“…in the fifteenth century, vessels that moved primarily under sail were reserved for bulky, low-value cargoes; passengers and previous freight moved on oared craft…” “A galley 150 feet in length might carry up to five hundred oarsmen…” “Cramming so much humanity into a small space utterly lacking in sanitation turned such craft into floating sewers.”
“Shipboard robbery and murder were not uncommon, and merchant ships provided corrupt government officials with easy targets.”
Even then, it was cheaper and safer than traveling over land where you had the ever-present threat of Bedouin raiders and brigands. Why trade at all? “…the grim trading life was preferable to the even grimmer existence of the more than 90 percent of the population who engaged in subsistence-level farming. An annual profit of one hundred dinars – enough to support an upper-middle-class existence – made a trader a rich man.”
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“…the incentives and equal opportunity afforded by free trade simultaneously improve the overall welfare of mankind and increase socially corrosive disparities of wealth. Even if trade slightly improves the real income of those at the bottom, they will fee the pain of economic deprivation when they fix their gaze at the growing wealth of those above them.”
“The political right embraces the mean, but rarely uses a different bit of jargon, the median – that is, the income or wealth at the fiftieth percentile, the “person in the middle.” When Bill Gates walks into a roomful of people, their mean income skyrockets while their median income changes hardly at all…”
Although free market Capitalism and trade seem like big, complicated words pregnant with political meaning, it’s actually rather simple if you just think of it as specialization and exchange. Imagine being on an island with 100 people. Nobody specializes. You all have to hunt and gather, make your own clothes and shelter, make your own hunting weapons and tools, make your own fire. Then someone comes up with the brilliant idea of specializing, but not only specializing, but allowing people to exchange goods or services which is an integral part of specializing. That’s all free market Capitalism and trade is. It’s simply allowing people to specialize and then exchange their goods and services. It doesn’t imply anything politically.
The difference between Capitalism and Communism is that with Capitalism, people freely decide whether to specialize or not and when and where to exchange their products and services. With Communism, a small group of people decide who specializes what and how they exchange their products and services. Nobody owns these products or services but the ‘collective’ which is controlled by the small group of people. This is similar to collusive and crony Capitalism where a small group of people own most of the land and capital through inheritance.
With specialization, you also get inequality. Without specialization, there is inequality in so far as some people are good at hunting, gathering, building shelters, and crafting tools while some are not. But since your life depends on all these skills, those who are good at everything tend to share the product of their labor with those who are not good at everything. With specialization, those who are good at things that are in demand will get higher compensation while those who are good at things that are not in demand, like collecting butterflies, will get lower compensation. However, the inequality will not be that great, because those who are good at things that are in demand can only accumulate so much food before it goes bad or so many fur coats, after which they might as well just give them away to friends and family.
With the invention of money, this all changes. Instead of storing a huge pile of food that will go bad or fur coats that you can’t wear, you can store up huge piles of cash in a bank. Because nobody sees it, there is little pressure to share the surplus. However, as some people accumulate more and more wealth that they can pass on to their offspring, you inevitably get different classes of people, and some lucky people are simply born into wealth. What makes this all the more corrupt and unequal is when you allow people to buy land and force others to pay rent to live on that land. At that point, the rich will always remain rich, while the poor will always be burdened by paying a rent to simply live on the planet Earth. The double whammy of inflation from the rich printing more and more money as well as interest paid to the rich when the poor borrow money creates even greater inequality. On top of this, you now have taxes that the poor pay while the rich pay a substantially lower tax rate on capital gains or they simply hide it in offshore accounts.
The idea that free market Capitalism and private ownership of land are inseparable is a false construct. They are two independent concepts that can and should be separated. It’s like charging people for air to breathe or sunshine. If you can’t afford sunshine, you are forced to live in a cave. If you can’t afford air to breathe, you simply suffocate and die. If you can’t afford to pay rent to live on land, you are forced to sleep on the streets and suffer constant harassment by police. One can argue that you are free to go live in the forest on public lands, but this is a facetious argument. We are all raised to live in cities now and lack any skills in living freely in a forest. Second, all the jobs are in the cities now.
The idea of paying rent to live on land is absurd and one of the biggest cons we have normalized and forgotten. You may argue, without private ownership of land, how do you keep people from squatting in your home or business? Getting rid of private ownership of land does not mean that land is freely shared, that if you build a house or factory, people can just wander in and sleep in it. People will receive a stewardship contract to live on or build a business on a tract of land. It gives them the ability to trespass people from this tract of land. What it eliminates is the ability of some rich buffoon forcing you to pay them to live or build a business on their land they did nothing to earn but being born into wealth. The stewardship agreement will allow you to exchange the tract of land for another if you choose to move. It is also revoked if you damage the land or cause a nuisance to your neighbors. You still need to pay people to build your house or business building and provide you with electricity and sewage. Free market Capitalism does not fall apart when you eliminate private land ownership. In fact, it actually improves it by freeing up income for you to invest more in your business or recreation or someone else’s business as investment. It also reduces extreme wealth inequality which is a drag on overall productivity.
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I’m not sure why all the chapters on ancient trade bored me. Perhaps it’s a combination of the distant past losing relevance and the author’s dry writing style. I skipped over to Chapter 12 which starts with the Americans in the 1800’s.
