Mainstream economics “experts” constantly attempt to lull the fears of anybody worried at seeing our manufacturing sector relocated abroad and our factories turned into ghost towns. They invoke Adam Smith’s arguments against mercantilism, arguing that it is a matter of free trade, that free trade always is the best policy, and insist that “protectionism” is a reversion to the policies Smith discredited so long ago.
P.J. O’Rourke once gave a good description of the principles of free trade:
Economic progress requires division of labor, freedom of trade, and pursuit of self-interest. One person produces one sort of thing—a sack of rice, perhaps. Another person produces another sort of thing . . . Being self-interested, both people want both things, so they trade.
That’s the situation Adam Smith defended in Wealth of Nations, arguing against the mercantile theory, which called for maximizing exports and minimizing imports in order to maintain a positive balance of trade and a maximum amount of gold circulating in the country. But note carefully the picture O’Rourke presents: One party produces goods on his own initiative, and the other party does similarly, and then they trade. The arguments for free trade apply to such situations.
The situation we’re faced with today is not one in which...