Recently, I posted a generally critical reply to an essay by Bryan Mercadente on the subject of free trade. He has been kind enough to acknowledge my comments and to offer a response.

While, as Mercadente notes, the exchange has indeed been amicable, I’m not sure I share too much of his optimism for finding common ground. In fact, if anything, his latest essay makes explicit a number of philosophical problems that lay beneath his earlier work. It is these issues I will try to address in what follows.

Duncan is, I think, a principled libertarian. He does not lack national feeling, but seems to see a nation as a large club of self-owning individuals, all with rights that the state must not trench upon except to avert plain evil. I am a contingent libertarian. I take the nation to be a real thing, not only a sum of contracts. Individuals are parts of it, but not whole.

I am, indeed, a “principled libertarian”, but Mercadente’s conception of this is a champion of an atomised, market transaction society. Here is just my latest correction I’ve made to this straw man.

My contingent libertarianism comes from the understanding that, if I want my nation to be rich and secure, individuals must be allowed certain rights to life, liberty and property, and that the state should abstain by default.

A principled libertarian believes that rights to life, liberty and property (or more precisely, just to property) are natural rights, the upshot of which is that people have the legal right to decide for themselves which ends are the most valuable to pursue.

A contingent libertarian, by contrast, begins by presuming what everyone else’s ends should be – usually expressed in utilitarian slogans such as “greater wealth” – and then “allows” property rights only insofar as they help deliver those ends.

The difference isn’t cosmetic. For the contingent libertarian, liberty is a switch to be flicked on or off depending on how well it serves his chosen metrics – or on how much he thinks liberty should be “balanced” against whatever other values he happens to prefer.

The principled libertarian doesn’t measure the worth of liberty by whether it makes us richer or more efficient. While it’s true that freer societies tend to grow wealthier, they don’t have to. A free people might just as easily choose asceticism – and remain free all the same.

In Mercadente’s case, he knows that his “rich and secure” society requires a market economy, so he “permits” liberty on that condition. But once liberty stops serving those outcomes – or needs to be traded off against some other good – it’s revoked.

In other words, the contingent libertarian gifts you your freedom so long as he personally approves of how you use it. The moment he doesn’t, in come the handcuffs. His philosophy differs from open statism only in degree, not in kind – greater freedom just happens to form a bigger part of his personal plan for the rest of us. In this guise, liberty becomes sufferance, or licence. And as no two contingent libertarians could ever agree on where the boundaries should be drawn, everything becomes fair game.

Sam Bowman, Senior Fellow and former Executive Director of the Adam Smith Institute, describes this position, which he follows, in more detail. In spite of my disagreement, he at least deserves credit for having recognised this outlook as “fundamentally different” from libertarianism, preferring instead the term “neoliberal”.

The devil, however, is always in the precise exceptions. And right on cue, here they come:

I do not rule out active state choice where national survival or resilience is at stake.

Such exceptions are exactly why the contingent libertarian earns the nickname “fair-weather libertarian” – or, as others put it, the microlibertarian. He’ll sing hymns to freedom when the stakes are low – lower taxes, legalising weed, deregulated haircuts – but the moment liberty faces its biggest tests, he folds.

Economically, securing “national survival or resilience” is no different from any other end – it consumes scarce resources at the expense of other things. If people broadly agree on what the threat is and what must be done, they already have the means to coordinate voluntarily – to redirect spending, organise, and produce whatever’s needed, just as they’ve always done when solving every other human problem. They don’t need a state whip to do it for them.

If they don’t so act, it means one of two things:

• They disagree on what “national survival” actually entails; or
• They judge other ends more valuable for their limited time and resources.

So when the contingent libertarian insists that his personal priority must be imposed “for the nation,” he’s just begging the question. The absence of voluntary action is the nation’s verdict. Forcing compliance means coercing people who, by their revealed preferences, disagree with him.

And we’ve already seen where that thinking leads.

Barely five years ago, the belief that we faced a literal “survival” emergency justified an astonishing level of tyranny. It’s no surprise that Bowman and his kind went along with it.

And what about climate change? Is that too a matter of “national survival”? Millions think so; millions think it’s overstated or even fraudulent. Who decides? And with whose property?

Allowing the state to settle these matters as a proxy for its people ignores the fact that the state is a distinct institution. What is painted as questions of “national survival” or “national interest” has very little to with the well being of the ordinary person, but means the power, interests and survival of the state. Wars are not disputes between peoples, but between states. They have no qualms whatsoever in censoring, rationing or conscripting you as cannon fodder as soon as they realise that they face an existential crisis. Short of that, the ordinary citizen should be less bothered about Russia or Iran than the Chancellor’s next budget.

