The Perils Of Free Trade

“Land of the Free Trade,” by John Steele Gordon, in the July/August issue of American Heritage , was far below your usual standard. Instead of being a careful look at the forces that shaped history, it is a polemic to justify the greed of those who profit from the destruction of our national economy.

Adam Smith’s The Wealth of Nations was made obsolete as soon as it was written by the Industrial Revolution. This is not to take credit away from Smith, but to say we should not make a gospel of carefully selected parts of The Wealth of Nations . For example, Smith said, with very good sense, that a tax on wages is the most stupid, evil, and destructive way to finance the government. Yet that is what the income tax has come to be. This in turn makes American goods uncompetitive against imported goods, which do not carry this hidden tax burden. Buying imported goods is, in large measure, attractive because it is tax avoidance. We impose a tariff duty on domestic goods, from which imported goods are exempt, and call it free trade. Yet if one were to propose taxing imported goods the 30 or 40 percent equivalent to the hidden tax on American manufactures, all the John Steele Gordons would spring into life with a shout that Adam Smith must be obeyed.