Market Analysis

Free Trade Protectionists

What kind of an economy was the United States 150 years ago? Primarily agrarian.

What kind of an economy was the United States 150 years ago? Primarily agrarian. The average citizen harvested his own food and created most of his homestead with a little bartering and buying of traditional goods. Most people were uneducated.

What about 75 years ago? Industrial. The average citizen is a laborer, blue collar, working in often hazardous conditions and giant factories. However, these conditions also brought about the standards of ubiquitous electricity, utilities infrastructure, housing, health standards, etc. Most people were still uneducated.

And today? We're a service economy. The average, middle class citizen works behind a desk, part of a broadly educated workforce, accomplishing tasks that require brains over brawn. Little or no hard labor is entailed.

This is just a way of saying the US economy has progressed and developed to efficiently produce more and also raise the standards of living for its citizens. These positive changes cannot happen without a global economy characterized by free trade.

Once upon a time, the best TVs, trucks and toasters were made in the United States. But other developing nations found they could do it cheaper and better, and they did, and we let them. Instead, we began making something else, like semiconductors and computers. Now, those same developing countries are beginning to do that, too! This isn't scary, it's exciting.

Think of the catastrophe that could have been if we'd decided to close borders and force our citizens to buy US made goods and foods only. (This is essentially the effect of a tariff.) Much of the world would be mired in a stagnant, if not negative, isolated economy. And there are good real world examples out there of such practice like Mexico, which isolated itself from trade for decades.

Free global trade has created a network of interconnectedness—not just dependency. Other nations are developing just as we are, and they are striving to progress upward in the same way we have in the last 150 years. As we continue to provide services to the world, much of the world is providing goods to us. China and India, for instance, are rapidly moving from agrarian societies to industrial, manufacturing and service economies highly involved in global trade—raising the standards of living for their citizens while also providing needed goods to the rest of the world.

That this happens everyday is a boon to the global society and to markets. The key is to realize a free market system necessarily entails change and innovation—that's the mandate of capitalism. We cannot be the same economy today in 20 or 50 years…and we shouldn't desire it!

Rhetoric in Congress has grown increasingly isolationist and protectionist lately, and this is a concern. We're protectionists, too: protective of free trade and global development. Call us the Free Trade Protectionists.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.