Does this mean that the old idea of free-market “soft trade” famous for the French Enlightenment is dead? Maybe he never really existed. History shows that free markets can be a basis for friendship between powerful nations, but they are much less successful in securing peace and democracy than many hoped. In fact, the lofty talk of the free market was sometimes just a pretext to engage in the kind of “great power” competition that too often leads to war and plunder.
The idea that trade brings peace has its origins in humanistic thought, which sought to understand natural rights and trade through classical philosophy. In freedom of the seas in 1609 the Dutch jurist Hugo Grotius argued that God had made air and water unlimited and as such they were the common property of mankind. This meant that “every nation is free to travel to and trade with all other nations”. But it also meant that the Spaniards and Portuguese could not claim a monopoly of the seas in their empire. Meanwhile, despite Grotius’ theory that free passage meant peaceful passage, the Dutch used the freedom of the seas to attack the Spanish and Portuguese empires with their superior naval capability and famous pirate ships.
The idea that free trade could bring peace also found advocates among those who sought a Christian solution to human conflict. According to the influential French jurist and religious thinker Jean Domat, trade was humanity’s punishment for original sin. The Garden of Eden was a place where everything was provided. Once humans fell out of favor and into the earthly realm, their punishment was work and trade. Like Grotius, Domat believed that it was possible to discern immutable laws in nature which, when allowed to operate freely, would set in motion a dynamic market system which would check the mercenary tendencies of individuals. The exchange of things would bring with them contracts and “Pledges” between people that would compel them to interact civilly with each other for the common good. According to Domat, a free and legal market would eliminate “double-dealing, deceit, deceit and all other ways of doing harm and harm”.
This approach was also the basis of Bernard de Mandeville’s approach fable of the bees (1714), by which the “private vices” of greed could be transformed into the “public virtues” of peace and prosperity. The French philosopher Montesquieu had a less cynical outlook. In his treatise of 1748 The Spirit of Lawshe explained how “soft trade” would replace the warlike instincts of personal and national pride with the mutual benefit of trade, which could act as an antidote to jealousy, war, and poverty.
Mandeville and Montesquieu were writing in the context of what was to be over a century of war between the British and the French over colonial empire and global trade. From the War of the Spanish Succession to the Seven Years’ War to the American War of Independence, some philosophers on both sides of the Channel believed that free trade would bring peace.
Adam Smith, however, had a more nuanced view. The “father of economics” believed that a country with an absolute monarchy, like France, did not have the political virtue required for free trade. He believed that his monarchical system was controlled by monopolizing merchants who would never let him trade freely. In Smith’s eyes, international free trade had to be between equally virtuous trading nations. Smith’s hope for peace and free trade came from the British Empire. Smith was writing at the time of the American Revolutionary War (1775-1783) and hoped that the colonies would stay and form a free trade alliance. He viewed the empire system as a free trade zone that allowed his hometown of Glasgow to prosper through trade in grain, tobacco, slavery and manufactured goods. As the American colonies separated from Britain in 1776, the same year Smith published The Wealth of Nationshis classic and complex work on free trade, he would eventually impose tariffs in 1783.
When Britain’s free marketers succeeded in liberalizing their own markets with the repeal of the Corn Laws in 1846, it heralded an era of laissez-faire in Britain, but did not bring international peace. Richard Cobden, the famous free market leader of the Anti-Corn Law League, believed that free markets, pacifism, industrial savvy, Christianity and a good work ethic would lead Britain to local prosperity for the working man. Indeed, the very confidence and wealth that led so many Britons to believe in the superiority of free markets was based on colonial ideals and wealth. British colonial leader John Bowring used evangelical terms, saying that imperial might and laissez-faire economics could only do good: “Jesus Christ is free trade,” he exclaimed, “and free trade is Jesus Christ”. But the Empire’s Pax Britannica was based on gunboats, violent coercion and the plunder of the wealth of colonized nations. It is now estimated that Britain stole more than $40 trillion from India alone during the Raj’s century-long reign.
And while the empire created a free trade area for the British, it also sparked an almost constant series of colonial wars – from the more than 100 years of war with France in the 18th century, to another century of wars overseas with peoples and states in the Caribbean, China, India, Burma, New Zealand, Persia and Africa. Indeed, to obtain free market agreements with Latin American countries, Turkey and China, the British relied on military threats. Free trade remained based on naval power. While some British free marketers called for an end to reliance on colonialism, believing that free trade agreements with other industrial powers brought peace and advantage to industrially superior Britain, Britain’s competitors Britain began to realize that if they wanted free trade and the imperial advantages that Britain enjoyed, it too would need to arm itself.
In 1905, the Cambridge critic of free market economics, William Cunningham, prophetically warned that the militarization of Japan, Russia and Germany was a direct response to Britain’s unilateral imperial free market and that it could lead to world wars. These countries could not compete with Britain, so from the 1870s to the 1890s Russia, Italy, Germany, France and America imposed tariffs against what they saw as dominance world trade. Hungry for British empire and markets, Europe headed for world war.
When World War I arrived, it could be seen either as a product of protectionism and trade warfare or, as Cunningham put it, as a reaction to Britain’s domination of the imperial free market. In any case, with the rise of nationalism and communism, the hope of universal free trade has faded. Austria’s most famous free market thinkers, Ludwig von Mises and Friedrich Hayek, formed their free market thought in response to the rise of socialism, but also in reaction to the Nazi regime which forced them to flee Austria to the states -United. Both believed that the state was the ultimate danger to peace, but ultimately, at the end of World War II, the American state financed the reconstruction of Britain, France, Germany and of Japan, using the Marshall Plan to rebuild, but also to dictate democracy to former enemies and, in doing so, to create the most prosperous economies of the modern era. Paradoxically, the United States has provided well over $150 billion in today’s dollars to European countries and over $20 billion to Japan, while supporting government intervention in those economies, to throw the foundations of a future democratic free trade area.
During the Cold War, America’s massive military kept the peace between its industrialized and democratic partners, while waging a cold, hot war against communism around the world. US government support, peace, prosperity and free trade have been the dividends of America’s allies. But the global conflict with communism again meant that it took war and government support to establish democracy and, potentially, free markets through the GATT agreements that began in 1947 and spread throughout the twentieth century.
Even when the Berlin Wall fell in 1989, a real possibility of peace emerged with the normalization of relations between America, Russia, Europe, India and eventually China. During this period, free markets flourished – but even in peacetime, military budgets exploded under presidents of both parties. And yet, while much of the world embraces free trade, the United States has again gone to war in Iraq and Afghanistan, spending trillions of dollars and, one might say, squandering its own the peace of the free market.
We now come to a more perilous moment. Democracy is on the decline around the world. The global economy looks poised for a recession. And war has broken out in Europe, as tensions rise between the United States and China. Meanwhile, public skepticism of free trade is growing in this populist moment. Can free markets keep the peace? We have to hope they can. However, history shows that free trade is often in the eye of the beholder anyway. Ultimately, a military-based peace or deeper common interest might be needed to keep trade and the world on good terms.