Moreover, once you grant that the state may override liberty whenever “survival” is declared, you hand politicians the incentive to inflate emergencies, or manufacture them altogether. The examples already given illustrate that they rarely resist that temptation.

[G]overnment can be a force for positive good

Good for whom? At what cost to whom? If government means the state, such assertions just assume away all of the difficult questions.

Duncan often writes as if advantage were exogenous: climate, resource endowments, pre-existing tastes, and given technology. I do not deny those as real causes. But advantage is frequently endogenous.

I do not believe I omitted reference to what Mercadente refers to as “endogenous” factors, but it doesn’t change the argument either way. If skills, education or institutions conducive to progress are presently lacking, they also take time to develop, and require funding with real resources just as much as mining for ore or building a factory do. Where will those resources come from if one imposes tariffs?

They were products of human choice, and even of political interventions, that did not look useful until they became useful.

Any reference to “political intervention” creating something useful, good, wonderful, beneficial, etc. commits the broken window fallacy.

A country that cannot make munitions is not sovereign.

Whether it’s an individual in society or a state in the so-called “international community,” security rests far less on brute force than on the voluntary willingness of others to respect your boundaries. That willingness is maintained by a mixture of interdependence, moral pressure, and, yes, deterrence – but actual physical defence only ever works against the relative handful who defy the rules. No matter how fast the munitions factories are whirring, if the whole world turned on Britain tomorrow, we’d be flattened before lunchtime. The police preserve order on the same principle: not because they outgun the public, but because most people choose to obey the law.

Precisely how much of what should be done to maintain peace and prepare for its breakdown is always a matter of judgment, not mere military arithmetic. Every pound of steel or barrel of oil devoted to arms is one not spent elsewhere. If one can reasonably rely on allies for certain supplies, then producing everything domestically might be wasteful – just as it would probably be wasteful for me to mill my own flour or keep cattle simply because I fear the baker or milkman might one day let me down.

Some might even consider a standing army itself an extravagance – unimaginable today, but not impossible if states were serious about Jefferson’s long-forgotten ideal: “peace, commerce and honest friendship with all nations; entangling alliances with none.”

Whatever the case, the notion that a country should strive for “self-sufficiency” in munitions, food, or energy again overlooks the fact that the state is not a proxy for its people, and responds to entirely different incentives. Historically, drives toward autarky have made nations more belligerent, not less. The less a regime relies on others, the less it has to lose by fighting – and the more it has to gain. Give such a state the means to win wars, and it will soon go looking for one, especially once it’s burdened with a munitions industry desperate to justify its own existence.[1]

So if peace is our aim, the self-sufficiency of states is the last thing we should want. The goal should be the opposite: to make every state as weak and dependent as possible. Far from being a vulnerability, interdependence is the closest thing humanity has ever had to a lasting peace treaty.

If p removes a tariff and q lowers prices, good; but if the same p increases strategic dependency such that other agents can impose catastrophic costs in a crisis, the conditional result we care most about is not the local price vector but the loss of optionality. This is not a denial of the theory. It is ranking outcomes with a different weight.

But the question is: who ranks the outcomes? Removing tariffs is not some automated process that drops prices, against which some wise overlord must weigh the risk of “strategic dependency”; rather, it lets individuals decide for themselves which ends matter most with their own property. No one is forced to hoover up cheap imports; they just have the option. If people take that option, it means they’ve judged the trade-off worthwhile. If they don’t, the goods remain unsold. Either way, the choice is theirs.

If the playing field is already skewed by state intervention, then any negative outcome is the fault of those distortions, not of free trade itself. And if, in a genuinely free setting, people still choose cheap foreign goods, that only proves they don’t share Mercadente’s personal weighting of the risk of “strategic dependency.” By all means, he can criticise their choices; but a free society doesn’t allow you to ban other people’s decisions simply because you disagree with them.[2]

Where he goes wrong is in his assumption that dealing with them is only a matter of putting the right arguments to find those will [sic] the political will to do the right thing.

I’m not sure precisely which of my words make this assumption evident, but since it’s raised – yes, I largely do believe it. Most people aren’t originators of ideas; they’re receivers. Their worldview is shaped by a small cadre of people capable of broadcasting ideas on a wide scale – intellectuals, journalists, politicians, artists, academics, clerics, and now influencers. A “natural elite,” if you like. Liberty has declined over the past century not because the masses rejected it, but because this elite did.

