WEBVTT NOTE Support for Free Trade: The Impact of Religious Ideology 1 00:00:00.000 --> 00:00:18.000 Well, I was thinking, it's kind of early in the morning for a serious talk, I'm impressed that everyone is here, but then I was thinking, well, you know, this is kind of a sermon, and you know, this is about when sermons normally occur, so maybe this is an appropriate time. 2 00:00:18.000 --> 00:00:32.700 It's not going to be a normal sermon, best assured, but it is about religion and economics and with a whole series of illustrations from free trade. 3 00:00:32.700 --> 00:00:37.700 And before I go any further, I do want to thank the von Mises Institute. 4 00:00:37.700 --> 00:00:46.300 I'm very impressed with the facilities here. Jeff Tucker, Lew Rockwell, for the invitation, and I've been having a good time. 5 00:00:46.300 --> 00:00:48.100 I've been enjoying the session. 6 00:00:48.100 --> 00:00:51.660 I noticed the Lincoln session yesterday 7 00:00:51.660 --> 00:00:56.020 was didn't quite get as far on the religion front 8 00:00:56.020 --> 00:00:58.860 as I thought would have been appropriate. 9 00:00:58.860 --> 00:01:02.860 I mean, it seems to me I'm certainly not the first person 10 00:01:02.860 --> 00:01:07.060 to note that Lincoln was America's Christ figure. 11 00:01:07.060 --> 00:01:12.860 And he died to save men's souls. 12 00:01:12.860 --> 00:01:16.260 And you have to recognize that this metaphor has 13 00:01:46.260 --> 00:01:56.260 I think his political philosophy is that he should have gotten it from Plato or Aristotle or Thomas Aquinas. 14 00:01:56.260 --> 00:02:02.260 That didn't show much awareness of Western religion. 15 00:02:02.260 --> 00:02:08.260 If you look at Jesus, I didn't notice that he read a lot of philosophy books. 16 00:02:08.260 --> 00:02:14.260 He was kind of born in a manger, just like Lincoln was born in a log cabin. 17 00:02:14.260 --> 00:02:22.260 And so, if you're going to play in this game, you have to understand the metaphors quite well. 18 00:02:23.260 --> 00:02:31.760 But anyway, to get beyond that, I will also make a few preferatory remarks. 19 00:02:31.760 --> 00:02:37.760 I started getting into the subject of economics and religion in the 1980s, 20 00:02:37.760 --> 00:02:42.260 and it was considered somewhat of an odd subject to study, 21 00:02:42.260 --> 00:02:51.260 Although I had some fairly good reasons, I was looking at the time I was involved, I'm a professor of environmental policy, 22 00:02:51.260 --> 00:02:59.260 and I've always regarded a clash between economists and environmentalists as a sort of religious war. 23 00:02:59.260 --> 00:03:10.260 Fortunately, mostly in symbols and words, not in actual violence, but still it had all of that flavor. 24 00:03:10.260 --> 00:03:40.260 I started getting interested in the subject in the mid 1980s and I remember that Rick Stroop, who's at the Political Economy Research Center, probably a lot of you know who he is, commented to me at the time, he said, you know, this is a strange subject but you ought to go look at Murray Rothbard because he actually writes about this subject too and he's interested and I did and actually followed up and so he was there first like he was in a lot of things 25 00:03:40.260 --> 00:03:47.260 I've carried on at least, maybe not in exactly his vein, but somewhat maybe in his spirit anyway. 26 00:03:47.260 --> 00:03:53.260 I did review his economic history, two volumes of his economic history book. 27 00:03:53.260 --> 00:03:58.260 It's the longest I've ever spent reading a book to review it in my career. 28 00:03:58.260 --> 00:04:03.260 I professed how great, I agreed to do it because I knew I would benefit from it. 29 00:04:03.260 --> 00:04:10.260 and of course in this book it did emphasize the interrelations between economics and religion. 30 00:04:10.260 --> 00:04:21.260 Rothbard attacked Adam Smith as a deluded Calvinist and suggested that the prominent role of labor 31 00:04:21.260 --> 00:04:28.260 in his economic theorizing was due to his Calvinist propensities and of course Calvin believed that 32 00:04:28.260 --> 00:04:48.260 I think there was a lot to what Rothbard said. I did, however, suggest that he could have put more emphasis. I think he underplayed the importance of Christianity and modern individualism in his commentary. 33 00:04:48.260 --> 00:05:18.260 I would, however, suggest that he could have put more emphasis. I think he underplayed the importance of Christianity in modern individualism, and especially Protestant Christianity, and above all, Calvinist Christianity, and you could actually make a reasonable argument that modern libertarianism and individualism derive significantly from Calvinist roots. 34 00:05:18.260 --> 00:05:24.260 If you look at, you know, I mean, who was it that cut off the head of the King of England? 35 00:05:24.260 --> 00:05:35.260 Those Puritans who were the Calvinist offshoot of, they, the Puritans were the Calvinist, English Calvinist offshoot. 36 00:05:35.260 --> 00:05:43.260 And of course, that showed something about their attitude towards authority that we can all sympathize with here. 37 00:05:43.260 --> 00:05:49.060 but anyway to get before I get into free trade specifically I'll set it up a 38 00:05:49.060 --> 00:05:54.260 little bit by talking about the subject of economics and religion which is 39 00:05:54.260 --> 00:05:58.460 Rothbard was there but had but it's actually becoming rather fashionable 40 00:05:58.460 --> 00:06:04.560 believe it or not in intellectual circles these days the Templeton 41 00:06:04.560 --> 00:06:12.140 Foundation that the beneficiary of billions of John Templeton's money on 42 00:06:12.140 --> 00:06:21.140 The stock market is putting 2 or 3 million, right now at this moment they're putting 2 or 3 million into funding studies of religion and economics. 