In the early days, the South dominated the colonies both economically and militarily. It was industry that turned the tables, but in the early 1800’s, US industry was much younger and smaller than the British industrial behemoth. As such, the US used tariffs and subsidies to protect young US northern industry. This did not help the South that favored free trade and did not need to protect industry. It’s odd that nobody wonders why the South did not secede from the North in the early 1800’s. “Before 1820, the South had relatively little quarrel with the North: Dixie largely supported the American system. But that year the Missouri Compromise made the South aware of the ability of the growing Northern majority to restrict slavery. This in turn focused southerners’ attention on other disagreements with the North, prime among which was the tariff issue. Both issues ended the “Era of Good Feelings.””
The Civil War was an inevitability, but it was not just about slavery as US history textbooks claim. “The Jackson coalition voted with the Adams men to pass the draconian 1828 Act, better known as the “Tariff of Abominations.” This legislation inflamed the growing estrangement between North and South.” Had the South seceded from the North in 1828, it’s likely they would have soundly defeated the North and gained independence.
“In 1861, secession and war left the North with the need to fund its army, and later, pensions and Reconstruction; paying for all this would require billions in import duties. The Union, now shorn of Southern opposition, was free to erect one of the world’s highest tariff walls. For more than a half century after the Civil War, this formidable barrier shielded American industries from British competition.”
It’s so ironic how the US shifted 180-degrees from this protectionist stance when Europe dominated the world to a ‘free-trade’ stance once the US dominated the Capitalist world after World War II. Any country in the world can argue against the US position on ‘free-trade’ by pointing out that the US successfully grew its industry by erecting the world’s greatest protectionist trade system, allowing its industries to grow and prosper. “Before the adoption of the income tax during the twentieth century, import duties financed 90 percent of American government.”
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Although I studied Economics in college, it’s frustrating that the Economics I studied was more quantitative analysis and obfuscation as opposed to a true understanding of economic phenomena. Perhaps at a state university, I would have been given a more broad and less mathematical view of economics. I took a course on trade, but it was myopic and focused on comparative currency valuation. We literally spent the entire course fixated on a single equation. They never talked about the much more fascinating concepts of price differentials in two nations. “In 1870, meat sold for 93 percent more in Liverpool than in Chicago…” “In 1870, pig iron was 85 percent more expensive in the United States than in England…” I think a lot of people think that European labor migrated to the US, because the US was the land of great opportunity and the US economy was stronger. This is a fallacy. The European economy was stronger, and there was more opportunity in Europe. Europeans move to the US, because wages were higher in the US. The US had industry and farming, but they lacked labor as a result of the decimation of the native inhabitants and the abolition of slavery.
It is fascinating how landowners, capitalists, and laborers formed unions in different countries leading to much different political systems and alliances. In Germany, the landowners and capitalists united to oppose the workers creating a more radical political divide between fascists and socialists. With capitalists on the side of landowners, the workers had no reason to embrace Capitalism and all the more reason to embrace socialism or even Communism. In England, the capitalists and workers united against the historically powerful landowners/aristocrats. The capitalists would provide greater freedoms and liberties for workers if the workers embraced Capitalism and rejected socialism or Communism.
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An important form of trade that this book fails to appreciate along with the rest of the world is cultural trade. A book called The Birth of
Korean Cool reveals that South Korean government actively subsidizes and protects the Korean pop culture and entertainment industry. Otherwise, Korea, much like many other countries, would be flooded with Hollywood productions. Instead, Korean culture is exported to Southeast Asia, South America, and the Middle East where they are some of the most diehard K-drama and K-pop fans.
The US has dominated the export of culture after a brief surge of British pop exports starting with the Beatles and including the James Bond franchise. Cultural export is hugely underrated while its impact is hugely disproportionate to any other kind of export commodity. Because so many people in the world think America is so cool, it’s easier to sell US products overseas as people associate anything American as cool. British and Japanese consumers flock to McDonalds and KFC. Before the US embargo, Russians flocked to McDonalds. At the same time, Americans are now buying Hyundai’s, Kia’s, and Samsung phones despite a horrible start to Korean cars in the US. Korean food is the fastest growing food niche in the US in no small part to the success of K-pop and K-dramas.
But cultural exports go much deeper than simple consumption of commodities. Arguably, many people never embraced Communism because America was perceived as so much cooler and desirable than the cold, boring Soviets. The legendary Wendy’s commercial mocking a Soviet fashion show made everyone believe that in addition to being boring and plain, Soviet women were all unattractive. That has been disproven now with countless Russian and Ukrainian female athletes flooding the sports scene, due in large part to their poor economy making the relatively hard work and low returns on choosing athletics as an occupation still more attractive that working in factories for very little money. Because South Korea restricted US culture from its entertainment industry, it allowed its own entertainment industry to blossom and in many ways compete successfully against the US. Recently, the Korean film Parasite won Oscar for best picture. Before that, no foreign film had ever won the best picture award. It underlies the importance of protecting young and vulnerable domestic industries from large and powerful foreign industries.
At the end, the book duly notes that free trade does come with its winners and losers. Larger, dominant countries have a huge advantage and smaller, weaker countries have a huge disadvantage. If you’re not producing anything of global value, you’ll suffer a trade deficit and your nation’s wealth with leave the country resulting in poverty. High-tech, automated labor from large, dominant countries can underprice your labor, so wages go down. As the US demonstrated, you need to protect your borders from cheaper products overseas to help develop your vulnerable, smaller industries. If there were no borders, everyone would simply move to wealthier nations. The US population would be a billion. Europe’s population would double. Because we have borders, when rich countries dominate, all they do is impoverish poor countries. There ought to be no reason why poor people can’t move to wealthy countries. Afterall, Europe and the US stole much of their natural resources and now only pay cents on the dollar for them. If I went into your house and stole your furniture and electronics, and you wanted to live in my house where your furniture and electronics are, it’s absurd for me to trespass you and call you the criminal.