One of the Most Famous Ideas in Economics Is Wrong
Jacob Soll in Politico: One of the most enduring ideas in economics is that free markets bring peace between countries. It comes from the notion that commerce drives humans to follow their mutual material interests rather than make destructive war due to passions.
This was the animating force behind the U.S. granting China its “most-favored-nation” trade status in 2000, which allows for free trade and economic cooperation. Republicans and Democrats alike assured the public that the deal would bring “constructive engagement” and expose communist China to America’s “ideals” of democracy. Where are we today? Beijing has moved closer to authoritarianism, economic competition is fiercer than ever, and American and Chinese diplomatic relations are near a crisis point, with both countries brandishing threats of war. Free trade has brought some peace, but it has not brought lasting friendship between the world’s two superpowers.
The same point could be made for Russia. Germans clearly thought that free trade for Russian oil would bind Vladimir Putin’s kleptocracy to democratic Europe and lead it toward a more prosperous and open society. Instead, it weakened democratic Europe’s capacity to respond to Putin’s dictatorship and his bloody invasion of Ukraine.
Does this mean that the old idea of a “gentle commerce” of free markets, famously espoused in the French Enlightenment, is dead? Perhaps it never really existed. History shows that free markets can be a basis for friendship between powerful nations, but they are far less successful at securing peace and democracy than many have hoped. In fact, the noble talk of the free market was sometimes simply an excuse to engage in the kind of “great power” competition that too often leads to war and plunder.
The idea that trade brings peace has its origins in humanist thought, which looked to understand natural rights and trade through classical philosophy. In The Freedom of the Seas in 1609, the Dutch jurist Hugo Grotius argued that God made the air and water limitless and as such, they were the common property of humankind. This meant that “Every nation is free to travel to every other nation, and to trade with it.” But it also meant that the Spanish and Portuguese could not claim a monopoly on the seas in their empire. Meanwhile, in spite of Grotius’ theory that free passage meant peaceful passage, the Dutch used the freedom of the seas to raid the Spanish and Portuguese empires with their superior naval capacity and famous pirate ships. More here.
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Honorary contributors to DesPardes: Adil Khan, Ajaz Ahmed, Anwar Abbas, Arif Mirza, Aziz Ahmed, Bawar Tawfik, Dr. Razzak Ladha, Dr. Syed M. Ali, G. R. Baloch, Haseeb Warsi, Hasham Saddique, Jamil Usman, Jawed Ahmed, Ishaq Saqi, Khalid Sharif, Majid Ahmed, Masroor Ali, Md. Ahmed, Md. Najibullah, Mushtaq Siddiqui,, Mustafa Jivanjee, Nusrat Jamshed, Shahbaz Ali, Shahid Hamza, Shahid Nayeem, Shareer Alam, Syed Ali Ammaar Jafrey, Syed Hamza Gilani, Shaheer Alam, Syed Hasan Javed, Syed M. Ali, Tahir Sohail, Tariq Chaudhry, Usman Nazir