Mr. Summers is a member of the staff of The Foundation for Economic Education.
When we were young, our parents provided for all our needs. As we grew older, we learned to rely on our brothers, sisters, teachers, and friends. Strangers, however, were not to be trusted. Besides, who needed them?
Societies have developed along similar lines. In the earliest societies, people lived pretty much by their own wits. Later, they turned to their immediate neighbors for help with hunting, harvesting, and mutual protection. Strangers, however, were to be feared and driven away.
Only in recent times have people realized that strangers have something to offer. Let us review what has been learned about dealing with strangers, in the hope that we won’t repeat past mistakes.
Strangers are different. They look different and sound different. They also produce different goods and services. They have different skills, different natural resources, and grow their crops in different climates and soils. If we want to share in the many things the world has to offer, we will have to deal with strangers.
It’s harder to go it alone. Sometimes a stranger will offer a product that we can make in our own community. But perhaps he can make it for less. We can get more goods and services by specializing in what we do best, and trading for the products that others make best.
The carrot is better than the stick. If we want to get what a stranger has to offer, it is best to offer something in return. We can take what he has by force, but then he will stop producing. We can place heavy burdens on his output, but then he will trade with others.
Some strangers are very smart. They try to figure out what goods and services we will want, and then do their best to cut the costs of production. When they fail, they sometimes suffer great losses. But when they succeed, they often become rich. And because we are the ones who use and enjoy their products, we also benefit. It is smart for us to let others work in freedom.
We are all strangers. Our customs and ways differ from those of everyone else. But just as other people offer their goods and services to us, we offer our products to them. When we rely on someone as a trading partner, he also relies on us. In free trade, each person provides for his own needs by helping provide for the needs of others.