The Importance of Free Trade
An address delivered at the Henry George Congress,
New York, NY, September, 1935. Reprinted from Land and Freedom,
It is not my purpose to explain to you the merits of free trade, for
you understand them as well as I do. It is unnecessary to tell you
that Henry George's Protection or Free Trade is a classic, for
you know that too. But it may be in order to remind some of you that
the book is half a century old, that the tariff map of the world has
changed considerably in that time, and the universality and stringency
of trade strangulation today make the matter of commercial freedom
more important than ever before. It is my desire to help you in
visualizing the supreme importance of free trade in our larger
philosophy of complete economic freedom.
Too many of us have taken at more than face value the dictum that
advancing rent will absorb the gains that may result from free trade,
even as it has absorbed the lion's share of the gains from other
improvements and reforms.
Fifty years ago, when George wrote, Protectionism was in its infancy
as compared with what it is today. It was merely an irritating,
stinging sea nettle as compared with the giant octopus it is now, with
its tentacles embracing the earth and strangling the trade of all
nations, the trade that is the lifeblood of civilization, since
without it civilization must languish and die.
Yet in 1888 Henry George thought the matter so important that he
broke with many of his best and closest friends even with that great
soul whose memory we all delight to honor and revere, Father McGlynn,
who was even then under the ban of excommunication by his church for
having taken up the cross of this crusade, in order to support Grover
Cleveland for the Presidency on the mere chance that he might do
something for free trade.
I would invite you to read again the concluding chapter of Protection
or Free Trade, you who regard tariffs as a side issue, and see for
yourselves in the light of subsequent events the prophetic insight
which inspired it.
I have said that Protectionism is strangling the trade that is the
lifeblood of civilization. Why did Germany plunge the world into war?
For a place in the sun. Free trade would have given it to her.
Why has Japan entered upon a career of expansion and conquest on the
Asiatic mainland? For a place in the sun. Free trade would give it to
Why is Italy crying for more room and threatening the peace of the
world? For a place in the sun which only free trade can give her.
Free trade, and only free trade, can give to every nation, great or
small, rich or poor in natural resources, progressive or backward, its
rightful place in the sun, opening to all of them all the resources of
the earth through the channels of mutually profitable commerce.
I believe that Solomon had our philosophy of economic freedom in mind
when he said:
"There is that scattereth and yet increaseth, and
there is that withholdeth more than is meet, but it ter deth to
Certain it is that the poverty of the world is due to its greed, the
desire of the nations to keep their prosperity to themselves and to
allow none of it to leak over their boundaries.
Too many of our people are afraid of the tariff question. I've heard
them say they seldom or never start a discussion of the tariff because
it seems to close the mind of the prospect to any discussion of the
Georgean philosophy whatever. Well, it's just as easy to close the
mind of a prospect by leading off with a discussion cf the land
question as it is with the tariff. My own experience is that the
tariff offers one of the easiest and safest open ings for a discussion
of the broader philosophy of econnomic liberty which will give to all
humanity its place in the sun by freeing all industry and trade from
strangling restrictions and the burdens of taxation that should be
borne by our real commonwealth, the values which populations and their
activities create in the land.
Why do men fear that with free trade we would spend all our money
abroad for cheap goods, and so allow our home industries to die? Do
they not know that we can't spend American money abroad any more than
foreigners can spend foreign moneys here?
Money is not migratory. It stays where it can circulate. Our
merchants and manufacturers will not sell their goods abroad for
foreign money. Foreign merchants and manufacturers will not sell their
goods here for American money. Each wants the money of his own
country. It is the function of exchange banking to be the medium
through which exporters and importers exchange their credits, so that
each can pay and be paid in the money he desires.
In normal times one may gauge the way in which the tides of trade are
running by the movement of the foreign exchange market. Frank A.
Vanderlip has called the exchange markets of the world the "international
scale pans," and no more effective instrument exists for
discouraging excessive importing or excessive expcrting than the
balance of the international scale pans, which however, may be thrown
out of balance when government credit in the form of great foreign
loans are thrown into them.
