The Online Library of Liberty

A project of Liberty Fund, Inc.

• Foreword
• Economic Liberalism the Classical View
• 1: The Classical Psychology of Liberalism
• 1: The Theory of Moral Sentiments
• 2: The Lectures
• 3: The Wealth of Nations
• 4: The Achievement of Smith
• 2: The Political Ideas of the Classical Economists
• 1: The Political Philosophy of Hume and Smith
• 2: The Paradox of Economic and Political Freedom
• 3: Human Nature, History, and Government
• 4: The Nationalism of the Economists
• 5: The Structure of Government
• 6: Economic Improvement and Social Progress
• 3: Liberalism In the Great Century
• 1: The Importance of the Nineteenth Century
• 2: The Practice of Policy
• 3: The Meaning of Economic Liberalism
• 4: The Ideas of Policy
• 5: The Theory of Policy In Mill

4

The Nationalism of the Economists

The aversion of the economists toward concentrated power—which made them oppose absolute government—also made them advocate a strong national state. When their nationalism is set against their belief in free trade, there emerges a second paradox. Actually, the paradox is double-edged. There seems to be as much inconsistency in believing a government should have only limited power over its subjects and great power to confront other states as there is in believing in both free trade and national power.

The purely political side of the paradox—the opposition between believing the government should have limited power at home and great power abroad—I can explain only by saying that British liberalism was nationalistic. Its principles emerged from the history of the people who made up Great Britain; they were meant to describe that people’s social policy and to direct them. One would be pleased to believe that the liberals had as generous a view of foreigners as of their countrymen, that they brought the entire world within the compass of their ideas, and that their object was the welfare of the nations. But they did not think this way at all. They did not even include western Europe in their view. When Hume declared he wanted the French and Germans to prosper, he said he did so as an Englishman.25 I do not think the economists had any animosity toward foreigners, and they certainly kept themselves apart from the crude parochialism of the time. But they were not prepared to sacrifice the wealth and liberty of the British to the people of other countries.

THE EXCEPTIONS TO FREE TRADE

The economic aspect of the paradox is more important than the political. The paradox itself emerges (as stated above) from the fact that if free trade was carried as far as it profitably can be carried, national states would be impossible or unlikely. There is considerable evidence that the economists did not wish to carry free trade this far. Hume was against free trade if it reduced the military power of the nation. Moreover, in a significant passage he favored a protective tariff not only to hasten the development of industries that eventually would become efficient but also to encourage those that otherwise never would exist.26

The exceptions to free trade are even more pronounced in The Wealth of Nations. Smith defended the Navigation Acts as the wisest of all restrictive legislation, because “defense . . . is of much more importance than opulence.” When he passed from the general principle that should govern international trade to specific measures of trade policy, he advocated a surprising amount of restriction. He said a tariff was permissible (a) if it promoted national defense, (b) if it enabled one nation to force others into free trade, (c) if by the repeal of a specific duty legitimate vested interests would suffer, and (d) if a domestic product competing with an import was taxed. Finally, he said, there could be “a sort of reasons of state” which justify suspending free trade.27

(The distinctive feature of Smith’s mind is disclosed in passages like these, which qualify a general proposition and relate it to particular problems, as here he qualifies the idea that free trade is the most efficient way to organize the international market. At constructing general propositions, Smith was less gifted than the best of his contemporaries. He was much less original than Hume. He also was verbose where Hume was brief and was unclear where Hume was lucid. In putting propositions together into a general system which was complete, coherent, and logical, Smith was even worse. He does not compare with Ricardo at that sort of thing, which today is called model building. Most intellectual historians agree that Smith was not particularly original and that he certainly was not logical. They would say, however, that he was a great empiricist and that his marshaling of the facts was what made his conceptual structure distinguished. I would disagree even with this. He certainly was empirically minded, but often he was wrong about the facts. For example, many of the trade restrictions which he deplored were actually no longer in effect when he wrote. At times he not only was pushing at an open door but besieging institutions which already had surrendered. What seems to me to have been his great achievement was to move from general propositions to their particular application, to separate what was relevant and useful in them from what was not, to qualify, amend, and adapt ideas so that they would be helpful in solving specific problems. At this kind of work he had no equal. It is a work calling for a mind that is inquiring without being merely curious, skeptical but not pessimistic, tough but not unchangeable, and above all common-sensible and yet not prosaic. His good sense was his great glory.)

The work of Ricardo also reveals national feelings, despite the rigor with which he upheld the benefits of free exchange. In discussing the reasons why resources do not move freely across national boundaries, he stated that non-economic considerations were paramount. The emigration of capital is hampered, he said, by the “natural disinclination” which every man feels to quit the country of his birth and connections. He added that these are “feelings which I should be sorry to see weakened.”28

INDIVIDUAL FREEDOM AND NATIONAL POWER

Such national feelings expressed a more fundamental belief of the economists. It was that each nation must have power enough to secure its sovereignty. This belief in turn comes from their ideas of order and liberty. The paradox between nationalism and free trade can be resolved by examining Hume’s conception of the relation between liberty and national power. The state, he said, must have enough power to prevent liberty from falling into license, and the people must be powerful enough to protect themselves against the state. But that is not all. There is also a danger to liberty and order from those states that do not have a free constitution. That danger alone would have led the economists to support national power.

Conceivably the liberties of the people could be protected by the amalgamation of independent nations into one grand political unit, but this was impossible within the precepts of the economists’, and particularly of Hume’s, political doctrine. A world government could maintain itself only by an amount of power that was inconsistent with freedom. Such a government would have within its authority all of those powers by which, Hume believed, tyranny came to be established. Because its territories would be separated and widely distant, there could be no adequate communication among citizens. The dispersion of territories would enable the government to subvert the liberty of outlying areas and then move inward until all liberty had been destroyed. The chief officer of such a government necessarily would be remote from the people, which would engender a superstitious reverence for him. Hume believed that liberty and order are served best in small states, where the citizens can communicate easily with each other, where each region is aware of what is happening in others, and where the sovereign is always before the eyes of the people, who, seeing him in the regular business of government, come to realize that he is an ordinary mortal as fallible as they and no more worthy of reverence. Moreover, should something occur to disrupt social peace, a small state imposes limits to the spread of popular delusion; conversely, its relatively small area places limits on the extension of tyranny if once that should be attempted.29

The paradox of free trade and nationalism is to be explained, then, as a manifestation of the economists’ hostility to absolute government. They believed in free trade as the principle which should guide the economic relations among states, but they also believed in qualifying the principle in order to avoid its interfering with national power. An unqualified application of free trade (including the free movement of labor) is possible only in a world state. To the economists, however, the governing of any but a relatively small area required an exercise of power which they thought incompatible with the protection of liberty. They were forced to compromise either their belief in economic liberty or in political liberty, and it was the former that was modified.

[25] Hume, “Of the Jealousy of Trade,” op. cit., III.

[26] Hume, “Of the Balance of Trade,” op. cit., III, 365.

[27]The Wealth of Nations, pp. 425-436, 507.

[28] Ricardo, op. cit., p. 83.

[29] Hume, “Of the Rise and Progress of the Arts and Sciences,” op. cit., III, 133.