43 00:06:21.140 --> 00:06:25.140 The Pew Foundation is putting money into this area. 44 00:06:25.140 --> 00:06:35.140 Recently I was asked by the Journal of Economic Literature to review a book by Rebecca Blank and William McGurn on 45 00:06:35.140 --> 00:06:40.100 on Is the Market Moral, a subject that I don't think they would have, 10 years ago, it would 46 00:06:40.100 --> 00:06:44.180 have been almost inconceivable, they would have asked. 47 00:06:44.180 --> 00:06:46.980 Certainly it would have been very unlikely the book would have been written. 48 00:06:46.980 --> 00:06:54.140 By the way, the answer was yes, but Blank is an MIT PhD who's Dean of the Michigan Public 49 00:06:54.140 --> 00:07:01.060 Policy School and McGurn is the chief editorial writer for the Wall Street Journal. 50 00:07:01.060 --> 00:07:03.540 But that wasn't why they were asked to work on the book. 51 00:07:03.540 --> 00:07:11.040 was because they're both self-professed devout Christians, blank as Protestant and McGurn as Catholic, 52 00:07:11.040 --> 00:07:16.180 and they were sought out by Brookings, the Brookings Institution, specifically for this purpose, 53 00:07:16.180 --> 00:07:26.080 to write about the question of the morality of the market, and then Brookings published it as a Brookings Institution press book. 54 00:07:26.080 --> 00:07:37.080 Again, I suggest this is a sign of remarkable change occurring within the discipline of economics in places like the Brookings Institution. 55 00:07:37.080 --> 00:07:47.080 Now among professional economists, the greatest efforts have been made to incorporate religion into an economic framework. 56 00:07:47.080 --> 00:07:55.080 That is, joining a church or believing in a religion can be seen as consumer-maximizing utility behavior. 57 00:07:55.080 --> 00:08:06.080 And then you can do what economists do, run a bunch of regressions and so forth, and relate variables like price and income to religious participation and types of belief. 58 00:08:06.080 --> 00:08:16.080 It's basically Gary Becker applied to religion. And there's a whole host of students out there now who are getting interested in doing these kinds of things. 59 00:08:16.080 --> 00:08:23.600 And the leader is Larry Yannacone, who's now at the George Mason economics department. 60 00:08:23.600 --> 00:08:28.080 He's basically kind of pushing the whole field. 61 00:08:28.080 --> 00:08:38.440 Now, I'm a small part of this trend myself, but my approach has been quite different. 62 00:08:38.440 --> 00:08:45.120 I'm trying to incorporate economics within a theological framework of thought. 63 00:08:45.120 --> 00:08:59.220 And so I'm arguing that in the writings that I've done in this area, that American economics, which is mainly progressive economics in my terminology, is a form of religion. 64 00:08:59.220 --> 00:09:09.520 Of course, it's a secular religion. It's like the gospel of efficiency, as a lot of historians have referred to the progressive era. 65 00:09:09.520 --> 00:09:16.080 So there's nothing about God or the hereafter, or at least nothing explicitly so, in economic religion. 66 00:09:16.080 --> 00:09:19.360 And I've written a couple books on this subject, if anyone's interested. 67 00:09:19.360 --> 00:09:25.480 I'll take advantage of the audience here and mention that one was in 1991, 68 00:09:25.480 --> 00:09:29.520 Reaching for Heaven on Earth, The Theological Meaning of Economics. 69 00:09:29.520 --> 00:09:36.720 And the other was in 2001, Economics as Religion from Samuelson to Chicago and Beyond. 70 00:09:36.720 --> 00:09:42.520 and there's even a few copies of that one out there at a very cheap price if anyone 71 00:09:42.520 --> 00:09:46.320 is interested in pursuing some of these ideas further. 72 00:09:46.320 --> 00:09:52.160 But the first book is largely about secular economic religion before World War II and 73 00:09:52.160 --> 00:09:57.800 the second is mainly after World War II. 74 00:09:57.800 --> 00:10:04.560 And again, in terms of this growing interest among historians of economic thought and following 75 00:10:04.560 --> 00:10:11.560 in somewhat in Rothbard's footsteps and also relating the issues of free trade since we 76 00:10:11.560 --> 00:10:16.560 could call the wealth of nations in a way the Bible of free trade. 77 00:10:16.560 --> 00:10:21.560 But there's been a growing interest in the religious elements in Adam Smith. 78 00:10:21.560 --> 00:10:28.320 Writing in 2001 in the European Journal of the History of Economic Thought, Lisa Hill 79 00:10:28.320 --> 00:10:34.960 Paul writes that, quote, Adam Smith's social and economic philosophy is inherently theological 80 00:10:34.960 --> 00:10:40.060 and that its providentialist underpinnings cannot be removed without impairing his theory 81 00:10:40.060 --> 00:10:42.520 of social order. 82 00:10:42.520 --> 00:10:47.200 As she acknowledges, she's following in the footsteps of one of the leading economists 83 00:10:47.200 --> 00:10:52.280 of the 20th century, Jacob Beiner, who was also interested in economics, unusually so, 84 00:10:52.280 --> 00:10:58.300 interested in the relationship between economics and religion, and who also argued that Smith 85 00:10:58.300 --> 00:11:04.300 Adam Smith was unintelligible without understanding the theological assumptions. 86 00:11:04.300 --> 00:11:10.300 Still more recently, another historian of economic thought, a fairly prominent economist, 87 00:11:10.300 --> 00:11:16.300 Anthony Waterman, published a 2002 article in the Southern Economic Journal on, 88 00:11:16.300 --> 00:11:19.300 quote, well the title of the article was, 89 00:11:19.300 --> 00:11:23.300 economics as theology, Adam Smith's wealth of nations. 90 00:11:23.300 --> 00:11:30.980 And Waterman argues that Smith's grounding of his system in the idea of nature and the workings of nature, 91 00:11:30.980 --> 00:11:37.780 when he talks about nature, he really means God, or at least that's the best way to understand it. 92 00:11:37.780 --> 00:11:46.020 It's not clear entirely what Smith meant sometimes, but as Waterman says in many cases, quote, 93 00:11:46.020 --> 00:11:53.220 Nature is nearly synonymous with the god referred to in the Wealth of Nations as the deity. 