French President Nicolas Sarkozy has called for a fundamental rethink of capitalism in the aftermath of the financial crisis.That "scattered applause" line is classic - yes, I'm sure that there were tons of well-educated international financiers who were just psyched to hear the President of France badmouth free trade. But seriously, I normally wouldn't even bother to refute nonsense like this, but I will today because the morality of free trade versus protectionism is a point that I don't think I've addressed here yet, and I actually have some great (if I do say so myself) stock text available on the subject. So it's only a cut-and-paste away:
"We need deep profound change," he said in his keynote speech at the World Economic Forum in Davos.
His comments came as bankers and regulators clashed over proposals to break up banks that threaten the whole financial system.
Mr Sarkozy said he wished to restore a "moral dimension" to free trade.
"Were we not to change, we would be showing tremendous irresponsibility," he told the bankers and politicians that gather annually in the Swiss alpine resort....
Mr Sarkozy told the delegation - to scattered applause - that governments and companies in the world economy could not pretend it was business as usual.
"We are not asking ourselves what we will replace capitalism with, but what kind of capitalism we want?" he said.
"We must re-engineer capitalism to restore its moral dimension, its conscience," he said. "By placing free trade above all else, what we have is a weakening of democracy."...
The most principled case for free trade is a moral case. It is rooted in some of the very ideals upon which the United States was founded: the pursuit of life, liberty, and happiness, and the rule of law. Every American should be free to transact with whomever he wishes to transact, regardless of the nationality or location of the other party. Voluntary exchange is inherently fair, benefits both parties, and allocates scarce resources more efficiently than a system under which government dictates or limits choices. Individuals deciding for themselves how and with whom to conduct commerce will advance their own well-being, and thus the nation’s, far more efficiently than would some centralized authority that tries to influence private decisions by tipping the scales.Yeah, I think that just about sums it up, don't you?
Furthermore, government intervention in voluntary economic exchange on behalf of some citizens at the expense of others is inherently unfair, inefficient, and subverts the rule of law. Instead of individuals seeking to optimize their conditions subject to the rules, they are incentivized to divert resources from productive endeavors to changing the rules to their advantage through politics and backroom dealmaking.
Alas, this very sound and simple justification for free trade has been distorted over the years by groups seeking to tip the scales in their favor. They mischaracterize trade in the ancient but false dichotomy of the haves versus the have-nots. Evil corporations, they say, benefit from trade while regular people suffer its wrath. The public is told that companies like Wal-Mart profit from trade, but that the vast benefits afforded Americans who shop at Wal-Mart—benefits like more-affordable clothing, food, and other everyday products—count for nothing. The public is told that trade enriches the Chinese government, but that the benefits to U.S. manufacturers and their workers from record export sales to Chinese customers over the past few years are meaningless. In the political realm, trade is never about individuals acting in their own best interest by transacting with whom they choose to transact. Instead, trade is a zero-sum game featuring the collective “Us” versus the collective “Them,” and “they” are gunning for “our” jobs and wealth using underhanded tactics.
Of course the prescribed “elixir” of limiting or regulating trade invariably benefits those who speak the loudest against free trade. Trade barriers are no different from earmarks. Trade barriers are like pork projects. Trade barriers are akin to the auto bailout. In all three cases, special interests persuade rulemakers that their circumstances justify expropriation of other people’s resources to subsidize their own endeavors. Each is an affront to the rudimentary concept of fairness, individual liberty, and the rule of law.