In 2021 a giant container ship became wedged diagonally across the Suez Canal, blocking the vital waterway for 6 days. In retrospect, the fate of the Ever Given, as the ship is called, provides the perfect metaphor for the supreme folly of globalisation.
Rather than the once promised rising tide that would lift all boats, globalisation has run aground — blocking the only possible way ahead. On board the Ever Given was a consignment of French oak — destined for Britain yet sent all the way to China to be turned into veneered flooring. The oddity of sending wood over 5 thousand miles to undergo a simple industrial process would doubtless be celebrated by the liberal champions of free trade who condemn Donald Trump’s “liberation day” tariffs as a form of self-harm.
Yet, contrary to the Panglossian predictions made en masse at the turn of the century, globalisation hasn’t delivered perpetual prosperity and peace — instead it has hollowed out our economy, destroying communities where industry was once a source of pride and purpose.
The doctrine of free trade is so firmly entrenched in the consciousness of people with power that no political party has yet to dare to speak the plain truth. Though his methods may be erratic, Donald Trump is right to impose tariffs on the cheap imported goods that are destroying vital US industries.
In Britain, more so than America and elsewhere, free trade has the deepest of roots. Its apologists can barely tolerate counterarguments. After all, they say, “wasn’t the industrial revolution built on a buccaneering spirit of international commerce? Wasn’t the abolition of the corn laws driven by a popular movement to overcome the oppressive forces of economic protectionism? Were not Adam Smith and David Ricardo the founding fathers of the idea that free trade benefits us all?”
In fact, none of those pervasive claims are true. Until the early sixteenth century, England was a free trade nation — focused on its comparative advantage in the wool trade. The result was an increasingly backward economy dependent on the production of a low value raw material. It wasn’t until government intervened — importing textile manufacturing experts from Flanders and banning the import of processed wool productions — that domestic industrial wool production took off. Rather than a genuine popular movement, abolition of the corn laws was driven by a narrow elite of factory owners who didn’t want to have to pay their workers a higher wage to pay a fair price for bread. The consequence was widespread rural poverty.
As for Adam Smith and David Ricardo — far from being the great apostles of free trade of popular consciousness, they were both acutely aware of its limitations. As Oren Cass of the think tank American Compass has shown, both Smith and Ricardo were clear that free markets must be bounded to work effectively. For Smith, the “invisible hand” would naturally direct capitalists to invest in domestic industry for the sake of security. It was only in these limited circumstances that the “invisible hand” promotes “an end which was no part of his intention”.
David Ricardo, whose notion of competitive advantage is fundamental to the doctrine of free trade, was even more explicit than Smith that trade is only beneficial when it is difficult for capital to move from one country to another. For Ricardo, feelings of allegiance to one’s own nation, which, he writes, “I should be sorry to see weakened, induce most men of property to be satisfied with low rates of profit in their own country, rather than seek a more advantageous employment of their wealth in foreign nations.”
Both Smith and Ricardo assumed that capital would remain in domestic markets, with foreign exchange limited to goods for goods. Both understood that if capital did become mobile, it would undermine the very benefits of a capitalist system — the invisible hand would no longer operate to the benefit of everyone in our society. The rich would get richer, but these benefits would be limited to the privileged few — precisely what has happened in the age of hyper-globalisation. Capitalism works when bounded markets prevail — where imports and exports are in balance, and where investment favours domestic industry, skills and workers.
None of the supposed benefits of a hyper-globalised market have materialised. In the UK, as in America, living standards are stagnating, productivity growth has all but disappeared and the state grows ever bigger in the face of rising poverty and worklessness. Why then does the political class continue to profess blind faith in an economic model that has delivered record levels of state dependency?
Statecraft must be built into trade policy; nothing less will halt national decline
The only viable answer is that they have convinced themselves that tariffs themselves do not work and nothing can be done to reverse the inexorable process of industrial decline. Yet the record suggests overwise. Tune out all the noise surrounding the President’s on again, off again tariffs and you can detect the faint stirring of industrial revival. A detailed study of the impact of tariffs in Trump’s first term found that once the pre-existing decline in manufacturing employment was accounted for, tariffs did contribute to rising employment in areas with a large presence of protected industries.
Imagine then the potential benefits of a consistent and coherent trade policy that puts the needs of British industry first. The British system of parliamentary government is more capable of taking a long-term strategic view of tariffs and trade than the dysfunctional American experiment in the separation of powers.
We must not be afraid to use tariffs and import restricting quotas to bring trade back into balance, so ending once and for all our unsustainable trade deficit. Statecraft must be built into trade policy; nothing less will halt national decline and the continued rise of authoritarian systems built on exploitation and market manipulation.
Globalisation certainly isn’t moral, just as protecting the wellbeing of British firms and workers certainly is.