Why cannot the so-called war debts of our associates in the World War
be paid? Because, while their moneys are worthless here, we prevent
them from securing through trade the dollar credits necessary for
Why cannot the countries whose national and municipal governments and
corporations borrowed large sums after the war for the rehabilitation
of their industries, pay these debts, which amount to about as much as
the war debts? The reason is the same.
You may wonder why and how those countries borrowed dollars, though
dollars do not circulate abroad. They did not borrow them to take them
abroad. They borrowed them to pay for American machinery, equipment,
raw materials and foodstuffs, and it was for this purpose that the
foreign governments threw their credit into the international scale
pans. What we really loaned abroad was goods and services, and it is
goods and services we must take in repayment, or let the debts go
unpaid. In the face of this invincible fact, however, we have twice
raised our tariff to prevent this kind of payment, and have even added
insult to injury by calling our debtors "defaulters" and "welchers"
for not paying.
It is the strain of trying to meet these commercial obligations with
gold which has upset the gold standard itself, and this strain is an
effective bar to currency stabilization.
Trade is a two-way traffic, and to stop it one way is to stop it both
ways. We see its effects in the shrinking of agricultural products
which began many years ago, backing these products up on a domestic
market unable to absorb them until they smashed prices by their sheer
weight. The foreigner could not buy here because we made it next to
impossible for him to sell here. All this has helped immeasurably in
breaking down the domestic market for manufactured goods of every
description and scattering unemployment and destitution over this
country and the world.
Now the primal motive for all trade is to acquire things we want and
have not, and the thing we offer in exchange or sell in order to
acquire the wherewithal to buy is merely the means by which we expect
to get the thing we want. Let free trade liberate the consumer demand
of the world if we truly desire to set the wheels of industry humming
Why are we trying to cure want in the midst of plenty by reducing the
plenty? Because we refuse to liberate that consumer demand. These
trade-strangling tariffs are costing the nations not only their
prosperity, but their security and peace as well. Richard Cobden said
of the anaemic half-baked free trade of the Manchester school that it
was the best peacemaker. The late Henri Lambert of Belgium, who
understood our brand of free trade, declared it to be the only
I have never known any other man whose mind worked so clearly and so
independently along the lines blazed by Henry George as did the mind
of this Belgian nobleman, who not only disdained the use of his title
but was suspect as a "defeatist" and "pro-German"
during the war because of his clear diagnosis of the causes of the war
and his insistence on their removal. He became intimate with Col.
House, and to his influence I have attributed the third of President
Wilson's famous "Fourteen Points" for settling the war the
one calling for the elimination of economic barriers. And I have
attributed the break between President Wilson and Colonel House to the
discarding of these Fourteen Points at the Versailles Peace
In my talks with Henri Lambert he disclosed a thorough understanding
of the Georgean philosophy, but he maintained that George had unduly
subordinated free trade in order to push the land question to the
front, and he explained his attitude in this wise:
"The land question is basic, fundamental, and the
popular mind, never profound, cannot be led to consider so
fundamental a reform under conditions that exist today. War and the
fear of war oppress the nations continually, and the hard conditions
of life make it well-nigh impossible to think of anything else. Here
in Europe the fear of war is always with us. No generation has
escaped it. Our thoughts are centered on making our borders secure,
to the exclusion of everything else. Therefore you will pardon me if
I decline to be turned from my purpose of realizing for Europe a Pax
Henry George revealed to us the rock on which previous free trade
philosophies had been wrecked, and we owe him eternal gratitude for
showing to us the glories to which true free trade, or full economic
freedom, will yet lead the world, but he overshot his mark when,
without intending it, he allowed many of us to regard commercial
freedom as a mere subordinate part of the broader philosophy.
In the work of the Henry George School of Social Science too much
attention cannot be given to Protection or Free Trade.
George's book is a classic, but it is half a century old, and in that
time trade strangulation has assumed forms and phases he little
Our great need is for a text book which, without omitting or altering
any of the principles set forth by Henry George, shall bring this
surpassingly important matter up to date.