Without trade each household/family would have to be self-sufficient, i.e., would only have to consume what they themselves could make, grow or do. No one would doubt the dire poverty the world would endure. Even trade limited to your neighborhood, with each household specializing in a few things to trade with other families specializing in other needs or wants would significantly increase everyone’s income. The wider the range of trade the greater the degree of specialization and increased income possible.
Expanding the potential for trade requires the ability to transport goods and serves over longer distances. The benefits of such connectedness extend well beyond higher incomes. Quoting from George Will’s wonderful book The Conservative Sensibility: Referring to the:
“Erie Canal. [Dewitt] Clinton [the sixth governor of New York] saw this project as a means of preventing states in the West from detaching themselves from the Union. The canal would “bind the union together by indissoluble ties” because the people would be “habituated to frequent intercourse and beneficial inter-communication,” and all Americans would be “bound together by the golden ties of commerce and the adamantine chains of interest.” The canal also, and inadvertently, helped to bring down the old order in Europe. By bringing cheap wheat from America’s Great Plains, the canal struck at the roots of Europe’s landed aristocracy.”
Implicit in the above is private ownership of one’s production. People work hard for their own benefit but to benefit from trade they must take account of the needs and wants of others. Trade must be win-win or it will not take place. I benefit from selling my production and you benefit from buying it. Communism—communal production—lacks the personal (selfish) incentive to work hard and has broadly failed as a system. Also from George Will: “In China, once collective farms were disbanded in 1978 under the leadership of the reformer Deng Xiaoping, agriculture output doubled in the space of just four years.”
The topic of trade keeps returning and I have written about it often. Rather than repeat myself, yet again, I will share some of those earlier blogs:
Warren's space 