home > archive > 2003 > this article
Free trade equals prosperity
By Edwin A. Locke
Swarms of left-wing and environmentalist activists demonstrated against free trade and "globalization" last week during the ministerial meeting of the World Trade Organization in Cancun, Mexico. These activists were united by a single emotion: a virulent hatred of capitalism, especially global capitalism. Why the hatred?
The advantage of a global economy based on free trade and capitalism is so obvious and so enormous that it is difficult to conceive of anyone opposing it. The benefit is based on the law of comparative advantage: every country becomes more prosperous the more it invests in producing and exporting what it does best (in terms of quality, cost, uniqueness, etc.), and importing goods and services that other countries can produce more efficiently. For example, let us say that Nigerian companies can produce T-shirts for $1 a piece whereas U.S. companies can only produce them for $5 a piece. Under free trade, Americans will buy their T-shirts from Nigeria. This division of labor benefits people in both countries. Nigerians will have more money to buy food, clothing and housing. Americans will spend less on T-shirts and have more money to buy cell phones and SUVs, and the investment capital formerly spent on T-shirts will be put to more productive uses, say in the area of technology or drug research. Multiply this by millions of products and hundreds of countries and over time the benefits run into the trillions of dollars.
How, then, do we reconcile the incredible benefits of global capitalism with the anti-globalization movement? The protestors make three claims repeatedly.
First, they argue that multinational corporations are becoming too powerful and threaten the sovereignty of smaller nations. This is absurd on the face of it. Governments have the power of physical coercion (the gun); corporations do not; they have only the dollar--they function through voluntary trade.
Second, anti-globalists claim that multinational companies exploit workers in poor countries by paying lower wages than they would pay in their home countries. Well, what is the alternative? It is: no wages! The comparative advantage of poorer countries is precisely that their wages are low, thus reducing the costs of production. If multinational corporations had to pay the same wages as in their home countries, they would not bother to invest in poorer countries at all and millions of people would lose their livelihoods.
Third, it is claimed that multinational corporations destroy the environments of smaller, poorer countries. Note that if 19th-century America had been subjected to the environmental legislation that now pervades most Western countries, we ourselves would still be a third-world country. Most of the industries that made the United States a world economic power--the steel, automobile, chemicals and electrical industries--would never have been able to develop. By what right do we deprive poor, destitute people in other countries from trying to create prosperity in the same way that we did, which is the only way possible?
All of these objections to global capitalism are just rationalizations. The giveaway, and the clue to the real motive of today's left and their hangers-on, is that all their protests are against--they are anti-capitalism, anti-free trade, anti-using the environment for man's benefit--but they are not for anything. In the first third of the 20th century, most leftists were idealists--they stood for and fought for an imagined, industrialized utopia--Communism (or Socialism). The left's vision was man as a selfless slave of the state, and the state as the omniscient manager of the economy.
However, instead of prosperity, happiness and freedom, Communism and Socialism produced nothing but poverty, misery and terror (witness Soviet Russia, North Korea and Cuba, among others). Their system had to fail, because it was based on a lie. You cannot create freedom and happiness by destroying individual rights; and you cannot create prosperity by negating the mind and evading the laws of economics.
Furious over the fact that their envisioned utopia has collapsed in ruins, the leftists now seek only destruction. They want to annihilate the system that has produced the very prosperity, happiness and freedom that their system could not produce. That system is capitalism, the system of true social justice where people are free to produce and keep what they earn.
The fact that free trade is now becoming truly global is one of the most important achievements in the history of mankind. If, in the end, it wins out over statism, global capitalism will bring about the greatest degree of prosperity and the greatest period of peaceful cooperation in world history.
We should scornfully ignore the nihilist protestors--they have nothing positive to offer. We should not only allow global capitalism; we should welcome it and foster it in every way possible. It is time to rephrase Karl Marx: Workers of the world unite for global capitalism; you have nothing to lose but your poverty.
Edwin A. Locke, a Professor Emeritus of management at the University of
Maryland at College Park, is a senior writer for the Ayn
Rand Institute in
Irvine, Calif. The Institute promotes Objectivism, the philosophy of Ayn
Rand, author of Atlas Shrugged and The Fountainhead. Send comments to email@example.com Copyright © 2003
Ayn Rand ® Institute
Get weekly updates about new issues of ESR!
© 1996-2013, Enter Stage Right and/or its creators. All rights reserved.