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Friday, October 20, 2006

Peace and Free Trade: “One and the Same Cause”

The Nobel Peace Prize this year went to a different sort of activist. Muhammad Yunus, a Bangladeshi economics professor, and his Grameen Bank won the prize for pioneering the concept of microcredit, small loans made to poor producers who because they lack collateral can't get conventional bank loans. Lasting peace cannot be achieved unless large population groups find ways in which to break out of poverty, the Nobel committee said. Microcredit is one such means. Development from below also serves to advance democracy and human rights.

The Grameen Bank is not a pure market institution; it has ties to government. Nevertheless, two things are worth pointing out. First, the microloan is a far different approach to poverty from the big top-down projects favored by the failed IMF, World Bank, and U.S. Agency for International Development. Small loans extended to individual entrepreneurs is among the things Peter Bauer had in mind when he wrote about how development should occur — and does occur when people in developing countries have their rights respected. Indeed, Yunus has written some worthwhile sentiments:

I believe in the power of the free market and the power of credit in the marketplace. I also believe that providing unemployment benefits is not the best way to address poverty. The able-bodied don't want or need charity. The dole only increases their misery, robs them of incentive and, more importantly, of self respect. . . . [T]axes only pay for a government bureaucracy that collects the tax and provides little or nothing to the poor. And since most government bureaucracies are not profit motivated, they have little incentive to increase their efficiency. In fact, they have a disincentive: governments often cannot cut social services without a public outcry, so the behemoth continues, blind and inefficient, year after year. . . .


I believe that all human beings are potential entrepreneurs. Some of us get the opportunity to express this talent, but many of us never get the chance because we were made to imagine that an entrepreneur is someone enormously gifted and different from ourselves.

The second point prompted by Yunus's prize may have been far from the minds of the Nobel committee members, but adherents of the freedom philosophy ought never forget it. From the beginning (classical) liberalism regarded freedom of commerce and peace as, in Richard Cobden's words, one and the same cause. As Joseph Schumpeter noted, Wherever capitalism penetrated, peace parties of such strength arose that virtually every war meant a political struggle on the domestic scene. Leading French and British liberals played important roles in the world Peace Congresses held in the mid-nineteenth century, and American liberals rose up in protest when the United States went to war with Spain in 1898 and then held the Philippine Islands as a colony.

But, sadly, peace and commerce have gotten separated in the public's mind over the years, perhaps because opponents of the market and free trade have been the most visible critics of war. Yet you would be hard-pressed to name a great liberal who did not see peace as both a cause and consequence of prosperity: among them, to pick from the nineteenth and twentieth centuries, Frederic Bastiat, Cobden, John Bright, Herbert Spencer, William Graham Sumner, Albert Jay Nock, Ludwig von Mises, and Murray Rothbard.

Throughout history war and the sacrifices it imposed on regular people were glorified. The warrior was admired, the conqueror envied. Private life was subordinate to the claims of the nation. In response to this ethic the liberals proposed freedom, social cooperation, and prosperity for the common man and woman — which they insisted required peace. War was a disruption, perhaps a lamentable necessity in self-defense, but nothing to be aimed at or wished for, much less exalted. It brought death, destruction, taxes, regulation, inflation, and conscription. A small, limited government, the liberals said, couldn't regularly prosecute wars and remain that way.

As E. K. Bramsted and K. J. Melhuish write in their excellent anthology, Western Liberalism,

An important aspect of the liberal ideology in the nineteenth century was the belief in the harmony of the interests of nations. There existed, it suggested, a natural order on an international scale just as there was one within each society. This faith was closely allied with a belief in the productive function of commerce as an instrument for bringing the nations together more closely.


If freedom of trade from government interference was the magic formula for peace and prosperity at home, its corollary in foreign affairs was the non-intervention of one State in the affairs of another. It meant the application of laissez faire in a different field, the belief that growing trade interchange and prosperity made the traditional methods of diplomacy with their resort to war in the last instance unnecessary.


Frederic Bastiat

The liberal literature is filled with moving quotations on behalf of peace and commerce. For example, Bastiat, the free trader nonpareil, said, War is always the greatest of the upheavals that a people can suffer in its industry, the conduct of its business, the investment of its capital, and even its tastes. Elsewhere he wrote, If we take into account the extent to which labor has been wasted by war, if we consider the extent to which what remained of the product of labor has been concentrated in the hands of a few conquerors, we can well understand why the masses are destitute.

Richard Cobden

Cobden, businessman, member of Parliament, and leader of the peace-and-free-trade Anti-Corn Law League, spoke and wrote eloquently on behalf of free international commerce and against England's participation in foreign wars. Indeed, Cobden and his fellow Manchesterites were known as Little Englanders. His pamphlet England, Ireland, and America opened with a quote from George Washington's Farewell Address: The great rule of conduct for us in regard to foreign nations is, in extending our commercial relations, to have with them as little political connection as possible.

Cobden left no doubt about where he stood: I believe the progress of freedom depends more upon the maintenance of peace, the spread of commerce, and the diffusion of education, than upon the labors of Cabinets or Foreign Offices. When his countrymen, including John Stuart Mill, called for England to intervene in 1848-49 to defend the rebellious Hungarians against the Austrian empire and its Russian allies, Cobden objected: The middle and industrious classes of England can have no interest apart from the preservation of peace. The honours, the fame, the emoluments of war belong not to them; the battle-plain is the harvest field of the aristocracy, watered with the blood of the people. Wars, he said, have ever been but another aristocratic mode of plundering and oppressing commerce. This identification of the special interests that stand to benefit from war was a prominent theme in liberal thought.

If England wanted to advance freedom, Cobden said, it should set a good example. England, by calmly directing her undivided energies to the purifying of her own internal institutions, to the emancipation of her commerce . . . would, by thus serving as it were for the beacon of other nations, aid more effectually the cause of political progression all over the continent than she could possibly do by plunging herself into the strife of European wars.

Under the banner No foreign politics Cobden opposed the British leaders who strove to fill the people with fear that their country was perpetually threatened.

He never failed to make the connection between the two issues he cared about most: But when I advocated Free Trade, do you suppose I did not see its relation to the present question [of peace], or that I advocated Free Trade merely because it would give us a little more occupation in this or that pursuit? No; I believed Free Trade would have the tendency to unite mankind in the bonds of peace, and it was that, more than any pecuniary consideration, which sustained and actuated me, as my friends know, in that struggle.

John Bright

Cobden's partner in the cause was John Bright, also a businessman, a member of Parliament, and a passionate advocate of peace through commerce. Like Cobden's, his speeches and letters are worth reading today. On his country's participation in the Crimean War in 1854, he wrote in a letter:

This is war–every crime which human nature can commit or imagine, every horror it can perpetrate or suffer; and this it is which our Christian Government recklessly plunges into, and which so many of our countrymen at this moment think it patriotic to applaud! You must excuse me if I cannot go with you. I will have no part in this terrible crime. My hands shall be unstained with the blood which is being shed. The necessity of maintaining themselves in office may influence an administration; delusions may mislead a people; [Emerich de] Vattel [who established foundations of international law] may afford you a law and a defence; but no respect for men who form a Government, no regard I have for going with the stream, and no fear of being deemed wanting in patriotism, shall influence me in favour of a policy which, in my conscience, I believe to be as criminal before God as it is destructive of the true interest of my country.


Lord Palmerston's aggressive foreign policy, Bright famously said, is nothing more or less than a gigantic system of outdoor relief for the aristocracy of Great Britain.

Herbert Spencer

A few years later the liberal mantle was picked up by Herbert Spencer, who distinguished two types of society: the militant and the industrial. In his view industrial society was the superior and more advanced form.

[T]he militant type is one in which the army is the nation mobilized while the nation is the quiescent army, and which, therefore, acquires a structure common to army and nation. . . . Already we have ample proof that centralized control is the primary trait acquired by every body of fighting men, be it a horde of savages, band of brigands, or mass of soldiers. And this centralized control, necessitated during war, characterizes the government during peace. . . . There are precise gradations of rank in the community and complete submission of each rank to the ranks above it. . . . This structure, which adapts a society for combined action against other societies, is associated with the belief that its members exist for the benefit of the whole and not the whole for the benefit of its members. . . . The law recognize no personal interests, but patriotic ones only; so in the militant type throughout, the claims of the unit are nothing and the claims of the aggregate everything. Absolute subjection to authority is the supreme virtue and resistance to it is a crime. . . . The co-operation by which the life of the militant society is maintained, is a compulsory co-operation.


In contrast, the industrial type is marked by recognition of mutual claims and personal rights. There is voluntary exchange of services — giving equivalents of labor. There is a transition through stages of increasing freedom to a condition like our own, in which all who work and employ, buy and sell, are entirely independent. . . . Instead of having an authority extending over actions of all kinds, it [government] is shut out from large classes of actions. Its control over ways of living in respect of food, clothing, amusements, is repudiated; it is not allowed to dictate modes of production nor to regulate trade. . . . The co-operation by which the multiform activities of the society are carried on, becomes a voluntary co-operation.

Spencer lived long enough to see the beginning of the end of the liberal age, and he issued a warning: Naturally few, if any, cases occur in which societies of this [industrial] type have evolved into larger societies without passing into the militant type; for, as we have seen, the consolidation of simple aggregates into a compound aggregate habitually results from war, defensive or offensive, which, if continued, evolves a centralized authority with its coercive institutions.

Intended or not, the Nobel committee has lent a hand in reconnecting the causes of peace and commerce.

  • Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.