This is a book that operates on several levels and succeeds, to a greater or lesser degree, on all of them. Centrally, it is a history of economic thought in the form of extracts and short essays by the prominent advocates of free trade and protectionism, extending from mercantilist times to the present. Thus the reader is treated to a roughly chronological and fairly complete view of the development of economic thought and understanding of international trade and finance over more than two centuries, as well as the vital points in the free trade/protectionist debate.
Overbeek, professor of economics at the University of the Virgin Islands, divides the book into historical periods and for each one presents writings by the most prominent writers on both sides of the issue. He gives a short history of the periods regarding international trade and the public debate over the issue, and discusses how government policies were affected. He also provides a biography of each author and a summary of his arguments.
In his choice of material, I give Overbeek an A-plus. The most important writers are included, from Thomas Mun through Alexander Hamilton, Friedrich List, Mussolini, John Maynard Keynes, and Robert Reich on the protectionist side, and from David Hume and Adam Smith through John Stuart Mill, Ludwig von Mises, Gottfried Haberler, Melvyn Krauss, and Paul Krugman on the free trade side. Moreover, the extracts Overbeek has selected are all readable by anyone with even a rudimentary familiarity with economics. Abstruse mathematics is thankfully absent. My only criticism is that some of the readings are longer than necessary to make the author’s argument, while others seem too short. In an apparent attempt to shorten the book to its still-daunting 656 pages, the writings of some key economists (Henry Hazlitt and Milton Friedman chief among them) have been left out in favor of summaries by Overbeek.
The book’s virtue is that it clearly presents the arguments of both sides on the free trade debate. One cannot read both with any objectivity without seeing that the free traders have by far the stronger arguments. Interestingly, the reader observes that the brilliant breakthroughs occurred early on and that the principles established have never been overthrown. Particularly crucial are Ricardo’s demonstration of the principle of comparative advantage and David Hume’s demonstration of how monetary flows through international payments imbalances alter exports and imports to bring equilibrium to those balances and generate a natural distribution of specie. Those arguments destroyed the rationales of the mercantilists for trade barriers.
From then on, the case for free trade evolves only in detail and sophistication. The point of production is consumption, not vice versa, and the point of trading internationally is the imports we can thus obtain more cheaply (literally using fewer domestic resources) than if we produced them ourselves. Exports are simply the way we pay for imports. What is more, international trade has little effect on domestic employment, except to allocate labor from less efficient to more efficient uses.
Just as important as the compelling arguments in favor of free trade, the readings also illuminate the sordid history and motives of the protectionists. They never grasp the truly anti-social nature of their project, which is characterized by blind nationalism, chauvinism, and xenophobia. Even otherwise democratic and “liberal” protectionists must be made uneasy when they see their association with dictators and authoritarians of every stripe, all of whom adhere to the same protectionist doctrines they do.
The book contained many surprises for me. I was amazed at the brilliance of Nicholas Gerard Pierson, arguing for free trade in the late nineteenth century, whose work was unknown to me. On the other hand, I was disappointed to read the unwarranted concessions made to protectionism by such eminent free traders as F. W. Taussig, A. C. Pigou, and Lionel Robbins.
The biggest surprise for me was historical. It is common knowledge that the reaction against classical liberalism that eventually generated the totalitarian states and world wars of the twentieth century began in Germany in the nineteenth century. But without Overbeek’s book, I would not have known that Friedrich List, the father of German protectionism, lived in the United States and was heavily influenced by American protectionists such as Alexander Hamilton and Daniel Raymond, by whom he became convinced that protectionism had been vital to American economic development. List returned to Germany and spread that erroneous view with great and catastrophic effect. Hamilton has always been my least favorite among the Founders, and now I see that he and his ilk have even more to answer for than I had previously supposed.
There is far more in this book than can be described in a short review. It is costly to be sure, but you definitely get what you pay for.
James Rolph Edwards is professor of economics at Montana State University.