Although Mercadente concedes that protectionism faces serious headwinds, he still tries to throw it a lifeline, this time as political rhetoric. The whole argument (“Once the mills and works closed…hear a liberal case for a freed internal market”) is too long to quote directly, but here’s the gist:

People are too dim or dependent to vote for liberty. So we’ll dazzle them with a soothing but dubious protectionist policy – one that suspends their freedom (just a little – we’re not committed protectionists, of course). Once the tariff-driven industrial renaissance (fingers crossed it’ll happen) has made them suitably dignified and industrious, we’ll finally allow them to “hear” the case for liberty. And let them have their liberty back.

The absurdity aside, the likely outcome – or the best-case scenario – is that the imposed tariffs, however modest, will spawn a variety of interest groups.

First, the protected industries themselves. Far from maturing into self-reliant paragons ready for Mercadente’s mythical “sunset clauses,” they’ll fight tooth and nail to keep their privileges. Shareholders will pour their inflated profits not into readying the industry for independence, but into campaign donations for politicians who promise to keep the tariffs. Unions will frighten workers with tales of collapse and lay-offs should protection end. Case in point: the US steel industry, which, for the past two centuries, has somehow managed to convince everyone that it is simultaneously the nation’s backbone yet in constant need of life support.

Next come the losers – industries that lose capital and customers to the protected sectors. They will demand state subsidies, citing job losses and blighted towns. If those cries become politically inconvenient, the state will oblige, and once the subsidies start flowing, those industries too will focus on keeping the tap open.

Then comes everyone else who will say: “if them, why not us?” Because once you concede that “important” industries deserve state aid, you open the Pandora’s Box of determining what “important” means. And anything can be made to sound so where there is a concentrated interest group. “National interest” becomes the justification for every handout imaginable.

The result is not a population ready to “hear a liberal case for a freed internal market,” but a nation of rent-seekers elbowing for a turn at the public trough.

Curiously, Mercadente recognises all of this as a danger of “core” protectionism – “it risks nation-wide taxation of consumption, retaliation, and a permanent lobby that lives by calling its friends ‘strategic.’” What he misses is that you can’t confine such corruption to a narrow policy either. To Milton Friedman’s quip, “Nothing is so permanent as a temporary government program,” I would add: nothing is so cancerous.

I don’t deny, incidentally, that some messages resonate better in certain climates while falling flat in others. But the solution is either you keep repeating it, Ron Paul–style, until people are ready to hear it, or you find a better way of communicating it (here is one I suggest). What you don’t do is start shouting 2 + 2 = 5 simply because you lack either the patience or imagination to persuade people it’s 4.

While no real-world case is ever textbook perfect, some of the most remarkable bursts of prosperity followed more decisive and uncompromising approaches: the sharp collapse in US wartime spending in 1945; Ludwig Erhard’s postwar policies in West Germany; John James Cowperthwaite’s hands-off reforms in 1960s Hong Kong; and Roger Douglas’s in 1980s New Zealand. The latter, writing in his memoir[3], testified that the success of his reforms depended on short, sharp and brutal liberalisation – a “big bang” with no attempt to soften the blow. Why? Because when the signal is clear, markets adapt immediately, and the results arrive fast enough for the policy to vindicate itself – before opponents can regroup. The problems only arise when politicians start second-guessing everything by softening, delaying and hedging.

If [Duncan] replies that any admissible tariff is a seed of capture, I will answer that capture is already everywhere and that the cure for capture is not to abolish every instrument.

I’m prepared to lend cautious support to a state “instrument” – even tariffs – if the only alternative is a greater infringement. I’m not a utopian. Rather, libertarianism is the compass by which I judge imperfect options as better or worse. That, however, is a different rationale from classifying such policies as good in principle merely because one has adopted the pose of a “contingent libertarian.”

As our exchange has now wandered far from the original topic I suggest we leave it here. Mr Mercadente is welcome to have the last word.

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Notes

[1] Hans-Hermann Hoppe makes a similar point when contrasting rich, liberal nations with poor, despotic ones. See here.

[2] The economic law that removing tariffs tends to lower prices holds true only insofar as domestic buyers regard foreign and local goods as substitutes. Increased supply from foreign imports drives prices down, while comparative advantage decides which producers can survive at the new level. But if, for example, “British-made” is itself a quality of the good, then imported goods are no longer true substitutes, so removing tariffs will have little effect on price. The flood of cheap imports isn’t inevitable; it depends entirely on what people value. As with all supposed cases of “market failure,” the objection to free trade usually boils down to this: I don’t like how other people spend their money.

[3] Recounted in Floru, J P, Heavens on Earth: How to Create Mass Prosperity, Biteback (2014), 233-4.