94 00:11:53.220 --> 00:12:01.220 And Waterman notes that the term nature is used 149 times in the Wealth of Nations, 95 00:12:01.220 --> 00:12:10.100 natural comes up 232 times and naturally is found 272 times. 96 00:12:10.100 --> 00:12:15.220 Now it's used in different senses and not always, but in many cases it's being used in a 97 00:12:15.220 --> 00:12:45.220 Now, Mark Thornton met yesterday, talked a little bit about this, and mentioned there is some controversy over the real meaning of the hidden hand, and I'm sure that there are different interpretations, but these authors, and I would tend to agree with them, are basically saying that there is a hidden hand in the wealth of nations, and it's hidden because it's really the hand of God, 98 00:12:45.220 --> 00:12:54.220 and that's what puts the whole thing together and makes it make sense and actually that's why it resonated in his society because Christian culture was pervasive 99 00:12:54.220 --> 00:13:03.220 but yet people were having growing doubts so he kind of synthesized the Christian imagery but within a sort of a scientific set of metaphors 100 00:13:03.220 --> 00:13:09.220 and that was the key to his success. 101 00:13:09.220 --> 00:13:19.620 So, and if you look at what the, of course, Smith's commands of God are not found in the Bible. 102 00:13:19.620 --> 00:13:23.620 They're found in his interpretation of the natural world. 103 00:13:23.620 --> 00:13:34.620 So society follows, in Smith's portrayal, the laws of self-interest, which is the equivalent of gravity in the solar system, 104 00:13:34.620 --> 00:13:49.620 It has a similar tendency towards equilibrium, and thus Smith has revealed the true social order of nature as Newton revealed the true social order of the solar system and of the physical world. 105 00:13:49.620 --> 00:13:58.620 In fact, Smith saw himself in terms of Newton, saw himself as the Newton of society. 106 00:13:58.620 --> 00:14:05.540 So you could say in this sense that Smith was the revealer of a new religion. 107 00:14:05.540 --> 00:14:11.540 He had revealed the real plan of God for the world. 108 00:14:11.540 --> 00:14:14.180 But it's not really a Christian God. 109 00:14:14.180 --> 00:14:20.420 And so in a sense, you could call it a Christian variation or heresy or whatever, 110 00:14:20.420 --> 00:14:26.780 perhaps, although I'm sure it could be interpreted in some Christian framework. 111 00:14:26.780 --> 00:14:29.260 But I think it's actually a strain. 112 00:14:29.260 --> 00:14:31.980 And another, again, reflecting the increasing amount 113 00:14:31.980 --> 00:14:35.820 of writing on these kinds of subjects, 114 00:14:35.820 --> 00:14:39.780 another intellectual historian, Peter Minowitz, 115 00:14:39.780 --> 00:14:43.980 in a book which I recommend, it's a 1993 book about Adam 116 00:14:43.980 --> 00:14:47.940 Smith's thinking, says that Smith is basically 117 00:14:47.940 --> 00:14:51.340 non-Christian or even anti-Christian 118 00:14:51.340 --> 00:14:53.460 in his explicit language. 119 00:14:53.460 --> 00:15:01.460 Although he's in an understated or an implicit way borrowing heavily from Christian thinking. 120 00:15:01.460 --> 00:15:11.460 Now, so this illustrated what I would say has been a common theme of the whole modern age. 121 00:15:11.460 --> 00:15:16.460 A lot of the greatest intellectual figures of the age, looking back now, 122 00:15:16.460 --> 00:15:20.460 and we're starting to have a little more perspective on them than we had, 123 00:15:20.460 --> 00:15:25.260 took Christian themes and they recast them in secular language. 124 00:15:25.260 --> 00:15:31.860 Sometimes even condemning Christianity, as Marx, for example, did, as the opiate of the masses, 125 00:15:31.860 --> 00:15:38.860 even when you actually look at it now in retrospect, it clearly is a variant of Christian thinking. 126 00:15:38.860 --> 00:15:46.260 And this also, you know, at least in my interpretation, you could have a lot of discussions, 127 00:15:46.260 --> 00:15:54.960 explains the success of a lot of these thinkers because basically they were operating in a culture that was suffused with Christian assumptions and values, 128 00:15:54.960 --> 00:16:03.760 but they were translating these, though, to a new and more acceptable, quote, scientific language. 129 00:16:03.760 --> 00:16:12.660 And so in the 18th century, we saw the beginnings of this emergence of secular religion as a challenge or two, 130 00:16:12.660 --> 00:16:22.020 and eventually even a victor over traditional Christianity in many forums, especially in terms of the governance of public life. 131 00:16:24.020 --> 00:16:37.420 So Brousseau was one of the first and was tremendously influential, Smith came later, Carl Marx followed, produced another powerful secular religion, 132 00:16:37.420 --> 00:16:46.720 Paul Tillich once described Marx as the most influential theologian in Western civilization since the Reformation. 133 00:16:46.720 --> 00:16:55.920 He wasn't talking about Marx's brilliant logic, which was actually terrible, 134 00:16:55.920 --> 00:17:04.420 but he was talking about a message that stirred such powerful religious emotions. 135 00:17:04.420 --> 00:17:11.500 and Marxism Resonated in a Christian Civilization because it was already very familiar with 136 00:17:11.500 --> 00:17:12.500 the main themes. 137 00:17:12.500 --> 00:17:18.500 There's another book talking again about the development of this recent literature by an 138 00:17:18.500 --> 00:17:28.380 Israeli historian, Egal Helfen, who interprets the history of communism in Russia as basically 139 00:17:28.380 --> 00:17:32.140 a misguided working out of a religious revolution. 