Autarky

The debate between whether we should achieve economic autarky or not is the debate between whether we should have the freedom to choose the goods and services we want or have the government decide for us. Free trade (the opposite of autarky) in its purest form is the freedom to sell your product to anyone willing to buy it without any intermediary that could hinder, support, or discourage this transaction. It can work the other way, too, the ability to buy a product from anyone without this intermediary (the government). Free trade is absolutely necessary in bettering the aggregate American and world population because of competition amongst different companies. People can buy what they need/want at the price they want and can afford. (Sowell, Thomas)

The biggest infringement on free trade is tariffs. Tariffs are one area where economists since Adam Smith's “Wealth of Nations” generally agree is a bad thing. A tariff is a tax on an imported or exported good. Hence it is not preventing imports or exports. It is disincentivizing them because it is artificially raising the prices of goods, so the businesses buy or sell from another place, whether it be domestically or just from a different nation than the one they put tariffs on. Yet, throughout history, we see free trade being the rule. Like all other things, there are exceptions. Most of these exceptions are a product of some exceptional circumstances. Probably the single most famous and notable exception to this rule is the Keynesian revolution. Even here, John Maynard Keynes was an advocate for free trade but later came out in favor of the use of tariffs. He advocated in favor of tariffs because he believed that free trade (which he believed was the best policy) was not currently possible, given the political and economic vicissitudes. He believed Britain should go off of the gold standard, end the fixed exchange rate, allow the pound to be a free market currency where the price is determined by the market (advocating the use of floating exchange rates). However, Keynes said this was not currently politically feasible. Hence he used tariffs as an alternative to the devaluation of the currency. He said we could use a tariff on imports and subsidize exports, which in the end can be the same thing as devaluation. It is important to note even the biggest exception to the rule of free trade was an advocate of free trade and believed his own policies were the second-best solution to the problem. (The Case for Free Trade) The only reason he did not advocate for free trade is that he didn't believe politicians would take to the idea.  Some of the other notable examples include Great Britain after the repeal of the Corn Laws in 1846, thirty years of free trade in Japan after the Meiji Restoration, and free trade in Hong Kong under British rule. However, the United States hasn't had complete free trade in a while. Throughout the nineteenth century, we used many tariffs, and they only proliferated in the twentieth century with the “Smoot-Hawley tariff act” (1930) (The Case for Free Trade), Which many agree is also part of the reason we had the great depression. It was basically a tax on imported goods, so farmers within the United States can get more domestic consumers. 

To quote Milton Friedman, “Today, as always, there is much support for tariffs--euphemistically labeled "protection," a good label for a bad cause.” In all reality, the only thing this “protection” protects is the consumer from better products and lower prices. Tariffs focus far too much on the producer and which ones they want to punish because of political tensions between nations, rather than the alternative of them concentrating on the consumer and giving the buyer the maximum amount of options at the lowest price and highest quality. The reason taking away tariffs is a focus on the consumer is because it decreases the barriers to entry and frees up the market, every company will want to take over this area, so they will compete with all the other companies to get the consumer to buy from them instead of the other companies they are competing with. In order for the consumer to buy from them, they will look at the price and the quality. If tariffs have been proven time and time again to be largely unsatisfactory, why do realists still advocate the use of them?

The first reason is the national security argument. They argue that certain industries are needed domestically for the purposes of defense, such as steel. However, this argument is more or less a justification than an actual reason. It is clear that, on occasion, a temporary tariff for the purposes of national defense is justified. Going anywhere past a temporary measure for the purposes of national security is a clear justification for a means to an end, the end being more tariffs, not just for the purposes of national defense. (The Case for Free Trade)

The second argument being the small/infant developing industry/company argument. This argument was developed by Alexander Hamilton. He claimed “a potential industry that, if once established and assisted during its growing pains, could compete on equal terms in the world market. A temporary tariff is said to be justified in order to shelter the potential industry in its infancy and enable it to grow to maturity when it can stand on its own feet.” Even in this scenario, in my opinion, a tariff is by no means justified. If a company is to do well in the industry because of consensual transactions between the consumers and producers, what was the point of the initial tariff? They clearly have a product that people like at a price that they like it. I do not believe it is too much of a stretch to say they could have thrived on their own. In either case, subsidies will be given. In one case, the producer is given priority by the government subsidizing them. In the other case, the consumer is being given priority by the consumers that are subsidizing them because of the product the producer provides at a price better than the other companies competing with them. Once more, to quote Milton Friedman, “The infant industry argument is a smokescreen. The so-called infants never grow up. Once imposed, tariffs are seldom eliminated. Moreover, the argument is seldom used on behalf of true unborn infants that might conceivably be born and survive if given temporary protection; they have no spokesmen. It is used to justify tariffs for rather aged infants that can mount political pressure.”(The Case for Free Trade)

