Published: July 14, 2008 04:18 pm            

Arthur Foulkes: Acts to keep political power hurt security

TERRE HAUTE — It’s ironic that enemies of international trade often cite “national security” as their goal.

In truth, international trade enhances cooperation among people around the world and increases global wealth. Both of these things promote peace and national security.

Adolf Hitler wanted Germany to be economically self-sufficient. To do so, he embarked on a policy of conquest and war. As Austrian economist Ludwig von Mises wrote at the time, Germany did not seek economic self-sufficiency as means to achieve war; rather, it sought war as a means to achieve economic self-sufficiency.

Cutting off trade always means a resort to force. Sometimes, to secure access to foreign-owned resources, nations engage in imperialistic war. But, at the very least, prohibiting international trade means passing laws and employing legions of customs officials and government agents to ensure that otherwise peaceful and law-abiding people do not engage in the forbidden, peaceful exchanges.

Cutting off trade also makes people poorer. One of the greatest economic insights of all time is that when we specialize in what we do best and trade for the rest, productivity is increased and everyone is made better off. Greater material abundance promotes peace just as greater scarcity promotes poverty, insecurity, mistrust and war.

Recent dramatic increases in global food prices have led some governments to promote policies of economic “self-sufficiency” — only making matters worse.

For example, Egypt, Argentina, Kazakhstan and China have imposed restrictions on grain exports, while Vietnam and India have announced future curbs on rice exports — all in the name of economic self-sufficiency. Russia, meanwhile, was expected to place a 40-percent tax on exports of wheat, and China has imposed price controls on grains, edible oils and dairy products such as milk and eggs. Meanwhile, the French government is doing its part to make things worse by urging nations in Africa and Latin America to adopt economically disastrous policies to promote “economic self-sufficiency” in agriculture.

Things are no better in the highly politicized world of global oil production. Analyst Alvaro Vargas Llosa of the Center for Global Prosperity notes that many foreign governments have done their parts in recent years to badly hamper oil production by nationalizing and politicizing their oil markets.

In Russia, for instance, President Vladimir Putin raised taxes on oil profits to 90 percent and effectively nationalized half the country’s oil production capacity. In Venezuela, oil revenues were politically squandered rather than reinvested to improve productive capacity. And in Mexico, private capital is banned from oil markets. Not surprisingly, oil production is down in all these countries despite booming global demand and record oil prices.

As Vargas Llosa concludes, the “causes [of higher oil prices] all amount to one original sin: politicians interfering with the process of supply and demand, profit and loss. Adding insult to injury, we now have [American] politicians throwing around proposals that will at best do nothing to cure the problem (tax holidays) and at worst (raising taxes on Big Oil, using antitrust legislation to stem ‘market concentration,’ increasing subsidies for alternative fuels, controlling prices) will keep oil underground.”

People in government seek to maintain political power. To do this, they will often not stop at demonizing foreigners, crippling the private sector or hampering free people from engaging in voluntary exchange. All these things may promote political careers and government power, but none promotes peace or economic security.

Arthur Foulkes is a Terre Haute native and long-time resident. The Tribune-Star reporter writes a weekly column on business and economics. He can be reached at (812) 231-4232 or Arthur.foulkes@tribstar.com.

        

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