140 00:17:32.140 --> 00:17:40.580 was nominally atheistic, but the underlying messages were historically Christian, as Helfand 141 00:17:40.580 --> 00:17:49.020 explains, the Marxist concept of universal history was essentially inspired by the Judeo-Christian 142 00:17:49.020 --> 00:17:56.460 bracketing of historical time between the fall of man and the apocalypse. 143 00:17:56.460 --> 00:18:05.220 So he goes on and basically shows that the Marxist ideas as eschatological ideas had 144 00:18:05.220 --> 00:18:11.780 an enormous impact even in the development of Russian society and the details of organization 145 00:18:11.780 --> 00:18:15.080 and Marxist ideology. 146 00:18:15.080 --> 00:18:24.780 So I've made again I'd say a small contribution to this trend and wrote about Smith a bit 147 00:18:24.780 --> 00:18:37.780 In the book, Reaching for Heaven on Earth, I suggested, along with Rothbard, that there were strong elements of Calvin, but also Thomas Aquinas, and that in some ways you could interpret Smith as being a... 148 00:18:37.780 --> 00:18:49.780 His magic formula was that he synthesized Calvin and Aquinas in language and metaphors that were increasingly suitable to a secular age. 149 00:18:49.780 --> 00:18:54.780 Now, you could say that this is all of historical interest, especially with Smith. 150 00:18:54.780 --> 00:19:01.300 I mean, maybe Smith was theological, I think there's a very strong case, but maybe his 151 00:19:01.300 --> 00:19:05.860 arguments can just as well be made now without any theology. 152 00:19:05.860 --> 00:19:11.960 Maybe God or no God, the market system is still the most efficient way of organizing 153 00:19:11.960 --> 00:19:14.780 a modern economy. 154 00:19:14.780 --> 00:19:23.340 But I question in my writing that you can dispense so easily with religion. 155 00:19:23.340 --> 00:19:28.220 The full argument is in the second book, Economics as Religion, but I'll illustrate the argument 156 00:19:28.220 --> 00:19:36.420 with respect to the topic of free trade, which is the assignment I have today. 157 00:19:36.420 --> 00:19:41.860 I'm going to suggest that there are necessary theological assumptions in order to make the 158 00:19:41.860 --> 00:19:47.700 the argument for free trade full and convincing. 159 00:19:47.700 --> 00:19:50.500 That is to say, belief in free trade 160 00:19:50.500 --> 00:19:55.580 has to rest on a normative foundation. 161 00:19:55.580 --> 00:19:58.700 You can start off by noting that free trade 162 00:19:58.700 --> 00:20:01.500 is a universalist vision. 163 00:20:01.500 --> 00:20:05.180 The whole world should become free traders. 164 00:20:05.180 --> 00:20:07.180 And then it'll bring everybody together 165 00:20:07.180 --> 00:20:10.940 in an economic community of common bonds. 166 00:20:10.940 --> 00:20:19.940 In this respect, actually, it's a bit like Christianity, which, unlike many other religions, was universalistic and sought to convert the whole world. 167 00:20:19.940 --> 00:20:27.380 Other people, like the Japanese, have almost no desire to go out and convert other people to their own value system. 168 00:20:27.380 --> 00:20:35.180 In fact, they want to stay as far away from other people as possible, and their preference would probably be to just be Japan by themselves. 169 00:20:35.180 --> 00:20:45.780 But in the West, and also Islam, which is a biblical religion, there's a constant missionary character. 170 00:20:45.780 --> 00:20:53.380 It's interesting, when the World Bank sends out a team these days to less developed countries, they actually call them missions. 171 00:20:53.380 --> 00:21:03.180 And they're spreading the ideas of economic progress to the world. 172 00:21:03.180 --> 00:21:12.180 So, and Adam Smith argued just that, that free trade would promote bonds of friendship and community, and this was a critical element. 173 00:21:12.180 --> 00:21:22.180 And in fact, it was kind of essential to the whole enterprise, because if we look at history, you know, we see that the history of the world, 174 00:21:22.180 --> 00:21:29.980 of tribes and nations, is one of war and conflict, often, you know, disastrous. 175 00:21:29.980 --> 00:21:40.980 And so, in advocating free trade, you have to be assuming that somehow economic progress will cure nations of this kind of bad behavior. 176 00:21:40.980 --> 00:21:44.980 Commerce will take the place of war. 177 00:21:44.980 --> 00:21:54.980 We can talk about this with the illustration of the case of China, just to bring it up to a very current and practical example. 178 00:21:54.980 --> 00:22:00.580 Most free traders would celebrate the widening of trade relations with China. 179 00:22:00.580 --> 00:22:08.880 Not just the cheap goods for the United States, the assumption is that China is being drawn into the world community of nations. 180 00:22:08.880 --> 00:22:16.880 And as China trades more and more, it gets richer and richer, we assume that China will become more democratic. 181 00:22:16.880 --> 00:22:21.680 We assume it will become more cooperative and rational as a nation. 182 00:22:21.680 --> 00:22:31.680 We assume that Mao Tse-Tung was an aberration that could not happen again in the new free trading in much richer China. 183 00:22:31.680 --> 00:22:42.680 Now, I'd say, you know, this idea that we're changing the Chinese and their behavior in some fundamental sense as a nation is already getting rather religious. 184 00:22:42.680 --> 00:22:45.680 It has overtones of salvation. 185 00:22:45.680 --> 00:22:54.680 and it's making assumptions about the economic progress that go well beyond total individual utilities. 186 00:22:54.680 --> 00:23:01.680 But it is basically just an assumption. We don't really know. I mean think of an alternative scenario. 187 00:23:01.680 --> 00:23:08.680 China could get rich but still think that Chinese are the center of the earth and superior to all other nations. 