Donald Trump, conservatism and free trade

I realise we live in a world of economic solipsism, where virtually nothing of the past endures while the most superficial gloss passes for deep profundity. The reason I bring it up is that occasionally I am accused of misunderstanding conservative principles because I fail to condemn Donald Trump’s attempt to protect American workers from the open borders vandalism of others. Here I have an excerpt on free trade from a website called “The Imaginative Conservative” titled, The Economics of Prudence: Roepke, Ricardo, and Free Trade. That virtually no one today would have the slightest idea who Wilhelm Roëpke was is just how it happens to be. But he was in his time as important as Hayek, an important part of the conservative tradition from the 1930s through to the 1960s. The post is, however, by Ralph Ancil who is described as “the President and Economist for the Roepke Institute.” You are welcome to read his entire post, which was written in 2010, thus well before Donald Trump was even on the horizon. He is discussing free trade with this his central point:

Mainstream economic theory has traditionally relied on the principle first articulated by David Ricardo in the early 19th century England. Ricardo’s famous example to illustrate this was trade between two countries: Portugal producing wine and England producing linen. The free trade argument concludes that nations jointly maximize their levels of consumption to their mutual benefit when firms within the nations are allowed to engage in trade unhindered by arbitrary interventions by government especially those intended to shield some industries from foreign competition. Hindering such trade through the imposition of tariffs or quotas is called protectionism. His principle and approach have been the basis for subsequent expansion and development of the free trade idea, and are still taught in principles textbooks.

However, in the hands of politicians or economists with a certain axe to grind the discussion loses sight of the major prerequisite for the benefits of free trade to hold: it is assumed that capital and labor stay within each country. They are reallocated within a country, but not between them. That means that outsourcing of, say labor, is not an example illustrating free trade nor are those who object to outsourcing promoting protectionism. In short, maintaining the Ricardian prerequisite is not anti-free trade.

The key concept which drives this conclusion is the distinction between comparative and absolute cost advantages. A country may be able in absolute cost terms to produce something more cheaply than its trading partner (using fewer workers, for example). However, it still may find it advantageous to let its trading partner produce this good, if its own alternative uses of (labor) resources allows it to be still more productive. Subsequent trade between the two countries will be to their mutual benefit. The essence of the free trade principle then is comparative not absolute advantage. Yet when corporations scan the globe for the cheapest labor to move their factories to or hire their services from, they are looking for absolute not comparative advantage–a situation that goes beyond the bounds of the free trade principle. It is not a tenet of free market economics that losing one’s productive assets is beneficial for the nation, however much it may benefit a particular corporation. Current US experience makes the point very clear: the middle class continues to shrink while paupers and billionaires continue to grow. This is not the hallmark of a healthy economy.

Armed with this distinction we are liberated to adjust policy (within limits) without losing our economic integrity to free markets. We can, for instance, admit that there are situations where a complete free trade or laissez-faire approach is unwise. These are situations not considered in the Ricardian analysis but which subsequent work has shown complicate the picture of benefits and costs arising from international trade and which do call for prudent policy interventions.

Trump certainly understands all of this intuitively. Making free trade the touchstone of conservative means one has understood neither the nature of conservative philosophy nor the principles that underlie the operation of free markets. It also means the distinctions between conservative and libertarian perspectives remain completely invisible. And I might mention that the biography of Roepke provided above is by Russell Kirk, possibly the greatest conservative scholar produced by the United States during the whole of the twentieth century.

And let me add this about my collection of blog posts on the American election. The most astonishing part for me in reading them through was to discover how consistently conservative I am in the true sense of the word. If you are interested in what conservative means, you could try reading the book.

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