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Classical Liberalism, Free Trade, and Accelerating Change

The 2016 election was a victory for the Republican party but it was hardly a resounding one for classical liberalism at least as historically defined. Classical liberalism, for instance, has reflected an enthusiasm for free trade along with other free markets. But Donald Trump ran the most aggressively anti-free trade platform of any major party nominee Democratic or Republican in the last century.

But rather than simply bemoaning the fact, classical liberals need to take account of it, because the anti-trade turn is a part of the greatest challenge classical liberalism has ever faced: how to address the ever faster rate of social and economic change. The freedom to make such transformations through technology and trade creates very substantial wealth but it disrupts people’s lives, making them less liberal and more eager for state protection than before.

There can be no doubt that such disruption was at the heart of Trump’s victory. ​Studies have shown that much of his strongest support came in counties where foreign trade, particularly from China, led to layoffs. And there can also be no doubt that trade has swifter and more disruptive effects than before.  In an interesting new book, The Great Convergence: Information Technology and the New Globalization, Richard Baldwin shows that the ability of information to travel instantaneously from nation to nation allows foreign competitors to combine first world know-how with third world wages in unprecedentedly effective ways.

The happy result is cheap clothing and other human staples that have made the rate of inflation much lower for those of modest means than wealthier people who buy bespoke goods.  But the unhappy one is communities where workers face huge difficulties in finding new jobs that are nearly as remunerative as the old.

And technological change is likely to be even more disruptive as computation moves rapidly to automate jobs. Self-driving cars and trucks will arrive in the next decade or so and save tens of thousands of lives now lost in accidents.   But currently three million people in the United States drive for a living.

How can classical liberalism itself adapt to this faster rate of change?  Was this political philosophy dependent on a slower rate of change in previous centuries?  It is easier for children to adapt to a new world than their parents and thus trade and technological change that forces the next generation to change its way of life even fundamentally is much less destabilizing than a rate of change that disrupts the current generation. It is striking in this respect that Trump’s appeal was much less strong to the young than to the old.

Michael Oakeshott famously thought any ideology was secondary to felt experiences of the current world. It was those experiences rather than principles that were the basic stuff of politics. I believe that the principles remain relevant through the ages, but Oakeshott is right to recognize that principles become irrelevant unless they take account of relevant facts of the age. And the speed of change is the most important fact of our contemporary world that many libertarians and classical liberals have largely ignored. In a subsequent post, I will discuss how classical liberalism can be refurbished for an age of accelerating change.

Reader Discussion

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on November 21, 2016 at 13:01:33 pm

Fine topic.

But is “rate of change” really the relevant variable? True, change by itself induces stress that may cause many people to adopt a defensive and “conservative” posture. I’d like to see a sociological study of Native American tribes that abruptly find themselves awash in casino money: Does it result in social nirvana, or individual drug- and car-fueled self-destruction, or perhaps both?

In contrast, Trump folk do not merely describe their concerns as related to change, but to loss—loss of material wealth, or of security, or of status. Admittedly, perhaps people are dissembling. Maybe they describe their problem in these terms because they think it will attract more sympathy than saying that they’re just concerned about change in general. (“Oh, we’ve got a POOL HALL in River City—and THAT’S TROUBLE!”) But maybe—just maybe—they’re in earnest.

I neither wish to overstate nor understate the material aspects of people’s concerns. But it’s hard not to trot out the old nostrum that classical liberals should embrace a modicum of wealth redistribution, if for no other reason than to fend off the appeal of demagogues who will seek GREATER redistribution (among other things). It’s better to endure a flu shot than the flu.

But how much redistribution would it take to de-fang the demagogue? Again, I don’t want to overstate the role of rational self-interest here: Fact-free propaganda can be quite effective in whipping up a sense of grievance against some enemy, real or imagined.

On the other hand, I do fear that the labor market will provide people with ever poorer opportunities for remuneration. I will also trot out my theory that we’ve reached the end of Say’s Law regarding labor. We long ago discovered that we no longer need 90% of the population employed in food production. Now we have women entering the paid labor force at rates comparable to men, and immigration, and globalization, and automation, all adding competitive pressures to the labor supply. The US has never been more productive—including the manufacturing sector—but we just don’t need as many hands to produce the goods and services as we used to.

In short, the labor market no longer functions to distribute the nation’s wealth among the voting classes. Ever more people are losing faith that they can achieve success merely through hard work. Ever more people are concluding that “the system is rigged.” And when people conclude that they can’t achieve success no matter how hard they try, they’re going to quit trying—and seek their relief elsewhere.

And when the day comes that people demand some new alternative arrangement for sharing society’s wealth, classical liberals may want to have a second-best proposal at the ready.

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nobody.really
on November 21, 2016 at 13:13:28 pm

John:

I rather liked this one. There is much of interest / value in it. Especially appreciated the 1st world info / 3rd worl wages nexus. quite correct!

Coupla questions, however:

1) Would you say that we actually do practice free trade if one considers all the carve-outs by both US and foreign negotiators. I have in mind some items such as "environmental protections" inserted by our leftist friends into trade pacts and that are honored in the breach by foreign signatories but enforced by US authorities; or certain wage / labor laws provisions - again honored in the breach by foreign partners.

2) How would you characterize the effects upon free trade of say General Electric's shenanigans in (pushing) supporting the end of incandescent light bulb production in the US when GE was far more capable of shifting bulb production offshore and far more readily able to convert to new technology. (PS - I think it backfired on the buggers)

3) Recall if you will, how some of our trading *partners* will continue to construct / enforce unreasonable barriers to entry for US products. I remember Japan requiring the most rigorous quality requirements for American made baseball bats (and automobiles,etc). The US did nothing to counter this. Probably the only time I found myself admiring the French - they turned the tables on the Japanese and informed them that all Japanese products would henceforth require inspection at port. And Oh BTW, there would be only ONE port of entry AND there would be ONLY one inspector. Things changed - quickly.

Yet, you are correct - on the surface, this does not appear to be a classically liberal trade regime advocated by The Trumpster. Perhaps, he may sim[ply be contemplating a *French* solution?

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gabe
on November 21, 2016 at 13:28:55 pm

Hey, generally good stuff here.

1) A case can, or perhaps will HAVE to be made, at some point in the future, for a more *organized* re-distribution of wealth ( but not in the Tyler Cowen mode of silliness). Change is coming and at an ever faster rate.
-QUESTION: Ought we to regulate that rate of change? How so? Lastly, Can we?

2) "The US has never been more productive—including the manufacturing sector—but we just don’t need as many hands to produce the goods and services as we used to."
TRUE - but it leaves out consideration of precisely what these manufacturing goods are that are being produced at ever higher efficiencies? Are the weekly paper advertising circulars that I receive in the mail, and summarily toss into recycling bin really to be considered "manufacturing? What of "capital" and durable goods - where are they coming from?

A realted point, and one that I have made many times in the past:

What does this lack of *true* manufacturing prowess / capacity portend for National defense. Are we to ask the Chinese to continue shipping certain electronic components vital for our military / communications hardware to us should the old soft material hit the proverbial fan? Then again, something else I suggested years back: Do we really want them to keep supplying us with communications devices when it was finally disclosed that many of the phones have software that will send the users messages / info back to the Chinese. Is this purely for commercial advantage or also military?

Paranoid? Nawwwhhh! Just cautious and cognizant of the historical fact that we only won Civil War, WWI and WWII because of our awesome manufacturing prowess.

So, I'll take a little less "classical" free trade and a little bit more "big manufacturing" on the domestic side.

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gabe

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