Isegoria

Fitzhugh finds the standard arguments for free trade as false as they are specious:

The usual and familiar arguments in favor of this policy are, that it is cheaper to buy abroad good manufactured articles in exchange for agricultural products, than to buy them at home, where more indifferent articles would be obtained for a larger amount of agricultural products.

And again, that we, having no skill or spare moneyed capital, but possessing a rich soil, fine climate, and suitable labor for farming, should follow farming, whilst other nations, without these advantages, but having a large moneyed capital, and great artistic and mechanical skill, should produce manufactured articles, and exchange them for our grain and other products, that thus both we and they would be benefited. The argument is specious, but as false as it is specious.

If an agricultural people were found without any manufactures, by a manufacturing one, the effect of free trade would be to prevent the invention and practice of all the mechanic arts, for “necessity is the mother of invention,” and trade would remove the necessity of home manufactures. But, in truth, there never was a people, however savage, without some knowledge of manufactures and the mechanic arts. When that knowledge, as in the instances of Africans and Indians, is very slight, and the processes of course very tedious, laborious, and inefficient, the immediate effect of contact with a civilized nation by trade, is to extinguish the little knowledge they have, and to divert them to fishing, hunting, searching for gold and similar pursuits, which savages can practice almost as well as civilized men. The African ceases to smelt iron when he finds a day’s work in hunting for slaves, iron or gold, will purchase more and better instruments than he could make in a week, and the Indian pursues trapping, and hunting, and fishing, exclusively, when he can exchange his game, his furs and fish, for blankets, guns, powder and whiskey, with the American. Thus does free trade prevent the growth of civilization and depress and destroy it, by removing the necessity that alone can beget it. Its effects on agricultural countries, however civilized, are precisely similar in character to those on savages. Necessity compels people in poor regions, to cultivate commerce and the mechanic arts, and for that purpose to build ships and cities. They soon acquire skill in manufactures, and all the advantages necessary to produce them with cheapness and facility. The agricultural people with whom they trade, have been bred to exclusive farming, by the simplicity of its operations, its independence of life, and the fertility of their soil. If cut off like China was, and Japan yet is, from the rest of the civilized world, they would have to practise at home all the arts, trades and professions of civilized life, in order to supply the wants of civilized beings. But trade will supply everything they need, except the products of the soil. As they are unskilled in mechanic arts, have few towns, little accumulated capital, and a sparse population, they produce, with great labor and expense, all manufactured articles. To them it is cheaper, at present, to exchange their crops for manufactures than to make them. They begin the exchange, and each day the necessity increases for continuing it, for each day they learn to rely more and more on others to produce articles, some of which they formerly manufactured, — and their ignorance of all, save agriculture, is thus daily increasing. It is cheaper for a man, little skilled in mechanics, to buy his plough and wagon by the exchange of agricultural products, than awkwardly, clumsily and tediously to manufacture them of bad quality with his own hands. Yet, if this same man will become a skilful mechanic, he will be able to procure four times as much agricultural products for his labor, as he can now secure with his own hands. His labor too, will be of a lighter, less exposed, more social character, and far more improving to his mind. What is true of the individual, is true as to a nation, the people who buy their manufactures abroad, labor four times as hard, and as long, to produce them, as if they made them at home. In the case of the nation, this exclusive agriculture begets a sparse and poor population; sparse, because no more people can be employed, than are sufficient to cultivate the land, — poor, because their labor, though harder and more exposed, produces in the aggregate about one-fourth what the same amount of lighter labor would, in a purely mechanical and manufacturing country. Density of population doubles and quadruples the value of labor and of property, because it furnishes the opportunity for association and division of labor, and the division of charges and expenses. When one man has to bear the expense of a school, a church, a mill, a store, a smith’s shop, &c., he is very apt to let his family go without religion and education, and his farm without many of the necessaries and conveniences that properly appertain to it. Where a few have to bear these expenses, the burden on each is very heavy, but where, as in manufacturing countries, with a dense population and many villages, these expenses are sub-divided among many, the burden is light to each, — so that their property and their labor is vastly more available and valuable.

