Monday, November 14, 2005

No Laughing Matter

John Blundell, Director General of the Institute of Economic Affairs (whose New Rural Economy is published on Monday), writes a trenchant piece, “EU cows are paid more than third-world families” in The Business today.

“The notion that “self-sufficiency” is an ideal to be attained is the opposite of good economics. We can grow our own crops and our own trees if we have a comparative advantage in doing so. If not, we are far wiser to import our food and wood. This intellectual battle was won when David Ricardo and Adam Smith and others laughed mercantilism off the stage of respectable ideas.”

I agree with the drift of Blundell’s message – highly appropriate for a Sunday newspaper, even a quality one like The Business – but I am still going to quibble, just for the record.

David Ricardo is not known for his less than terribly serious approach to economics. The idea of him laughing is somewhat unlikely – he wrote a very, very serious book on Principles of Economics, as 'difficult' as Karl Marx’s early chapters in volume 1 of Capital.

As for Smith his writings on mercantile political economy (he never used the word mercantilism) are among the most angry, sharply polemical and high-blown of his rhetoric that he ever wrote. He was truly an angry man when it came to mercantile policies, considering them to be near outrageous in their supposed defence of the interests of the nation, but in fact were articulating the squalid self-interests of ‘merchants and manufacturers’ (Book IV, "Wealth of Nations", ‘Of Systems of political oeconomy’, pages 428-688).

Smith admitted his polemical style in Book IV was a ‘very violent attack’ upon the ‘whole commercial system of Great Britain’ (Correspondence, Letter 208 to Andreas Holt, 26 October 1780, page 251). He wasn’t laughing.

True, latter-day protectionists deserve a battering (intellectually) and no doubt the odd smile at their idiocies too. But to some extent we free traders are lumbered with the phoney free traders who speak on our behalf, while running some of the most destructive protectionist economies known to humankind, namely in the rabid protectionism of the EU’s and the USA’s agricultural sectors (to which the lunacy of subsidising cows to an extent greater than the incomes of poor farmers in the unwealthy countries of the developing world, is well made by John Blundell). Anti-free traders only have to point to EU-USA protectionism to shrug off free trade attacks as being hypocritical – which they are.

Smith and Ricardo won the intellectual argument, but politicians and the special interest groups of subsidised farmers threw that advantage away. Nobody’s laughing, least of all the victims of protectionism.

Read John Blundell's piece at: http://www.thebusinessonline.com/

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