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Tuesday, February 13, 2018

Global Trade Is the Way to Global Peace and Prosperity

The "capitalist peace" may be a heresy, but it's real.

Capitalism is not nationalism. Capitalism knows no borders.

Capitalism is not an exclusively American phenomenon. Free trade is the implementation of capitalism on an international basis.

Tiger Economies

In his marvellous book, Eat the Rich, P.J. O’Rourke points out that trade restrictions with that bastion of communism, Cuba, had, in fact, helped to entrench communism, not to erode it. A libertarian as well as a humorist, O’Rourke opines that the trade embargo gave “Castro an excuse for everything that’s wrong with his rat-bag society. And free enterprise is supposed to be the antidote for socialism. We shouldn’t forbid American companies from doing business in Cuba, we should force them to do so.”

The four Tiger Economies are economic powerhouses and bastions of capitalism.

Much of the exportation of western ideals and western capitalism has taken over Asia. The four Tiger Economies, South Korea, Hong Kong, Taiwan and Singapore, are economic powerhouses and bastions of capitalism. O’Rourke explores Hong Kong in his book. He sees it as “the best contemporary example of laissez-faire” in the world.

He quotes John Cowperthwaite, the architect of the Hong Kong miracle who adopted a hands off approach to the economy: “… in the long run the aggregate of decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is less likely to do harm than the centralized decisions of a government; and certainly the harm is likely to be counteracted faster”.

These tiger economies spread and now include the Tiger Cubs — Indonesia, Malaysia, Thailand, Vietnam and the Philippines. The Wikipedia article on the Tiger Economies notes that “in Latin America, the fast-growing and emerging economies, oriented to free trade and free market development are called the Pacific Pumas which consist of Mexico, Chile, Peru & Colombia.”

Economies adopting capitalism and free trade are emerging in Africa as well. This is all part of a policy of globalization — freeing up borders to the movement of goods and people with a minimum of government restriction.

Globalization Has Increased Prosperity

In his excellent book, The Rational Optimist, Matt Ridley details some of the triumphs of this policy, not just for the world but for the west as well. The first chapter, “A Better Today: The Unprecedented Present” should be mandatory reading for every doom and gloom soothsayer out there of whatever stripe. Ridley chronicles the incredible increase in prosperity for everyone that has resulted from international capitalism and free trade.

One sub-section is called “The Declaration of Interdependence.” In it he argues that “self-sufficiency is not the route to prosperity.” He points out that trade enables us to improve our wealth through the division of labor and specialization. He cites Leonard Read’s classic essay “I, Pencil” which shows how an item as lowly as a pencil results from the input of many people from around the world, all brought together by the invisible hand that Adam Smith wrote about.

Ridley lays out some statistics that are truly astounding.

“It is hard to find any region that was worse off in 2005 than in 1955,” he writes. “The average South Korean lives twenty-six more years and earns fifteen times as much income each year as he did in 1955 (and earns fifteen times as much as his North Korean counterpart). The average Mexican lives longer now than the average Briton did in 1955. The average Botswanan earns more than the average Finn did in 1955. Infant mortality is lower in Nepal than it was in Italy in 1951. The proportion of Vietnamese living on less than $2 a day has dropped from 90 percent to 30 percent in twenty years.

“The rich have got richer but the poor have done even better. The poor in the developing world grew their consumption twice as fast as the world as a whole between 1980 and 2000. The Chinese are ten times as rich, one-third as fecund and twenty-eight years longer-lived than they were fifty years ago. Even Nigerians are twice as rich, 25 percent less fecund and nine years longer-lived than they were in 1955. Despite a doubling of the world population, even the raw number of people living in absolute poverty (defined as less than a 1985 dollar a day) has fallen since the 1950s.”

He notes that according to the United Nations, “poverty was reduced more in the last fifty years than in the previous 500.”

Not only has globalization increased wealth and prosperity worldwide, it has produced a more peaceful world. That may seem an incredible claim considering continuing wars in places like Syria and parts of Africa, but it is true.

Unprecedented Peace

In his monumental book, The Better Angels of Our Nature: Why Violence Has Declined, Steven Pinker describes the steady decline of violence over the centuries, a trend that continues to this day, despite blips like the World Wars which he considers anomalies. He writes about the Rights Revolutions — civil rights, women’s rights, children’s rights, gay rights. He writes about the reduction in infanticide and child abuse, the effective end of lynchings, the steady decrease in violence towards gays and the increased awareness of spousal abuse and its reduction as a result.

Since 1945 we have entered an unprecedented period of peace.

And he writes about the Long Peace. Since 1945 we have entered an unprecedented period of peace. He presents a detailed argument complete with statistics to support his thesis. He looks for an explanation. The increase in the number of stable democracies is a factor. But an even larger factor is what he calls the Liberal Peace.

“The Democratic Peace,” he writes, “is sometimes considered a special case of a Liberal Peace — “liberal” in the sense of classical liberalism, with its emphasis on political and economic freedom, rather than left-liberalism. The theory of the Liberal Peace embraces as well the doctrine of gentle commerce, according to which trade is a form of reciprocal altruism which offers positive-sum benefits for both parties and gives a selfish stake in the well-being of the other.”

Pinker specifically mentions globalization, noting that “history suggests many examples in which freer trade correlates with greater peace.” He cites the research of Bruce Russett and John Oneal. “They found that countries that depended more on trade in a given year were less likely to have a militarized dispute in the subsequent year.”

“Russett and Oneal,” he continues, “found it was not just the level of bilateral trade between nations in a pair that contributed to peace, but the dependence of each country on trade across the board: a country that is open to the global economy is less likely to find itself in a militarized dispute.”

The ability to leave and seek freedom and opportunity elsewhere is the most precious of all rights.

Some political scientists, he writes, have taken these findings “to entertain a heretical idea called the Capitalist Peace. The word liberal in Liberal Peace refers both to the political openness of democracy and to the economic openness of capitalism, and according to the Capitalist Peace heresy, it’s the economic openness that does most of the pacifying.”

Pinker concludes the section on the Liberal Peace with a quote from peace researcher Nils Petter Gleditsch who updated a popular 1960s anti-Vietnam War slogan to “Make money, not war!”

Libertarians have and should continue to support a policy of exporting liberal values of individual rights, peace, capitalism, and free trade to the world at large. If people are trapped in an insular state that oppresses its people, the ability to leave and seek freedom and opportunity elsewhere is the most precious of all rights. Given the opportunity, people will naturally gravitate toward freedom and prosperity. Globalization encourages this natural inclination as well as puts pressures on governments to liberalize their economies and to improve individual rights.