Free Trade, Mercantilism, and Empire


Most people these days – outside of certain left-wing and right-wing populist circles – understand that global trade tends to increase the prospects and prosperity of all people and nations that share in it. Unfortunately, much confusion exists as to what "free trade" actually is and how one goes about getting it. For many in the US political and foreign policy Establishment, the formula for having free trade would go something like this: 1) Find yourself a global superpower; 2) have this superpower knock together the heads of all opponents and skeptics until everyone is playing by the same rules; 3) refer to this new imperial order as "free trade;" 4) talk quite a bit about "democracy." This is the end of the story except for such possible corollaries as 1) never allow rival claimants to arise which might aspire to co-manage the system of "free trade"; 2) the global superpower rightfully in charge of world order must also control the world monetary system. Alas, there may be some problems with this formula.

Problems or not, proponents of the American Empire have put forward the United States as the one and only Last-Remaining-Superpower on hand and the only such superpower with the needed moral qualifications to rule the world. This last bit derives from our having published somewhere in our remote past a couple of high-sounding public documents – even if we haven’t paid much attention to them of late. The proponents of endless American world police work expect to play a role in making the world as "orderly as a Baptist convention presided over by the Honorable Cordell Hull" (to quote Charles Beard). Thus their advocacy may not be entirely without self-interest. I hasten to add that I am not opposed to self-interest, enlightened or otherwise. I merely note that it seems to work better in the purely private sector. "A man is never so innocently employed as when he is making money," as the great Dr. Johnson said. It is the "public spirited" self-interest of policy makers which worries me.


The formula outlined above was decidedly not the 18th and 19th-century liberal view of free trade. Free traders like Richard Cobden, John Bright, Frederic Bastiat, and Condy Raguet believed that free trade is the absence of barriers to goods crossing borders, most particularly the absence of special taxes – tariffs – which made imported goods artificially dear, often for the benefit of special interests wrapped in the flag under slogans of economic nationalism. That was the point, for instance, of the Anglo-French treaty of 1861 which abolished a whole array of restrictions.


Classical free traders never thought it necessary to draw up thousands of pages of detailed regulations to implement free trade. They saw no need to fine-tune a sort of Gleichschaltung (co-ordination) of different nations’ labor laws, environmental regulations, and the host of other such issues dealt with by NAFTA, GATT, and so on. Clearly, there is a difference between free trade, considered as the repeal, by treaty or even unilaterally, of existing barriers to trade, and modern "free trade" which seems to require truckloads of regulations pondered over by legions of bureaucrats.

This sea-change in the accepted meaning of free trade neatly parallels other characteristically 20th-century re-definitions of concepts like "war," "peace," "freedom," and "democracy," to name just a few. In the case of free trade I think we can deduce that when, from 1932 on, the Democratic Party – with its traditional rhetoric about free trade in the older sense – took over the Republicans’ project of neo-mercantilism and economic empire, it was natural for them to carry it forward under the "free trade" slogan. They were not wedded to tariffs, which, in their view, got in the way of implementing Open Door Empire. Like an 18th-century Spanish Bourbon government, they stood for freer trade within an existing or projected mercantilist system. They would have agreed, as well, with Lord Palmerston, who said in 1841, "It is the business of Government to open and secure the roads of the merchant." British historians John Gallagher and Ronald Robinson have referred to this as "the imperialism of free trade." Quite so, provided we don’t confuse it with the genuine free trade espoused by anti-imperialists such as Cobden and Bright. (You know that the other side has done well in the semantic war when you have to put words like "genuine" in front of formerly uncontested concepts.)

Here, John A. Hobson – despite his confusions with respect to the alleged "overproduction" in advanced capitalist economies – was directly in the line of real free-trade thought. Hobson wrote that businessmen ought to take their own risks in investing overseas. They had no right to call on their home governments to "open and secure" their markets.


All this leads one to further meditations on the American imperial mindset. The late Murray Rothbard noted that the "Leninist" theory of imperialism was developed, "not by Lenin but by advocates of imperialism, centering around such Morgan-oriented friends and brain-trusters of Theodore Roosevelt as Henry Adams, Brooks Adams, Admiral Alfred T. Mahan, and Massachusetts Senator Henry Cabot Lodge."1 Building on the "overproductionist" fallacy these gentlemen maintained the necessity of ever-expanding foreign markets to the continued health of the American economy. By socializing, in effect, the costs of finding, opening, and securing such markets through an active foreign policy, the federal government would guarantee prosperity, float all boats, and – just incidentally – benefit personally some of the advocates of this "large policy." It might take a war now and then to sustain such a policy, but that was just the way things had to be.