The sparsely settled agricultural country makes by its pursuits, one-fourth what the manufacturing country does, and the money that it makes is probably, in general, if spent at home, capable of purchasing one-half only of the pleasures, comforts and luxuries of life that the same amount of money would in countries engaged in other pursuits. The pleasures of society are seldom indulged in, or if indulged in, at much expense of time and inconvenience, in merely farming countries, where people live at considerable distance from each other. There is no occasion for towns or cities, and not enough of the rich to support places of recreation and amusement. The rich are, therefore, all absentees. Some go off for pleasure, some to religious conventions and associations, some for education, and those who remain at home, do so not to spend money and improve the country, but to save it, in order that they too may hereafter visit other regions. The latter class are no less absentees, in effect, than the former classes.

Nothing has more perplexed political economists and mankind at large, Fitzhugh says, than the subject of usury:

That it was right, proper, and laudable for every man to get the highest market price for the use of his money, as for the use of every other article, was an obvious deduction from the axioms of the economists. The instincts and common sense of mankind, whilst admitting the premises, stubbornly denied the unavoidable conclusion. Convicted in argument, but not convinced; they still fought on. In truth, the error lay in the premises, in the axioms and first principles of political economy. That systematic selfishness that inculcates the moral duty to let every man take care of himself and his own selfish interest, that advises each to use his wits, his prudence, and his providence, to get the better of those who have less wit, prudence and providence, to make the best bargains one can, and that a thing is worth what it will bring, is false and rotten to the core. It bears no sound fruit, brings forth no good morality. “Laissez nous faire,” and “Caveat Emptor,” (the latter the maxim of the common law,) justify usury, encourage the weak to oppress the strong, and would justify swindling and theft, if fully carried out into practice. But it is not safe or prudent to swindle or steal; one incurs the penalties of the law; and it is not politic, for one scares off customers and subjects. The man who makes good shaving bargains, will in the long run grow rich; the swindler and the thief never do. Mankind have ever detested the extortionate usurer who takes advantage of distress and misfortune to increase his profits, more than a Robin Hood who robs the rich to relieve the poor. There is always at bottom some sound moral reason for the prejudices of mankind. Analyze their motives, their feelings and sentiments closely. The man who spends a life in dealing hardly and harshly with his fellow men, is a much worse and meaner man than the highway robber. The latter is chivalrous, and where there is chivalry there will be occasional generosity.

The law should protect men, as well from the assaults of superior wit as from those of superior bodily strength. Men’s inequalities of wit, prudence, and providence, differ in nothing so much, as in their capacity to deal in and take care of money. This creates the necessity for laws against usury. Under occasional circumstances, a heavy rate of interest is morally right, but it is generally wrong, and laws are passed for ordinary and not extraordinary occasions.

I think he has made a better case against complex contracts and financial derivatives than against high interest rates.

Instinct and common sense deny the economic proposition that a nation gains nothing by selling more than it buys, Fitzhugh says:

They say, that the way for individuals or people to get rich is to sell more than buy. Philosophy beats them all hollow in argument, yet instinct and common sense are right and philosophy wrong. Philosophy is always wrong and instinct and common sense always right, because philosophy is unobservant and reasons from narrow and insufficient premises, whilst common sense sees and observes all things, giving them their due weight, comes to just conclusions, but being busied about practical every day matters, has never learned the process of abstraction, has never learned how to look into the operations of its mind and see how it has come to its conclusions. It always judges rightly, but reasons wrong. It comes to its conclusions by the same processes of ratiocination that abstract philosophers do, but unaccustomed and untrained to look into its own mental operations, it knows not how it arrived at those conclusions. It sees all the facts and concludes rightly, — abstract philosophers see but a few, reason correctly on them, but err in judgment because their promises are partial and incorrect. Men of sound judgments, are always men who give wrong reasons for their opinions. They form correct opinions because they are practical and experienced; they give wrong reasons for those opinions, because they are no abstractionists and cannot detect, follow and explain the operations of their own minds. The judgment of women is far superior to that of men. They are more calm and observant. Every married man knows that when he places a scheme before his wife and she disapproves it, he conquers her in argument, goes away distrusting his own opinion, though triumphant, and finds in the end his wife was right, though she could not tell him why. Women have more sense than men, but they want courage to carry out and execute what their judgments commend. Hence men, although they fail in a thousand visionary schemes, succeed at last in some one, and are dubbed the nobler sex. An old bachelor friend of ours, says: women are great at a quarrel, bad at argument.