188 00:23:08.680 --> 00:23:12.680 They might build up a big army and navy. 189 00:23:12.680 --> 00:23:19.680 It might then turn out that free trade had made China powerful in order to threaten the United States. 190 00:23:19.680 --> 00:23:26.680 And the Marxists used to say that a capitalist will sell you the rope to hang him. 191 00:23:26.680 --> 00:23:35.680 And maybe, you know, maybe we're creating a China which is eventually going to pose a... 192 00:23:35.680 --> 00:23:38.680 We don't know. I mean, this is where the assumptions come in. 193 00:23:38.680 --> 00:23:44.680 and the assumptions about economics and the effect of economics on national and individual character. 194 00:23:45.680 --> 00:23:57.680 But for me, I can only promote and enthusiastically endorse the idea of building up China if I feel fairly confident that it's going to become a cooperative member of the world community of nations. 195 00:23:58.680 --> 00:24:04.680 Adam Smith would have assumed that that was the case. Most free traders implicitly assume it, but we don't know. 196 00:24:04.680 --> 00:24:13.680 This is part of the idea that economic progress is not only materially uplifting, but morally uplifting. 197 00:24:13.680 --> 00:24:22.680 And this is, again, this Chinese example is just an illustration of one of the main themes I emphasize in my writing. 198 00:24:22.680 --> 00:24:28.680 In Christianity, original sin was in the fall in the Garden of Eden. 199 00:24:28.680 --> 00:24:35.680 in the Garden of Eden, in economic religion, there's another equivalent to original sin, 200 00:24:35.680 --> 00:24:41.680 it's economic deprivation. Why do people lie, cheat and steal? 201 00:24:41.680 --> 00:24:47.680 Economic religion says it's because of poverty. That's why China behaved so badly before, 202 00:24:47.680 --> 00:24:52.680 because they were so poor, but now that they get rich, they'll become model world citizens. 203 00:24:52.680 --> 00:25:00.680 And so the salvation of the world then is to eliminate material deprivation and that's where free trade comes in. 204 00:25:00.680 --> 00:25:07.680 As I don't have any question, free trade is the best route of rapid economic progress. 205 00:25:07.680 --> 00:25:16.680 So free trade becomes the route of moritual and spiritual uplift, if that's what economic progress does to people. 206 00:25:16.680 --> 00:25:30.680 It's actually the way to banish bad behavior, or in a Christian framework, evil actions in the world, or that is to say, again, in a Christian terminology, to save the world. 207 00:25:30.680 --> 00:25:38.680 But of course, we don't need a Christian god to do it if it actually can be done through economic means. 208 00:25:38.680 --> 00:25:45.680 And we see these kinds of assumptions in the United States. Why do people commit crime in the inner city? Because they're poor. 209 00:25:45.680 --> 00:25:50.680 We want to solve crime, we solve poverty, and everything will be fine. 210 00:25:50.680 --> 00:25:56.680 And again, it's economic theology, if you want to call it that. 211 00:25:56.680 --> 00:26:02.680 So I'm going to switch a bit now and look at another aspect of this, 212 00:26:02.680 --> 00:26:09.680 which is also going to involve the interaction of theology or religion and free trade. 213 00:26:09.680 --> 00:26:14.680 What about the effects of free trade internally in the United States? 214 00:26:14.680 --> 00:26:18.680 Does free trade really make us better off? 215 00:26:18.680 --> 00:26:23.680 And I'm not also talking about whether, going back to my China discussion, 216 00:26:23.680 --> 00:26:30.680 whether a richer United States will be a more peaceful and cooperative member of the world community of nations, 217 00:26:30.680 --> 00:26:37.680 although I know that a lot of people in Europe and around the world are wondering about that these days, looking at Iraq and so forth. 218 00:26:37.680 --> 00:26:46.680 But I'm actually going to ask the question of whether the US is better just in terms of the welfare of its citizens as a result of free trade. 219 00:26:46.680 --> 00:26:53.680 And I'd suggest the answer is less obvious than many economists have argued. 220 00:26:53.680 --> 00:26:59.680 It only becomes obvious if you actually make some normative assumptions about progress and the benefits of progress. 221 00:26:59.680 --> 00:27:06.680 And that are not really as obvious as some people have taken for granted. 222 00:27:06.680 --> 00:27:19.680 So I'm not questioning that goods from China are cheaper. I mean, I go to Walmart too. I'm aware of what you get in Walmart. 223 00:27:19.680 --> 00:27:28.680 But I'm asking whether, and I'm not questioning that Americans, in terms of total consumption, get more as a result of free trade. 224 00:27:28.680 --> 00:27:31.680 They do, as far as I'm concerned anyway. 225 00:27:31.680 --> 00:27:37.680 But my interest and concern is what you could call the cost of transition. 226 00:27:37.680 --> 00:27:45.680 There's a lot of turmoil and economic upset associated with the market in general and with free trade in particular. 227 00:27:45.680 --> 00:27:52.680 Even people who don't lose their jobs experience a lot of anxiety about the possibility. 228 00:27:52.680 --> 00:27:57.680 And we're seeing increasing evidence in the United States that people don't like change, 229 00:27:57.680 --> 00:28:03.280 Especially having to look for a new job, and maybe it's because we're already so rich. 230 00:28:03.280 --> 00:28:07.680 I mean, by any previous historical standards, we're richer than king. 231 00:28:07.680 --> 00:28:13.280 So, you know, maybe with the idea is that, hey, how much more do we need? 232 00:28:13.280 --> 00:28:18.680 It'd be better to just have a job and have a stable situation. 233 00:28:18.680 --> 00:28:26.680 So, and there's a, actually this fits into, there's a new academic field that's called happiness studies. 