive, not-so-easy to remember, and suggest our individual lack of human control (for starters) can seem like an uphill battle in the war of ideas. So we sally forth into a kind of wilderness, an economic fairyland. We are myth busters in a world where people crave myths more than reality. Why do they so readily embrace untruth? Primarily because the immediate costs of doing so are so low and the psychic benefits are so high.
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