Land Of The Free Trade

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Moreover, the ability of sovereign governments to determine their own internal economic policies (and thus which domestic interest groups to favor) is swiftly diminishing. To give just one example of why this is, when currencies began to float freely, international transactions became more complicated to negotiate. But floating currency values also made currency traders, now operating around the globe and around the clock thanks to the quickly falling cost of communications, an important force in the world economy. Today currency trading amounts to about $5 trillion a day, and no central bank or even combination of central banks can any longer effectively intervene to determine how that trading moves. When France elected a socialist government in 1981, and that government instituted traditional socialist policies, currency traders immediately began savaging the franc on world markets until the French government had no choice but to reverse course.

Today, whether individuals like it or not, the world is moving toward that singular blessing for society as a whole that Adam Smith was instrumental in giving the United States two hundred years ago, a borderless marketplace. But it will happen even sooner if we remember Smith’s most profound lesson: that the greatest enemy of capitalism is always the short-term self-interest of capitalists and, in our day if not in Smith’s, unions and those in government who protect and promote their special interests.

So far, despite intense political pressure to look after the few who fear competition rather than the many who will thrive on its effects, the United States is still leading the way. In 1988 we established a free-trade area with Canada. In 1992 Mexico joined what will be, when it is fully implemented, a North American common market of 365 million people. The latest round (the fifth) of negotiations on the General Agreement on Tariffs and Trade is nearly complete; it will do much to stimulate trade in services and intellectual property and foster the agricultural exports of Third World countries, strengthening their demand for manufactured imports.

A global economy is already a reality. If this country continues to lend its active support to a world wholly without economic borders, it will turn out that America’s Smithian inheritance will be the greatest of all our exports.