The fundamental benefits of free trade first published by David Ricardo must be defended, even moreso today as the Trump administration seeks to implement protectionist policy to inhibit free trade. The U.S. implemented its highest foreign tariffs of the 20th century during the Great Depression, and we must not allow history to repeat itself. By reexamining the works of thought leader and economist, David Ricardo, we see how comparative advantage and free trade have sustained benefit throughout history.
Renowned economist David Ricardo built his fortune on developing the concept of comparative advantage and advocated fiercely in support of free trade. He believed in the importance of free trade as it contributes to national economies and individuals alike. Ricardo famously developed and defined the concept of comparative advantage:
“Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole. By stimulating industry, by rewarding ingenuity, and by using most efficaciously the peculiar powers bestowed by nature, it distributes labour most effectively and most economically: while, by increasing the general mass of productions, it diffuses general benefit, and binds together by one common tie of interest and intercourse, the universal society of nations throughout the civilized world.”
This suggests that globalization benefits consumers in the form of low prices and nations in the form of increased output, job creation, and technological advancement. Ricardo’s contributions to the field of economics are seen in virtually every entry-level macroeconomics course today. Though there are nuances and caveats still up for debate in regards to Ricardo’s beliefs, advocacy for free trade is a fundamental value held by many across both ends of the political spectrum.
The Trump administration has reiterated its protectionist stance against free trade and insinuates the notion that it is a zero-sum game. This ideal has been criticized and disputed by The CATO Institute, former US Treasury Secretary and Harvard professor Charles W Eliot, and China’s vice minister of commerce, and many others from varying political ideologies. Globalization fuels economic growth by increasing output in developing nations, providing lower priced goods to consumers, and increasing the standard of living for each side of free trade. It is not an issue to be politicized, rather a concept that has proven value to both parties.
Implementing barriers to trade and imposing protectionist policy will harm more Americans than it will help. An isolated economy causes citizens (especially of lower socioeconomic status) to suffer in the form of scarce foreign goods, rising price levels, and decreased purchasing power due to lower real wages. Cutting U.S. trade relations with the world could have profound effects. Valid fear exists that retaliatory tariffs could ignite a global trade war and lead to global economic recession. To echo Eliot’s sentiment, we should focus on helping the Americans who were displaced because of outsourced jobs rather than placing restrictions on global trading partners.
David Ricardo’s chapter in New Ideas from Dead Economists notes, “When economies turn inward, they almost always turn downward. There is no such thing as an inward and upward spiral in economics.”