Free-traders are fond of drumming up the words of the original economist, Adam Smith:
It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy.. . . If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage.
This may sound well and good, and it should, since within the confines of its own universe, it is entirely correct. The universe of which I speak is that of micro-economics -- the branch of economics which takes the point of view of a small fish in an infinitely large pond. That Smith has assumed the microeconomic point of view here is clearly stated in that that he assumes the point of view of the "prudent master of a family," as opposed to that of the "prudent master of a country." As Shakespeare said, "Aye, there's the rub." The small fish doesn't concern itself with how its actions affect the huge pond, or at best treats the effects as negligible and accordingly neglects them. What Smith is saying here is merely a more specific case of the more general microeconomic maxim that one should seek the best price on everything, everywhere, every time. It only makes sense. The only misleading part is that his famous book was titled "Wealth of Nations," intoning a more macroeconomic nature, which this passage is clearly not.
From the point of view of the macroeconomist, however (which is the point of view with which governing bodies should be most primarily concerned), Smiths words here could be taken to mean quite the opposite of how free-traders interpret them. Let us rewrite them slightly to demonstrate this point:
Because it is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy, it is incumbent on the master of the state to compensate for this natural tendency of family masters. For while the master of a family is primarily concerned with his own family's immediate welfare, the general welfare is quite another matter. The master of the state, whose mandate is to promote the general welfare, therefore, must compensate for this natural tendency of the master of the family by ensuring that it is never cheaper to "buy it of them" than it is to make it at home. This incumbency is readily met by the simple means of a tariff on imported product, whereby only in the most extreme cases would it make more sense to "buy it of them" than it would to make it at home, at least from the point of view of the master of the family.
This was the policy of Alexander Hamilton, and it worked very well. If this isn't crystal clear, than ask yourself these questions:
In times of international crisis, does it make sense to be dependent upon foreign states for our most basic necessities such as cotton, grain, and fuel?
Does it make sense for our military, whose sole reason for existence is to exert force against foreign states, to be dependent upon foreign states for its weapons and supplies?
Can we possibily maintain some semblance of advantage for our state if we outlaw slavery, while at the very same time we legitimize importing the work-product of foreign slaves? Or would such practice merely put our free workers at an insurmountable disadvantage, and ultimately leave the state destitute?
This, gentlemen, is why I implore you to maintain constant vigilance as the price of liberty, as Thomas Jefferson warned. As the entropy laws of John Clerk Maxwell implied, you can't win, you can't break even, and you can't get out of the game. It is why I call the lure of free trade "free lunch trade," invoking the immortal words of John Maynard Keyenes "There's no such thing as a free lunch." If you choose to try to evade paying the price (in this case of domestic labor) by paying the piper (free trade) instead, the piper will end up kidnapping your children, and your legacy will be gone -- you will become extinct.
TD