234 00:28:26.680 --> 00:28:35.680 And it stems from Richard Easterlin, he wrote a classic article in the 1970s. 235 00:28:35.680 --> 00:28:42.680 Easterlin found that as people got richer within a country, they reported significantly higher happiness scores. 236 00:28:42.680 --> 00:28:47.680 That is, you feel good if you're rich, and other people in your country are poor. 237 00:28:47.680 --> 00:28:55.680 But what he found, which was rather remarkable, was that when whole nations got richer, their happiness scores didn't correlate with their income. 238 00:28:55.680 --> 00:29:05.680 And so, it's a rather disconcerting result in terms of free trade, since the whole point of it is to make nations richer. 239 00:29:05.680 --> 00:29:09.680 But if they don't get happier, happiness was the goal that Adam Smith had in mind, 240 00:29:09.680 --> 00:29:15.680 this would seem to be at least modest empirical questioning of the whole point of the exercise. 241 00:29:15.680 --> 00:29:23.680 And now people have even gone to measure it. They actually have happiness scores and then they do regression analyses 242 00:29:23.680 --> 00:29:33.680 And they correlate happiness with things like your income, your education, your sex, your age, and all these other things. 243 00:29:33.680 --> 00:29:37.680 And so they use the best statistics which are available. 244 00:29:37.680 --> 00:29:49.680 And just a recent article, 2004 article in the Journal of Public Economics says that losing a job has the equivalent effect on happiness 245 00:29:49.680 --> 00:30:09.680 and happiness as gaining or losing $60,000 on average, so that means free trade is going to have to produce a lot of benefits in terms of cheaper goods, prices of goods in order to compensate for that, multiply by all the jobs that are displaced and so forth. 246 00:30:09.680 --> 00:30:17.000 Interestingly, just to give you the flavor of this, they also estimate that it takes, 247 00:30:17.000 --> 00:30:20.960 on average, $100,000 to make up for a divorce. 248 00:30:20.960 --> 00:30:29.680 So again, it shows that change in people's lives is difficult, and any system which imposes 249 00:30:29.680 --> 00:30:34.200 large amounts of change is going to have a lot of stress and strain. 250 00:30:34.200 --> 00:30:49.200 There's a new book out by one of the more distinguished British economists, he's even Lord Richard Laird, published just a month or two ago, in 2005 it's called Happiness Lessons from the New Science. 251 00:30:49.200 --> 00:31:03.200 Now remember, Adam Smith is basically all about happiness, when you really get down to it and how to maximize it in the world, or at least that was what he said he was doing, he was maximizing self-interest, but presumably to make you happier, to maximize your utility. 252 00:31:03.200 --> 00:31:09.200 Utility is just another word for happiness, a little more formal and academic sounding. 253 00:31:09.200 --> 00:31:12.200 So people are actually trying to look at this now. 254 00:31:12.200 --> 00:31:20.200 But it raises points and issues with respect to free trade. 255 00:31:20.200 --> 00:31:24.200 Why is free trade so great if it involves all this disruption? 256 00:31:24.200 --> 00:31:30.200 And economists have certainly never made any attempts to measure the losses from the disruption 257 00:31:30.200 --> 00:31:34.440 of Disruption, and to compare them with the benefits in total consumption. 258 00:31:34.440 --> 00:31:37.520 They just take it for granted, that's just an automatic assumption. 259 00:31:37.520 --> 00:31:43.000 You could call it an article of religious faith, that the gains overall are greater 260 00:31:43.000 --> 00:31:48.400 than the losses of the individuals who lose, even though the individual losers are probably 261 00:31:48.400 --> 00:31:55.360 experiencing much bigger losses than the individual gainers from the trade, at least in the short 262 00:31:55.360 --> 00:31:57.400 run. 263 00:31:57.400 --> 00:32:00.680 Now why is free trade so important? 264 00:32:00.680 --> 00:32:04.840 Well, again, I would say it comes back to the argument I've been making that if you 265 00:32:04.840 --> 00:32:11.240 believe in economic progress and that economic progress is a way to make people better and 266 00:32:11.240 --> 00:32:19.480 make nations better, not just materially uplift people, but to morally uplift people, then 267 00:32:19.480 --> 00:32:22.240 free trade makes perfect sense. 268 00:32:22.240 --> 00:32:30.000 I mean, why worry about these temporary stresses and strain when we're on the road to affecting 269 00:32:30.000 --> 00:32:35.040 the human condition or, as I put it in my first book, when we're reaching for heaven 270 00:32:35.040 --> 00:32:40.680 on earth and there's some possibility of actually getting there. 271 00:32:40.680 --> 00:32:46.560 So on this road, we'll want to move as rapidly as possible. 272 00:32:46.560 --> 00:32:51.600 Those people who complain about being disrupted and losing their jobs, I mean, they're like 273 00:32:51.600 --> 00:33:00.200 People who are evil people who are violating the religion in a certain sense, they're malingerers. 274 00:33:00.200 --> 00:33:09.800 Why would anyone complain about having to bear some temporary stress if the world and 275 00:33:09.800 --> 00:33:15.600 this free trading system is actually going to solve all the historic most severe problems 276 00:33:15.600 --> 00:33:30.600 and other things that have afflicted the human beings in the past, such as war and crime and all kinds of other things which will gradually disappear as we maximize our material wealth. 277 00:33:30.600 --> 00:33:36.400 And you can draw some parallels with Christianity in this regard. 278 00:33:36.400 --> 00:33:46.100 In the Middle Ages also, the religious purpose was to get to heaven, but it was in the hereafter rather than here on earth. 279 00:33:46.100 --> 00:33:54.200 Ordinary people were often tempted by easy pleasures. Sin was easy to follow. 280 00:33:54.200 --> 00:33:58.500 Kings and other political leaders often ignored their Christian responsibilities. 