The Benefits of Free Trade

It’s no accident modern democracy emerged in trading nations and cities. The democratic impulse developed in England, the Netherlands, and a number of city-states, most notably in Italy. All were heavily involved in trade.

Such democratic breakthroughs were grounded in what today we call economic freedom and property rights. Sustainable democracy and freedom has never emerged in any city or state that lacks economic freedom – most particularly, the freedom to exchange goods (the domestic version of free trade) and property rights.

These freedoms liberated people from the power of the state, by giving them a material independence from the state.

Trading nations came under even more democratic pressure. To succeed in an international market – as Dutch and English traders did – you had to be able to employ the best people, not just the politically-favoured and powerful.

This force is at work today among liberalizing economies. Crony capitalism and state-controlled activities can’t compete on world markets. That put a lot of pressure on undemocratic and partly democratic governments the world over. It’s one of the reasons the world has become a more democratic place as freer trade has spread.

Part of my job involves managing the Economic Freedom Network of the World, a worldwide organization of over 50 independent institutions. It’s a humbling experience. I deal with courageous people from around the world, including from some of the world’s most authoritarian nations.

They put their lives at risk when they fight for economic freedom. It’s not that they care less about democracy and political rights, but they don’t see how these can be achieved when governments control economic life.

The network of institutes has just released 2001 Economic Freedom of the World report. This annual report was developed through a series of conferences in the 1980s and 1990s, involving about 100 scholars, including several Nobel Laureates.

Canada’s freedom has deteriorated. At the beginning of the 1990s, Canada was the fourth freest nation economically in the world. We’re down to 13th. Canada’s freedom has been falling while freedom’s been rising in other nations, like the Netherlands and Ireland.

Ireland gained spectacularly after sweeping reforms begun in 1987. It has gone from 22nd spot to 6th spot. The shows up in new prosperity. Fifteen years ago, Canada’s per capita GDP was two and a half times as large as Ireland’s. Now, the Irish are more prosperous than Canadians. Ireland’s unemployment rate was approaching 20 per cent. Now, it’s under 5 per cent.

Canada’s decline in economic freedom should please Canada’s left, which blindly demands increases in state power. The Council of Canadians even complains about Canada’s Chart of Rights as a limit on our “sovereignty.” Apparently, sovereignty is decreased when citizens gain legal rights which protect them from the power of government – so economic freedom, just like the Chart of Rights, must be a bad thing.

Yet, like the Council of Canadians, the Quebec demonstrators will claim to support democracy and freedom. Everything then gets confusing. The protestors will damn democratic governments negotiating the free trade agreement as being undemocratic – apparently because they are negotiating free trade.

But if the protesters want to protect and enhance the power of government, the question then arises: which governments should be given more power? The same governments that want to negotiate freer trade?

They can’t be trusted, according to the protestors. What sort of government do they want? The demonstrators, who have been elected by no one, will claim to represent democracy. Since voters apparently can’t be trusted to elect democratic governments, should we simply let the protesters appoint our government?

Reporters will wander through the crowd trying to find a coherent message, but all they’ll find is sound bites.

They’ll hear people damning the actions of democratic government, on one hand, while demanding governments be given more power, on the other. Protesters will complain about the plight of the poor, even though living standards, including those of the poor, are rising in trading nations, and falling in nations that limit trade.

Apparently, the message is: Support freedom by giving more power to the state. Support democracy by rejecting democratic decisions in favour of unelected street demonstrators. Help the world’s poor by destroying policies that are boosting living standards and by returning to a model of state economic control which continues to fail the poor.

This is all very bizarre, unless most people are showing up just for the party.