These worthy gents simply drew the opposite conclusion to Lenin’s. He decided that imperialism was wrong. As a Marxist, he blamed capitalism and proposed its abolition. The proposition that capitalism – understood as free markets and free trade – not only did not "cause" imperialism but was, indeed, radically opposed to it, tended to get lost in the 20th-century shuffle. Writing of post-Cold War US foreign policy thinking, Christopher Layne and Benjamin Schwarz comment that "the foreign policy community looks to American military power to impose harmony so that free trade can take place." Thus "modern Manchesterism" in this guise "is a fraud."2

Layne and Schwarz further note that, properly analyzed, cheap oil, one of the supposed benefits accruing to Americans from the neo-mercantilist policy of Open Door Empire, proves to be not so "cheap" after all. The costs of maintaining an imperial presence in the Mediterranean Sea and Indian Ocean – fleets, subsidies to allies, weapons of locally massive destruction, and all that – would, if added to the cost of the oil we actually consume, demonstrate that the oil is, in fact, rather dear.3 This might well be a better example of Bastiat’s "The Seen and the Unseen" in economic reasoning – far better than that broken window – if it weren’t so complicated that almost no one can understand who is actually paying which costs. Short-cut hypothesis: the American people are paying more for "opening and securing" these markets plus the actual crude oil prices than they would likely pay – absent these "enforcement costs" – in any other conceivable set of political-economic arrangements that might arise in the Middle East, even in much-ballyhooed worst-case scenarios.


The frequency with which worst-case scenarios are trotted out as arguments for American imperialism – "If we don’t blow Woggistan to bits now, we’ll have to fight all their cousins later" – brings up another issue. That is the time-honored demand of US policy makers for absolute security and peace of mind. It’s bad enough that so many mercantilist interest groups contribute to policy formation without an inherited assumption that we (or our leaders) must never, never feel threatened.

My favorite example is the case of the Virgin Islands. In 1916, while we were at peace with everyone and allegedly very, very neutral, Secretary of State Robert Lansing leaned on Denmark to "voluntarily" sell the United States the Virgin Islands. The reasoning was along these lines: We might, someday, be in a war with those terrible Germans. Those terrible Germans are presently at war in Europe. They might, one day, take a notion to conquer Denmark. They then might decide to fortify the Danish Virgin Islands, from which they might, eventually, menace us, if we were ever in a war with them, which we aren’t. Accordingly, bearing in mind the higher law that governs these things, Denmark must cede the islands to the US, lest we be driven to seize them outright, over which act we would then have to feel guilty for five or ten minutes, which guilt would be Denmark’s fault. In normal parlance, we simply bullied the Danes out of their islands; and they, a minor power, had to smile and sign on the dotted line. Albert K. Weinberg refers to this argument as "a lengthy series of assumptions regarding mere contingencies."(4)


It is bad enough that the US Establishment sees itself as historically destined or entitled to create an imperial order of pseudo-free trade. It is bad enough that few now remember that free trade – a very good thing – actually meant something quite different from the hegemony of One Great Super Power which talks a lot about free trade. It is even worse when the One Power wishes to rule everywhere, simultaneously, while believing at the same time in its own sacrosanct security ("freedom from fear, everywhere in the world?"). This a perfect setup for eternal tilting at windmills, bombing or occupying the world, and blaming anyone and everyone but themselves if these leaders’ plans lead to any adverse reactions, especially on their "own" territory. They’ve been writing treatise after treatise lately about how Americans – you and I – must be prepared to give up all three of our remaining civil liberties to meet the terrible threats which their policies have called , or may call, into being. Come to think of it, I don’t know if they are that concerned about our security – yours and mine – so much as the continuance of their world overlordship, their concrete mercantilist interests, to which we must add, in the case of the present lot, their universal-democratic ideological abstractions.

Meanwhile, let us at least not fall for their unspecified rhetoric about "free trade."


  1. Murray N. Rothbard, "The Origins of the Federal Reserve," Quarterly Journal of Austrian Economics, 2, 3 (Fall 1999), pp. 19-20.
  2. Christopher Layne and Benjamin Schwarz, "American Hegemony – Without an Enemy," Foreign Policy , 92 (Fall 1993), p. 13.
  3. Ibid., p. 17.
  4. See Albert K. Weinberg, Manifest Destiny (Chicago: Quadrangle, 1963[1935]), pp. 398-409.