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A Liberal, Radical and Progressive Manifesto Font Size: 
By Tim Worstall : BIO| 14 Aug 2020
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It's difficult to convey the shock with which a modern American liberal will greet Deepak Lal's new book, Reviving the Invisible Hand: The Case for Classical Liberalism in the Twenty-First Century. Lal effectively points out that just about every goal held dear by those who call themselves radicals and progressives is best reached by exactly the opposite policy prescriptions that they put forward. Indeed, we can go further and point out that the best methods of reaching those goals are in fact the truly liberal ones, those laid out all those decades ago by Adam Smith, David Hume and David Ricardo.

Another way of putting this is that this book can and should be a rallying point for those of us who are indeed liberal, radical and progressive. Liberal in that we believe in the maximum amount of freedom consistent with the avoidance of anarchy (it was, after all, a British Liberal Prime Minister who campaigned on the idea that "The man who is governed best is the man who is governed least"); progressive in that we can make the world a better place; and radical in that this is not going to be achieved by tinkering at the margins. No, rather, what we need to do is roll back the accretions of power by the State over the past century, those things that actually cause so many of our current problems, perform radical surgery on the special interests that have hijacked our political process.

Those of you who listened to Lal's podcast interview with TCS big cheese Nick Schulz will have a general idea of the thrust of his ideas. Global wealth has historically grown fastest when the extent of the global market itself was at its greatest. In the 19th century this was driven by the Pax Brittanica and since 1980 (when the current burst of globalization really started) by the Pax Americana, something less like an Empire and more driven by the policy agreements of the Washington Consensus.

Contrary to what we are so often told, in both these periods, inequality fell: both amongst and within nations as the division of labor driven by trade was able to do its magic. It might be worth remembering that in 1900 Argentina was one of the very richest nations on earth, made wealthy by commodity exports to the more industrial nations of Europe.

The opposition to globalization seems to be driven by two things: one contemptible, the other merely mistaken. The contemptible one is the reaction of the various pressure groups in our own countries, bewailing the way in which "the market" will crush all cultures. This seems, in Lal's view, to be driven by nothing more than hatred of people or Contemptus Mundi. The mistaken one is where there is a conflation between resisting the market itself (with the associated capitalism) and resisting American or European culture. It is possible to accept and benefit from one without importing the other -- something that has not yet quite occurred to all? Organizing an economy along free market lines does not mean that Islamic states will have to allow topless sunbathing, alcohol or to abandon their cultural practices: Lal rightly points out that Japan is very much a capitalist society, but is still distinctively Japanese. All can become rich through trade without that having to mean that all become the same.

Elsewhere in Reviving, there are little paragraphs -- asides almost -- which illuminate huge debates that we are having now. For example, we often hear that there should be global standards on working hours, on safety standards, on the way that labor is treated. This is put forward as a matter of justice, as a way of raising the living standards of those so ruthlessly exploited.

By the second half of the nineteenth century India had turned the tables on the Lancashire textiles industry. In the 1850s it had established a modern textile industry based on Indian entrepreneurship and capital and foreign technology. It began exporting cotton manufactures to Britain. The Lancashire cotton interests lobbied the British-Indian government to "apply British factory legislation en bloc to India so as to neutralize the 'unfair' advantages which the Indian mill-industry was enjoying because of the large scale employment of child labor and long hours of work".

That worked well, did it not? -- making India so, so much richer. Remember this next time you hear the AFL or CIO calling for international labor standards: it's pure protectionism.

Lal argues that the claim that poor countries must be able to impose tariffs upon imports in order to protect their infant industries is "by and large an intellectual curiousum". At another point Lal disputes the Nobel-winning economist Joseph Stiglitz's similar contention that there is an optimal tax and subsidy policy which can alter behavior for the better:

It might be noted that we ignore any discussion of the political processes by which the tax-subsidy schemes described below might be affected. Critics may claim that as a result we have not really shown that a Pareto improvement is actually possible

Lal's comment upon this is a sparse "Quite." We might also apply that insight to the infant industry argument. Lal's view of governments is very like that of Chairman of the Economics Department at George Mason, Don Boudreaux's. Both see governments as bandits or predators who prey upon their captive populations to a greater or lesser extent. That there might be an optimal tariff or method of protecting infant industries is itself a debatable academic proposition. That the predators in government will never apply it -- even if it is found -- is an unfortunate fact of reality.

To my mind the most interesting part of the book was explaining quite how the WTO negotiations (the Doha Round which has/is collapsing) came to be such a mess using simple game theory. We know that unilateral free trade benefits those that practice it, regardless of whether any or all other countries reciprocate. So why do we even have trade negotiations? There is the obvious and oft-stated reason: that the benefits of protectionism go to highly organized and vocal groups while the benefits of free trade flow to everyone in a much more dispersed manner. It is therefore always easier to agitate and influence government in favor of restrictions. But Lal goes further and points out that the unilateral argument has never really taken root in the US. At least on an institutional basis, in the political classes, trade is seen as something where a concession here must be matched by an equal or greater one there. That this is nonsense does not stop everyone else from acting in the same manner: everyone is unwilling to have unilateral free trade, for if we did; what would we have left to bargain with the USA? A mistaken attitude perhaps, but understandable.

As to the best use of this book? Perhaps the purchase of a few copies might be in order. One for yourself, to savor. Others to pass on to those of your friends and colleagues who consider themselves liberal, radical and progressive. It should be interesting to see their brains explode as they realize that the achievement of their stated desired goals is only possible by the complete abandonment of all their favored plans. I wonder if we could get Hillary to sit still for long enough to read it?

Tim Worstall is a TCS Daily contributing writer living in Europe.

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