Stefan McDaniel On Free Trade

by Pejman Yousefzadeh on September 18, 2009

He makes no sense:

. . . free trade makes us all richer. After Adam Smith, this is intuitive and seems to be amply borne out by history. But one should also consider the risk of creating a dangerous interdependence. As modern society and economy have developed, there has been a striking decline in self-sufficiency at every level of social organization. Nations, regions, cities, towns, and neighborhoods depend, for the most part, far more critically on externally provided goods and services for basic functioning than they did two hundred years ago. If the British blockaded Manhattan today, they would win in half a week without firing a shot.

What? First of all, interdependence has already come about. No one needs to go around “creating” it; interdependence is an ongoing phenomenon, which has reached self-reinforcing levels. It certainly beats autarky; just ask North Korea. This does not constitute a lack of “self-sufficiency,” rather, it constitutes recognizing the existence and power of comparative advantage in shaping trade patterns and policy. There is no inherent virtue in creating “internally provided goods and services” either; comparative advantage means that there will be others who are able to provide those services for you, and who get services from you in return. Finally, I suppose it is worth noting that “if the British blockaded Manhattan today,” the U.S. Navy would have something to say about un-blockading Manhattan, and kicking the gluteus of the British in the process.

This should be worrying for at least two reasons. The first is fairly straightforward: things can go suddenly and catastrophically wrong in any system, and the vaster, more complex, and more decentralized the system, the harder it is to control the damage. This is because it is harder to understand the chain of cause and effect and because it is harder for any authority to be effective in coordinating necessary remedial actions. It seems wise for communities of all sizes to insulate themselves partially from the effects of failures in larger markets, even at the price of gaining fewer benefits from participation in those markets. Maintaining such circumscribed but porous economies decreases but does not eliminate competition. Furthermore, it tends to nurture the local pride that can inspire good and creative work. We could therefore expect continuing innovation and growth in productivity within each economy, even if at a reduced rate. And such partial insulation is not merely self-interested, because, after all, one semiautonomous economic community can often provide assistance from a position of strength when another experiences internal failure. Loving your neighbor is rarely the same thing as chaining yourself to him.

See the above about the fact that there is nothing inherently wonderful about “good and creative work” coming from the locality; it is foolhardy not to take advantage of the expertise of others, expertise which is offered to one in such a way as to enrich one. If we have a “decentralized” system, we increase the number of actors who can ally with us and come to our aid, and it is not as though we lose our power in the process. McDaniel actually argues that it is better to be poor and autarkic than it is to establish working, deep, and lasting economic relations with others so as to be enriched in the process. Note to self: Never put this guy in charge of your finances.

The second reason hinges on a controversial judgment about the requirements for healthy polity. It is a judgment that may be risible or even unintelligible to those with very different political imaginations from mine, but it is important to propose it. Public authorities and legislators should promote integral human development. That is to say, development involving all the many, complex aspects of existence that make for a full human life. Deciding to seek integral human development does not lead automatically to any specific policies but (what is more radical still) changes the very language and patterns of reasoning followed in discussing policy options. If decision-makers chose to be explicitly responsive to all the various values in play when organizing the lives of their communities, political discourse would change almost beyond recognition.

Now, when it comes to making decisions about economics, a crucial value is generally overlooked: human beings are happiest when they belong to several concentric or overlapping communities, each with a distinctive way of life (enduring, usually, across many generations) and each enjoying a degree of organic wholeness; that is, the sense of being a demarcated ‘little world’ adequate (at least potentially) to provide the elements of a good, distinctly human life. Economies are deeply intertwined with concrete ways of life, and are crucial to establishing organic wholeness—they are not merely patterns of production to be judged only by their productivity and efficiency. Communities without somewhat circumscribed, partly independent economies of their own tend to have increasingly abstract and finally unreal existences.

If assertion were argument, McDaniel would have me beat at this point. But assertion is not argument, and McDaniel is putting forth claims that have no backing, and no reference whatsoever. One knows that one’s interlocutor is in a bad place forensically when said interlocutor has to resort to this gasbaggery in order to support an argument that had no business being made in the first place.

Consider a household in which even mundane tasks are routinely “outsourced”—older siblings never babysit, parents never clean house or mow the lawn, no family members entertain each other on instruments or cook for each other. Although this household may be efficient and may greatly increase the Keynesian multiplier, making everyone richer, it is impoverished qua household. It will be diminished as a group of persons sharing a common good achieved in part by joint management of community resources. This is why there may be good reason to pay one’s own child to mow the lawn, even if someone else does it better and more cheaply.

One tells one’s child to mow the lawn in order to teach said child responsibility. This is a moral stance, not an economic one. If McDaniel wants to raise the specter of outsourcing, I am happy to meet his argument by pointing out that the outsourcing bogeyman has been overhyped for a very long while. It is well past time to put this scary story out to pasture.

I suppose I could go through the rest of McDaniel’s article, but it is more of the same; unsupportable assertions, mixed with a healthy dollop of economic ignorance, with a side order of bizarre fascination with “complex communal goods” that are locally made to boot. Some days, I am sorry that there is an Internet.

UPDATE: Samuel Gregg responds to McDaniel. He is far more gentle than I would have wanted him to be. Gregg’s original article–to which McDaniel penned his “response”–is here.

Previous post:

Next post: