James Allan

Free Trade Revolutionary

barricades2For Brisbane, the G20 gabfest came and went, with all the usual suspects protesting all the usual things.  Very much out of step with the feral horde was the Australian Taxpayer Alliance, which  organised a protest in favour of free markets. Yes, you read that right: in favour.

Quadrant contributor James Allan, author of the newly published Democracy in Decline,  was one of the invited speakers.  Below is his rabble-rousing speech, best read with an Arther Scargill-style Scottish accent. It might also help to picture Allan with fist raised and clad in the revolutionary chic favoured by the likes of Che Guevara.

Good morning everyone and welcome to the only protest here today where speakers and listeners have all taken a shower sometime in the last week.  This is my first protest ever, so let me just get into the spirit of things if you’ll bear with me.  As I said, even though I’ve now crossed the half-century mark in age, this is my first protest.  I’m pretty excited about having been asked to speak here today.  As I said, I’m a protest virgin.

To put that in context, I was too young for the 1960s protest stuff; I missed out on all the free love and Woodstock. Then there were the ’70s.  Well, I confess I never protested over nukes (in fact I think they brought a perverse stability to a world that included the Soviet Union and Maoist China and unilateral disarmament seemed, frankly, bonkers to me).  Nor did I protest over Vietnam, over Watergate, over the general 1970s dress sense or John Travolta’s dance moves.  I was tempted to protest when the BeeGees entered their disco faze, but I didn’t.

Then came the ’80s.  I missed out on all those protest rallies in support of animal liberation, the Bader Meinhoff gang and Yasser Arafat’s hijacking of planes.  I will shock you and say that, unlike most other university protesters, I liked Ronald Reagan from Day One, so didn’t protest against him either.  In fact it’s pretty clear Reagan played a big role in bringing down the Berlin Wall – which some of the Maoist/Leninist/Socialists protested, as in they didn’t want the wall to come down. I missed that one too!

And heck, I liked Maggie Thatcher, so didn’t protest against her, even though my wife and I were living in London and had lots of opportunity to do so.  The feminists, some of whom will be protesting today, used to say she didn’t count as a woman.  You see, for a good many feminists you don’t count as a fellow feminist (excuse my use of ‘fellow’ I know it’s not PC), but you don’t count as one unless you hold proper left-wing views.  For them, feminism isn’t about choice for women.  It’s about toeing the party line, the left-wing party line.  So, alas, I didn’t protest with the feminists either, though I well understand the attractions of being part of a protest where you’re surrounded by bra-burning hot-looking women.

By the time we got to the ’90s I think all the good protests were drying up.  The Wall was down.  Command-and-control, centrally planned Soviet economies (with their concomitant and extensive police states where, as in East Germany, one-in-four people spied on each other and hundreds of thousands were sent to gulags), well, they had been consigned to the dustbin of history. It didn’t look too good for protesters.

But then the Gaia-worshipping Greens came on the scene.  If you wanted, you could protest dams in Tasmania. (I missed that one.)  You could protest nuclear power, and anything indeed with the word ‘nuclear’ in it. Never you mind that the Greens would go on to protest against nuclear power and against carbon emitting power sources at the same time.  Being in favour of a subsistence farming life-style (for everyone besides themselves) allows them to protest against anything.  In fact everyone here this morning who really likes protesting ought to move over to the Green Party protest.

Anyway, in the last dozen or so years the protests have become rather boring and old hat.  Sure, there might be the odd Julian Assange protest going on somewhere, because who can fail to be moved by Mr. Assange’s plight and the spectre he faces of having to face justice in the well-known police state that is Sweden? But mostly these days we’re back to protesting stuff that was being protested against decades before.  And I felt no desire to be a part of any of that then, or now.

But then I was asked me to speak to this protest here this morning — a protest in favour of free markets.  I confess that deep down I’d always hankered after a bit of protest action, being herded down streets by police on horses, a few smoke bombs, a water cannon or two, some Robocop-looking riot police … that sort of thing.  And, better yet, this was actually a topic I thought really important: free markets.  Heck, I’d even pretend to have tattoos for this one.

So let me make my brief points about free markets in this way.  I want to ask you this:  ‘What have free markets ever done for us?’

Well, as Adam Smith pointed out way back at the end of the 18th century, markets create incredible social wealth.  With division or specialisation of labour together with trade you get so much more wealth produced from the same inputs. You get an industrial revolution.  You get wealth.  So that’s one thing it’s done for us.

Sticking with Adam Smith, you get the counter-intuitive notion that people can come together and, against the backdrop of a few general rules, they can enter into deals with others to trade some of what they have for some of what others have.  Without any central planning at all you get an incredibly efficient allocation of resources – one far more efficient than anything a group of really smart central planners with untold computing power at their disposal could ever produce.  As Adam Smith put it, ‘it’s as though an invisible hand were at work’ creating a designed-looking set of outcomes when, in fact, no human beings could ever know enough to plan those outcomes.  What you get is markets, and those markets are driven by free trade.

So this counter-intuitive notion is a second thing markets have done for us. And be very clear: for most of the last century many, many, many really smart people believed that a Soviet-style centrally planned economy would be more efficient at allocating resources and creating wealth.  Those people were unambiguously wrong.  And I say that knowing a fair few people over at that Green Party protest I mentioned earlier still don’t get the advantages of markets and free trade.

Here’s a third thing free trade has given us.  It has helped lift 200 million Chinese out of poverty in only two or three decades.  This is a stunning achievement. And if we count the many people also lifted out of poverty in the rest of Asia, and Eastern Europe, and Africa, well, it’s not going too far to count that as a fourth thing free trade has done for us.

It has also allowed the specialisation of labour to develop at pace in our small country of just 24 million.  Because of markets and free trade in this sparsely populated country at the back of beyond you can have a world-best iron ore smelter, or aluminium plant.  You can be a world-class fashion designer, or world’s best mergers-and-acquisitions lawyer. I realise that mentioning ‘lawyers’ may have been a mistake at any self-respecting protest.  But let’s call that a fifth thing free trade has done for us.

How about this for a sixth?  Today is the best time ever to be alive.  Because of free trade, and markets, and a commitment to general Enlightenment principles – which I concede are under threat from a host of anti-democratic forces – all sorts of things are massively better today than ever before.  The expected lifespan today in Australia has basically doubled in little more than a hundred years.  Women no longer regularly die in childbirth.  We have antibiotics; we have jet air travel; we have an interconnected world.  And cascading through all that is trade.  Just go and look at some of those big cargo ships in harbour one day.

Free markets with their concomitant of free trade also undermine cartels and special interest groups and the many rent-seekers who take from the public to line their own pockets.  Free markets break down these special interest groups that feed from the public.  And they give more choice.  This is surely a lucky 7th thing that free trade has done for us.  Of course I’m well aware that the forces in favour of special interest deals, and locking out free competition and trade are always with us.  Just look at the NBN, and the bizarre idea of Australia in the year 2014 being pretty much the only OECD country to be involved in a de facto or quasi-nationalising of telecommunications.  As though government is good at any of that.  But snake oil always finds a receptive audience ready to buy.  The antidote is to make the case for markets and trade.  Make that case to everyone.

Let’s make our 8th item a more abstract one.  Free trade has given us an understanding of comparative advantage.  Now this is a really counter-intuitive idea.  But it drives the incredible wealth producing machine that is free trade.  Comparative advantage boils down to the idea that one country, call it Country X, can be better at producing every single thing than Country Y.  In absolute terms Country X has an advantage over country Y in everything.  And yet, in a host of areas, Country Y will have a comparative advantage over Country X. Think of US President Teddy Roosevelt.  Just before becoming President he had won the competition to find the world’s fastest typist.  No one typed faster than he did.  And yet when he became President he hired a typist.  He focused on doing stuff over which he had the biggest relative advantage, like carrying a big stick and hunting and running a country.  His secretary typed.  The scope of his advantage at doing presidential things was far greater than the scope of his advantage at typing.   Likewise, the United States may well be a more efficient pineapple producer than the Phillipines.  But it is even better at designing Silicon Valley computers.  So it does that and trades with the Phillipines for pineapples.

More wealth with the same labour, when you focus on your comparative advantage and then, let’s spell it out, T-R-A-D-E.  Trade, and both countries win.  Which is why virtually all countries want to sign up to GATT and to the WTO, even authoritarian one-party-states such as China.

But let me admit this.  If you don’t count those eight wealth-producing, life-improving, people-empowering things that free markets and free trade have done for us, then the answer to ‘What have free markets ever done for us?’ is clear: ‘They’ve done nothing!’ Zero!’

The trick to being part of the anti-free trade brigade is just to push out of your mind all of those myriad benefits.  Then you can go and join the Green Party protesters, or the Marxist/Leninists, or the Occupy crowd, or what have you.  You can disparage the WTO.  You can pooh-pooh free trade.  Because with that sort of amnesia, free trade has given the human race nothing!  Zero!

Of course, for those of us here today who are less inclined to live a subsistence farming lifestyle where protectionism runs rampant, people make their own clothes, grow their own food, and never travel more than a few miles from homes in their entire lives; well, for those of us who shun that hell, free trade and its friends, competition and division of labour, have given us the best lifestyles humans have ever experienced.  Ever.  So stick that on your banners and get protesting.  Get protesting in favour of free markets.

James Allan is Garrick Professor of Law at the University of Queensland. His new book is Democracy in Decline

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