The third argument is that a country that has a large share of a product may be able to take advantage of this monopoly/oligopoly situation by raising the prices of a product. Rather than raise the prices directly, they do it indirectly by placing an export tax (export tariff) on a product. Similarly to this, we often see one purchaser from this monopoly; this is called a monopsony. They can benefit by driving a hard bargain with the company and lower their prices as they are the biggest monopsony to this monopoly. (The Case for Free Trade)

The fourth and final reason is made by Alexander Hamilton. His claim is that free trade would be fine if all other countries practiced free trade but that, so long as they do not, the United States cannot afford to. This argument is simply flawed and immoral, to say the least. It is true that tariffs imposed on one nation hurt that nation,  but they also hurt the country imposing them. (The Case for Free Trade) It is simply a tax on your own people. This line of logic is also what got us into the great depression. Where every country was imposing tariffs on each other. 

It amazes me that the notion that the single largest and most powerful nation in the world (the United States) needs any sort of export quotas on Bermuda or the Bahamas to “protect the industries at home.” (Tariff Rate, Applied)

An important step towards free trade is to adopt an entirely floating foreign rate of exchange where the government cannot intervene. Some of the primary advocates for this paradigm, such as Ron Paul or Ayn Rand, argue going back to the gold standard. However, this is simply not possible, nor is it desirable. This was tried prior to the 1930s. The idea was the Federal Reserve would hold a stash of gold, they would give it to banks as they see fit, and in turn, the banks would loan it out to the people. The problem was the Federal Reserve didn't play by the rules that were set up for them, and the banks began to collapse when they hid their stash of gold, not allowing the banks to get any and in turn, not getting to the people. The way the international system was set up, England had a similar system. They gave the U.S. enough gold to set up another part of the economy to minimize the destruction caused by the Federal Reserve’s monetary policies. Once more, the Fed did absolutely nothing. They just sat on their supply of gold (Dellas, Harris). The point I'm getting at is that the inefficiencies of government as a whole make systems such as the gold standard impossible. 

A completely freely floating rate of exchange that is determined in and by the market and only the market, not the government, is the most optimal economic solution. When people think of a floating exchange rate, they often think of an extremely fluctuating exchange rate. In reality, this is far from the truth. What it advocates is a rate of exchange where it is free to change, but it is a very stable change because the economic conditions are more stable and predictable than the changes in government policies. To quote Henry C. Simpson, “Managed currency without definite, stable, legislative rules is one of the most dangerous forms of “planning.” A free enterprise economy can function only within a legal framework of rules, and no part of that framework is more important than the rules which define the monetary system. In the past, those rules have been empty and inadequate; but there is no tolerable solution to be found in a resort to the wisdom of “authorities.” No liberal can contemplate with equanimity the prospect of an economy in which every investment and business venture is largely speculation in the future actions of the Federal Reserve Board.”

My view on free trade is most closely aligned with liberalism, I believe that realists have fair argument as to how the system has worked in the past in terms of looking for their own national interests, such as the “Smoot-Hawley tariff act.” However, in terms of what should happen there is much agreement between my philosophy on free trade and most economists. Especially since Adam Smith published his magnum opus “Wealth of Nations” in 1776. Where he outlines many aspects of the classical liberal view on laissez-faire economics and free trade. 

Bibliography page

“The Case for Free Trade.” Hoover Institution, www.hoover.org/research/case-free-trade. 

Dellas, Harris, and George S Tavlas. “Milton Friedman and the Case for Flexible Exchange Rates and Monetary Rules.” Cato Institute, 1 May 2018, www.cato.org/cato-journal/springsummer-2018/milton-friedman-case-flexible-exchange-rates-monetary-rules. 

“Tariff Rate, Applied, Weighted Mean, All Products (%).” Data, data.worldbank.org/indicator/tm.tax.mrch.wm.ar.zs. 

Sowell, Thomas. “Most Favored Nation.” Thomas Sowell, 6 June 2000, www.jewishworldreview.com/cols/sowell060600.asp.