Comment Articles

Adam Smith's lessons for IT

Declan McCullagh CNET News

Published: 27 Nov 2003 12:25 GMT

Defending free trade
The more important point is not that Micron is seeking a political advantage, which it is, but that it's not alone. Earlier this year, the American catfish industry successfully lobbied the Bush administration to slap tariffs of between 37 percent and 63 percent on imported Vietnamese catfish. The supposedly free-trading Bush administration levied tariffs on steel imports and imposed quotas on Chinese dressing gowns and bras, while sending aides to agree to a "free trade" framework with Latin American nations this month in Miami.

Individually, tariffs, taxes and other impediments to free trade have little effect on an economy as large as that of the United States. But together, they add up. Just as tariffs on DRAM chips raise the cost of computers, MP3 players and PDAs, tariffs on steel raise the cost of vehicles and appliances, and tariffs on fabrics raise the cost of clothing. Protectionism means that American consumers pay more and that any economic recovery is delayed.

Alan Greenspan, chairman of the Federal Reserve Board, warned of the Bush administration's "creeping protectionism" in a speech last Thursday at the free-market Cato Institute. "Over the years, protected interests have often endeavoured to stop in its tracks the process of unsettling economic change," Greenspan said, according to The New York Times. He added: "Virtually all such efforts have failed. Consequently, it is imperative that creeping protectionism be thwarted and reversed."

Greenspan seemed to be echoing Adam Smith, the prescient economist who defended free trade in his 1776 treatise. "The gains of both [parties] are mutual and reciprocal, and the division of labour is in this, as in all other cases, advantageous," Smith wrote.

It's no accident that Cuba and Burma, virtually firewalled from the rest of the world, rank among the poorest places on Earth. Nor is it a coincidence that free-trading Hong Kong and Singapore, which top the 2003 Index of Economic Freedom, are among the wealthiest.

For the United States to retain its current dominant position in technology, President Bush might want to spend less time listening to corporations pleading for special favours -- and more time reading Adam Smith.