281 00:33:58.500 --> 00:34:13.500 The priesthood had to remind them of their duties and their obligations, but it is in medieval religion, and no one should reasonably sacrifice a heavenly future for a few short-run pleasures of the moment. 282 00:34:13.500 --> 00:34:22.500 And like Christianity, economics always emphasizes that it's about the long run, although Keynes did say that in the long run we'll all be dead. 283 00:34:22.500 --> 00:34:27.200 He was trying to actually argue with the prevailing way that most economists were thinking and 284 00:34:27.200 --> 00:34:32.640 then still do in considerable part when they focus on equilibrium, for example. 285 00:34:32.640 --> 00:34:38.780 That's worrying about the long run and not about how we get there and what the path is 286 00:34:38.780 --> 00:34:42.140 and what the qualities of the path are like. 287 00:34:42.140 --> 00:34:48.620 But that all makes sense if progress is a transcendent value. 288 00:34:48.620 --> 00:34:54.740 In all of these lost jobs and other transitional costs in the short run, reasonably enough 289 00:34:54.740 --> 00:34:55.740 can be ignored. 290 00:34:55.740 --> 00:35:03.780 So, to repeat my point, economic progress, maybe, I wouldn't actually, I'm not really 291 00:35:03.780 --> 00:35:08.460 even intending to dismiss this, maybe it's true, although I have my doubts, as you might 292 00:35:08.460 --> 00:35:13.700 suspect, but I'm not saying it's wrong, it's just, I'm saying it's an article of faith. 293 00:35:13.700 --> 00:35:17.820 I don't really know whether economic progress actually has all these great benefits. 294 00:35:17.820 --> 00:35:22.820 There's certainly some reasons to doubt it, but there's also some reasons to believe it. 295 00:35:22.820 --> 00:35:28.820 But it's an article of faith that has to go with the whole system or else the system starts to unravel. 296 00:35:28.820 --> 00:35:37.820 And if economic progress is not what it's really cracked up to be, 297 00:35:37.820 --> 00:35:43.820 then the case for free trade has to shift from what it's historically been presented. 298 00:35:43.820 --> 00:35:46.820 It doesn't necessarily go away, but it needs at least to be modified. 299 00:35:46.820 --> 00:35:56.820 Now, I think this issue is arising because for much of the 20th century, you were a bit of a crackpot if you questioned progress. 300 00:35:56.820 --> 00:36:00.820 I mean, everybody took it for granted. I mean, it was part of the American religion. 301 00:36:00.820 --> 00:36:06.820 I mean, Abraham Lincoln was part of this in his own way, and he symbolized it. 302 00:36:06.820 --> 00:36:11.820 But now a lot of people are questioning it, especially environmentalists. 303 00:36:11.820 --> 00:36:33.820 These are mostly environmentalists, and so it's not, this is part of the religious war between environmentalists and believers in economic progress as a redeeming feature of life, and it's not coincidental that environmentalists are the fervent, you know, the leading opponents of the merits of globalization. 304 00:36:33.820 --> 00:37:03.820 They're not actually stupid, they're simply saying, admit, some of them are not very good at articulating, I have to admit, so maybe they are stupid, but implicitly what they're saying is that progress is not what it's cracked up to be and doesn't really redeem people, and so therefore globalization is not as important as a lot of people are suggesting it is, and when you look at things like progress, I mean people are undoubtedly influenced 305 00:37:03.820 --> 00:37:10.860 Things like the 9-11 terrorist attack, I mean, it raises ambiguities about progress. 306 00:37:10.860 --> 00:37:16.160 With modern science, all it takes now is a few nutcases and they can destroy thousands 307 00:37:16.160 --> 00:37:19.220 of people and possibly even millions of people. 308 00:37:19.220 --> 00:37:24.340 So you know, this fear that science is kind of a Faustian bargain has become much more 309 00:37:24.340 --> 00:37:30.300 widespread and of course science is obviously associated with progress. 310 00:37:30.300 --> 00:37:36.060 So that's sort of my metaphysical theological discussion. 311 00:37:36.060 --> 00:37:42.760 I will switch gears and finish up with a few more pragmatic observations on the connection 312 00:37:42.760 --> 00:37:45.460 between religion and free trade. 313 00:37:45.460 --> 00:37:54.580 And again, I'll refer to an existing body of work among economists. 314 00:37:54.580 --> 00:38:00.180 The economists in the 1990s got interested in the subject of social capital. 315 00:38:00.180 --> 00:38:05.780 I mentioned spiritual capital being, social capital is a broader thing. 316 00:38:05.780 --> 00:38:10.940 It's basically that, I mean to take a simple example, language. 317 00:38:10.940 --> 00:38:13.380 A language is a form of social capital. 318 00:38:13.380 --> 00:38:18.500 Nobody creates it exactly, nobody invests in it, but yet a language is a tremendously 319 00:38:18.500 --> 00:38:19.500 efficient thing. 320 00:38:19.500 --> 00:38:21.940 It even is tremendously beneficial to the economy. 321 00:38:21.940 --> 00:38:33.940 The spread of English around the world is a form of social capital which is greatly and rapidly reducing transactions costs, but nobody planned it, nobody invested in it, it just happens and is happening. 322 00:38:33.940 --> 00:38:47.940 But there are all kinds of forms of social capital and economists are saying, well, you know, we actually need to start studying the social capital as well as physical capital and human capital in the form of education. 323 00:38:47.940 --> 00:38:56.940 So, maybe to have a free trading system, I mean, we need some worldwide social capital. 324 00:38:56.940 --> 00:38:59.940 That's one way of thinking of it anyway. 