The Rational Optimist (P.S.)

by Matt Ridley

The message from history is so blatantly obvious – that free trade causes mutual prosperity while protectionism causes poverty – that it seems incredible that anybody ever thinks otherwise. There is not a single example of a country opening its borders to trade and ending up poorer (coerced trade in slaves or drugs may be a different matter). Free trade works for countries even if they do it and their neighbours do not. Imagine a situation in which your street is prepared to accept produce from other streets but they are only allowed what they produce: who loses? Yet in the aftermath of the First World War, one by one countries tried beggaring their neighbours in the twentieth century. As currencies devalued and unemployment rose in the 1930s, government after government sought self-sufficiency and import substitution: Greece under Ioannis Metaxas, Spain under Francisco Franco, America under Smoot-Hawley. Global trade fell by two-thirds between 1929 and 1934.