Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

November 20, 2006

Want Peace ? Support Free Trade. Want Protectionism ? Support War.

by Doug Mataconis

So argues Donald Boudreaux, Chairman of the Economics Department at George Mason University in a column in today’s Christian Science Monitor:

Back in 1748, Baron de Montesquieu observed that “Peace is the natural effect of trade. Two nations who differ with each other become reciprocally dependent; for if one has an interest in buying, the other has an interest in selling; and thus their union is founded on their mutual necessities.”

As Boudreax points out, there is plenty of real world evidence to support this 258 year-old theory:

During the past 30 years, Solomon Polachek, an economist at the State University of New York at Binghamton, has researched the relationship between trade and peace. In his most recent paper on the topic, he and co-author Carlos Seiglie of Rutgers University review the massive amount of research on trade, war, and peace.

They find that “the overwhelming evidence indicates that trade reduces conflict.” Likewise for foreign investment. The greater the amounts that foreigners invest in the United States, or the more that Americans invest abroad, the lower is the likelihood of war between America and those countries with which it has investment relationships.

Professors Polachek and Seiglie conclude that, “The policy implication of our finding is that further international cooperation in reducing barriers to both trade and capital flows can promote a more peaceful world.”

Columbia University political scientist Erik Gartzke reaches a similar but more general conclusion: Peace is fostered by economic freedom. Economic freedom certainly includes, but is broader than, the freedom of ordinary people to trade internationally. It includes also low and transparent rates of taxation, the easy ability of entrepreneurs to start new businesses, the lightness of regulations on labor, product, and credit markets, ready access to sound money, and other factors that encourage the allocation of resources by markets rather than by government officials.

Not only that, but free trade, and respect for private property rights, goes hand-in-hand with political freedom as well:

Democratic institutions are heavily concentrated in countries that also have strong protections for private property rights, openness to foreign commerce, and other features broadly consistent with capitalism. That’s why the observation that any two democracies are quite unlikely to go to war against each other might reflect the consequences of capitalism more than democracy.

Instead of closing borders to trade, we need to be opening them. Instead of making it more difficult for foreign products to compete, we should be making it easier. The alternative, trade barriers that impose economic consequences on the world as a whole, only lead to the type of conflicts that brought us such lovely little disasters as World War One and World War Two.

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