325 00:38:59.940 --> 00:39:04.940 I mean, to have a good system of free trade, property rights need to be enforced across borders, 326 00:39:04.940 --> 00:39:11.940 trade agreements need to be established, cheating on these agreements needs to be policed. 327 00:39:11.940 --> 00:39:13.940 There's a whole set of things that have to happen. 328 00:39:13.940 --> 00:39:16.940 I mean, free trade is not world anarchy. 329 00:39:16.940 --> 00:39:25.640 It's actually a managed system of markets, but with laws, arrangements, institutional arrangements. 330 00:39:25.640 --> 00:39:36.340 Actually, for better or worse, John Maynard Keynes was the leading architect of the post-World War free-trading regime, 331 00:39:36.340 --> 00:39:41.840 which has been enormously successful in terms of economic progress, if that's what you're looking for. 332 00:39:41.840 --> 00:39:49.280 and but hopefully you know within this system most people will behave in a 333 00:39:49.280 --> 00:39:54.480 reasonable fashion on a voluntary basis that is we don't have to force them by 334 00:39:54.480 --> 00:39:57.260 threatening to punish them they actually believe in it and they want to 335 00:39:57.260 --> 00:40:05.280 contribute to it and be part of it so how would we get this kind of behavior I 336 00:40:05.280 --> 00:40:11.600 mean there are as I've mentioned before a lot of losers in trade a lot of people 337 00:40:11.600 --> 00:40:17.600 People who might be angry about the results, who might protest it. 338 00:40:17.600 --> 00:40:22.880 Well one way historically that you build up social capital or in this case world capital 339 00:40:22.880 --> 00:40:29.740 of a social nature is through a religion, which would suggest that you need some kind 340 00:40:29.740 --> 00:40:37.680 of world religious backing, again referring back to some of my earlier themes, as a normative 341 00:40:37.680 --> 00:40:39.600 foundation. 342 00:40:39.600 --> 00:40:49.200 Some people might prefer the word ideology, but I think that's actually religion, and 343 00:40:49.200 --> 00:40:55.380 I've had arguments with people, probably some of you would argue with me, but I think religion 344 00:40:55.380 --> 00:40:58.440 is the most accurate word. 345 00:40:58.440 --> 00:41:03.020 And if we were going to say, what's the religion going to be that's going to create a set of 346 00:41:03.020 --> 00:41:18.020 World Bond that are going to combat opportunism, to use a piece of economic lingo these days, or to maintain trust, to provide that social capital foundation for world trading. 347 00:41:18.020 --> 00:41:30.020 What's the common belief system? Well, the only one I can see right now, although maybe I'm wrong, this will be my last point at the end, the only one I can see is this belief in economic progress. 348 00:41:30.020 --> 00:41:44.020 So whether it's valid or not, and I have said that it's easy to wonder about it, it does seem to be the essential normative foundation right now. 349 00:41:44.020 --> 00:42:14.020 and now there are, it is possible to imagine some other normative foundations the you could go back and say that God is a free trader and maybe you could find justification in the Bible and economic progress is a secular religion we might be able to find justification in traditional religion 350 00:42:14.020 --> 00:42:19.020 These are the principles of free trade. I haven't really explored that subject in great depth. 351 00:42:19.020 --> 00:42:24.020 I'm probably skeptical, but probably not impossible. 352 00:42:24.020 --> 00:42:30.020 And in effect, what I've been suggesting is that in a somewhat secularized way, 353 00:42:30.020 --> 00:42:37.020 that was essentially what Adam Smith was arguing, was that God basically had established this system. 354 00:42:37.020 --> 00:42:43.020 It was the proper way of ordering relationships among human beings. 355 00:42:43.020 --> 00:42:51.020 If we were worried about China, we didn't have to worry, because God knew what was going to happen, and China was taken care of in the grand plan. 356 00:42:51.020 --> 00:42:56.020 And so we can rest at ease about this issue that I raised before. 357 00:42:56.020 --> 00:43:01.020 And so in that vision, it wouldn't be economic progress that would protect us against China. 358 00:43:01.020 --> 00:43:08.020 It would be, and its benefits and its impact on China would be a divine intervention. 359 00:43:08.020 --> 00:43:11.020 So that's an option. 360 00:43:11.020 --> 00:43:19.020 I guess, if you had asked me, I guess as a somewhat libertarian, although you might wonder based on all my comments here, 361 00:43:19.020 --> 00:43:30.020 I guess I would argue, if I had to at this point make an argument, a fundamental argument for free trade, 362 00:43:30.020 --> 00:43:39.020 it would basically come down to the principle of ordering society based on voluntary consent as individual. 363 00:43:39.020 --> 00:43:46.420 And frankly, I don't care as much whether it actually produces a tremendous rate of economic progress or not. 364 00:43:46.420 --> 00:43:49.720 So maybe I'm a departure in this respect. 365 00:43:49.720 --> 00:44:00.220 And so it's really the principle of individual freedom and not being oppressed by government, et cetera, et cetera. 366 00:44:00.220 --> 00:44:06.820 So I guess maybe you could say that I have a libertarian God. 367 00:44:06.820 --> 00:44:13.100 But whether it's a Christian, economic, libertarian, or whatever, 368 00:44:13.100 --> 00:44:14.980 it does seem to me that you're going 369 00:44:14.980 --> 00:44:17.300 to have to defend free trade in terms 370 00:44:17.300 --> 00:44:19.460 of some normative principle. 371 00:44:19.460 --> 00:44:23.380 And those principles are not just scientific. 372 00:44:23.380 --> 00:44:30.420 And that could be the big question for the 20th century, 373 00:44:30.420 --> 00:44:31.920 as I said in here. 374 00:44:31.920 --> 00:44:33.620 What God will it be? 375 00:44:33.620 --> 00:44:35.180 I don't know. 376 00:44:35.180 --> 00:44:37.180 Anyway, I'm trying to raise some questions about...