[This review appeared in the Conservative Review, March/April 1997, pp. 35-37.]

Book Review

The Industrial Revolution and Free Trade

Burton W. Folsom, Jr., editor

Foundation for Economic Education

Irvington-on-Hudson, NY, 1996


Reviewed by Dwight D. Murphey

            A collection of articles published in The Freeman over the past several years by the pro-free market Foundation for Economic Education, this book deals with a series of fascinating people and events: such historic leaders of the Free Trade movement as Richard Cobden and John Bright, who led the 1840s movement in Britain for the repeal of tariffs on grain; and such subjects as child labor, the survival of the whales, the war against infectious disease, the digging of the Suez Canal, a history of Hong Kong, and the Irish famine.

            Its first section contains essays about the theory of capitalism and its principal opponents, Mercantilism and Marxism. The second discusses the Industrial Revolution. Here, it continues the rebuttal, long and very credibly underway among supporters of a market economy, that shatters the "doom and gloom" perception of the Industrial Revolution that was spawned so successfully during the nineteenth century by an intelligentsia whose members supported either the aristocratic anti-bourgeois Old Regime or the emerging Left.

            The book's third section argues the case for Free Trade. The reader is treated to some excellent instruction in the fundamental theory of a market economy: such things as the international division of labor, an economy that is self-regulating through the price system, the importance of the accumulation of capital, and the mobility of both capital and labor.

            There are important insights, some of which reverse the way Americans have been taught to see things. One of these has to do with "the evil of child labor," which is commonly thought to have been abolished by child-labor laws. Lawrence W. Reed is on the mark when he explains, contrary to this common belief, that "child labor was relieved of its worst attributes not by legislative fiat, but by the progressive march of an ever more productive, capitalist system. Child labor was virtually eliminated when, for the first time in history, the productivity of parents in free labor markets rose to the point that it was no longer economically necessary for children to work in order to survive." Until then, no political movement for child labor's abolition would have been thought of, much less have enjoyed appreciable support. The Left's ideological claim to a connection between child labor prohibitions and the disappearance of child labor is one of the clearest post hoc fallacies that a logician can point to in the history of social thought. Social legislation often comes along just as an evil is disappearing, and it is a serious mistake to assign the legislation credit for the disappearance.

            However, despite the well-deserved praise that a reviewer is justified in giving to these essays on the grounds just mentioned, there are also reasons to be much less favorable. In the years to come, American conservatives and "classical liberals" will find it increasingly necessary to engage in a fundamental debate over the efficacy, precisely to a free society, of Free Trade.

            Throughout the past two and a quarter centuries -- i.e., since Adam Smith -- this ideology has seemed fully compatible with the overall values and institutions of an individualistic free society. It has easily taken its place as part of that complex of ideas. An important exception has perhaps been that the high tariff wall adopted by the United States between 1865-1933 played a major role in making the United States a major industrial power. Would most Americans consider it to have been better to have remained primarily a supplier of agricultural products and raw materials? A complete discussion should grapple with an issue that is so obvious and so important, and this collection of essays does not. The issue is basic to the theory, since it brings to the fore the question of whether -- from any given people's point of view (as distinct from an economist's point of view considering only "what benefits the consumer") -- trading "according to ones comparative advantage" is always most truly advantageous.

            Now, under the circumstances of the on-rushing "global economy," the relation between Free Trade and a free society is no longer nearly so clear as it has so long seemed to be. This is so for two reasons:

            First, the theory of an international free market calls for an uninhibited flow of capital and labor. To the extent this is perfectly realized, and subject to time-lags in its attainment and some attenuation due to "utility of place," all unskilled labor in the world will converge upon the same level of compensation. The same is true of skilled labor and of the return on capital.

            It is important to realize that this is what the theory calls for -- and what it countenances. What it means in actuality, of course, is that unskilled labor in the United States, India and China will tend toward a common level, since each person providing such labor will be in competition with all others doing the same. Nor is there any safe harbor for skilled labor, the practitioners of which will be subject to the same process. (And we want to remember that there are, and soon will be, millions of Chinese, Singaporeans, Indians, Pakistanis, and the like, prepared to provide skilled services.)

            If someone objects that "we as Americans don't want our workers brought to a common level with those in India and China," the Free Trade proponent will answer that the market is cosmopolitan and pays no regard to nationality. This rebuttal is compelling only so long as we allow ourselves to be limited to a theoretical system that takes into account solely economic values and that eschews any special concern about a given people or nation. If we say "we care about those other things," economic science has nothing to say to us other than to point to certain costs that will be incurred. (It is important to note that, at the same time, that science takes no account of the costs impacting on any non-economic values people may hold. The pointing to "costs" should be considered a two-way street. It can be used as much against Free Trade as for it, which is something that proponents of the unhampered market economy have long chosen to ignore.)

            Second, many supporters of laissez-faire economics are following its logic to favor unrestricted immigration into the United States and Europe (as part of endorsing it for any place in the world). The writers in the compilation under review mainly remain silent about this implication, but the logic can be seen in the recent writings by Jacob Hornberger and Julian Simon. Theirs is a logic that, if pursued, spells the end of any given nation, culture or civilization, including Western Civilization. Again, the ideology cares nothing about such things; it is founded solely upon deductions from laudable premises concerning "individual rights" and market transactions stemming from those rights.

            All supporters of a free society are forced, therefore, to ask: Is this proferred decimation of the standing of American workers (including the middle class) and of Western Civilization, including the national identity of the United States as a political entity and as a people, in the best interests, either theoretically or practically, of a free society as best conceived? I don't think so. The laissez faire theory is a deductive system from premises that leave out too much that is vital, in any given time and place, to freedom. It serves as an important part of the mental constructs that are important to thinking about the attainment of individual liberty, but is only a part, to be harmonized with all other imperatives.

            The compilation of essays under review is essentially a popularization of the thinking underlying a market economy as applied to the Industrial Revolution and to Free Trade. As such, it grapples deeply with neither of the difficulties just mentioned (nor with the more general issue of the omission of non-economic values in general). But it is imperative that supporters of a free society do so -- and quickly. The contributors to the Foundation for Economic Education's compilation are the ideal people to do this, if only they will broaden the horizons of their deductive system.