I3. Enamoring Individuality: The Free Trade Argument

 

Sir Thomas Mun, in 1630, published a treatise entitled England’s Treasure by Foreign Trade, which exemplified the developing mercantilist economic position of the period. His argument fought against the "bullionists", who urged the king to store all of England’s gold while trading to acquire new assets. This position weakened the posture of England’s trading companies, said Mun; rather, the movement of gold should be allowed given the opening of extensive commerce with the New World (Averitt, 1968). The foundation for the mercantilist position was that the greatness of the state must be consistent with the happiness of its subjects, a notion only recently arrived at, as I have described above. The incentive to apply such a philosophy of the public/private interrelationship was undeniable and it was intrinsic to the development of several strains of capitalistic activity that differently interpreted how the equilibrium of public and private good should be construed in actual, everyday business activity. Two of these strains came to be known as mercantilism and free trade, and although they shared many premises, "the issue that decisively divided them was the mercantilist contention that political authority was necessary and able to insure that the widespread pursuit of self-interest resulted in the good of the nation as a whole" (Teichgraber, 1986: 111).

Mercantilists believed that the economic world was a closed system: if one nation was to become wealthy, another must necessarily lose its wealth. And, while international trade is important for developing the wealth of the nation, "untrammeled international trade might undermine national wealth and power. Hence, mercantilists thought it necessary to protect as well as strengthen a state’s economy" (Teichgraber, 1986: 112; emphasis mine). The free trade thinkers, on the other hand, believed in the world economy as an open system:

 

Hume argued in ‘Of the Jealousy of Trade’ [that] reasonable men must oppose the ‘narrow and malignant opinion’ that all trading nations are rivals and cannot flourish except at one anothers expense. The truth is that the ‘encrease of riches and commerce in any one nation, instead of hurting, commonly promotes the riches and commerce of all its neighbors; and that a state can scarcely carry its trade and industry very far, where all the surrounding states are buried in ignorance, sloth, and barbarism…Hence, the first -- and still the most well known -- novel element that free trade thinkers introduced into their discussion of commerce was the call for the removal of the state’s supervision of its subjects economic activity -- ‘laissez-faire, laissez passer,’ as the Physiocrats aptly put it…Throughout the Political Discourses, Hume referred to mercantilist policies as the work of a ‘narrow and malignant politics’, of an unfounded ‘jealous fear’ among states (Teichgraber, 1986:113).

 

Much of Hume’s economic work concentrates on the themes of "jealousy" and "narrow attitudes". He concerns himself largely with describing the tension between reason and passion in the human condition and redirecting that analysis into the issue of the social contract. While the free trade thinkers of this period are largely credited with establishing an ethic of "self-interest", it was not necessarily a rational self-interest that they were describing:

 

Hume’s ultimate concern...was not to challenge the view that repayment of loans is just or that justice itself is a virtue. He in fact had no quarrel with the ideological message of Hutcheson’s natural law theory of justice. When he said that a just society is one in which ‘every one knows what he may safely possess’, he...sought to demonstrate that while rules of justice were designed to help men retain exclusive control over their property, the motives for this design had little to do with reason. Put another way, Hume wanted to show that rules of justice were in one essential respect similar to those of personal morality. Both were matters of the excitement and restraint of passions; both were approved of and obeyed without ‘the intervention of thought or reflection’ (Teichgraber, 1986: 89; emphasis added).

 

 

Hume directly states that the valuational side of human life must be primary with respect to the ideational side: "reason is and ought only to be the slave of the passions, and can never pretend to any other office than to serve and obey them" (Reese, 1980: 236). The upshot of this results in a re-instatement of government into modern life: rather than abolish the state, which was still quite a radical idea despite the more or less recent split between the public and private realms , Hume gave the state a place of residence. Since people are governed by their passions, government must be available strictly as a mediator of people’s differing passions, as an instrument to enforce the rules of justice. "The rules of justice, which Hume had held governments must enforce, were a remedy for a specific ‘contrariety of passions’. By nature, men were generous to family and friends. But this honorable passion was counterbalanced by each man’s instinctive desire to know ‘what he may safely possess’ " (Teichgraber, 1986: 115; emphasis added). So, according to Hume, the government, rather than directly controlling economic activity, should be limited to dispensing justice.

 

Adam Smith likewise believed that an economy unfettered by restrictions placed upon it by the state (whose concern we remember has been polarized from that of the individual economic actor), was an economy that would flourish in response to a relative absence of government interference. "In The Wealth of Nations, published in 1776, Smith rejects the notion that economic activity is a zero-sum game. Smith saw that trading in markets gave vent to a natural harmony of interests between buyer and seller, allowing both to improve their condition through trading" (Averitt, 1968:24). This distinctive element of the free trade argument that was inherited from the earlier revolution in social thought that followed the Renaissance encompassed the desire to see the individual not merely as a patriot or nationalist economic actor, but as a world-citizen. Rather than be merely a member or participant within the national economy, the individual should be a solitary actor in what seemed at that time of colonialism and exploration an infinitely vast world. The opportunity for economic power that was available to the individual actor now that he or she had shed the bonds of a public persona was enormous; a single businessman could conceivably hold the same amount of wealth that only two centuries previously none but the sovereign (embodied within the icon of the Church or the King) could possess (although not always and necessarily "safely").

 

The idea that enterprise be conducted free of influence from any entity other than buyer or seller was fundamental to Smith. Given this premise, it was vital for him to explain how the society would benefit from such an arrangement. Hence, he established the famous argument of "the invisible hand", a metaphor that has become a well-known explanation for how the free enterprise system benefits the state.

 

Every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it…By directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it (Smith, 1976, orig. 1776: 477-478).

 

The "invisible hand" argument uses the idea that societal good comes from individual gain to justify great personal wealth. Teichgraber (1986) notes this interesting corollary to Smith’s position:

 

Smith had made it clear that he, unlike Rousseau, wanted to record the benefits as well as the dangers of economic inequality. From one perspective, a man who in the eighteenth century consumed an annual income of 10,000 might be taken as ‘the most destructive member of society we can possibly conceive’. For he seems to have spent on himself what might have supported 1,000 ordinary men and their families. But from another, this account is entirely misleading. For the value of particular goods wealthy men happened to consume was trivial in significance when compared to that increase in ‘work and manufacturing’ their demands for those goods must occasion. Thus, even if it had not been their intention, rich men act in ways that turn out to be of great advantage to society (Teichgraber, 1986: 146-147).

 

 

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