I gave the following presentation at a fringe event during the Conservative conference in Birmingham.
Human Co-operation and the Universal Division of Labour
Adam Smith showed us, and it is not disputed internally within the nation, that specialisation in tasks has led to the explosion of the population and material prosperity. One person the farmer, one the hunter, one the gatherer, one the home maker, etc., with the specialisation always geared to who is best at doing the task.
This is accepted by all rational people.
Ricardo showed us that what applies to the individuals in the nation should also apply to the free trade between the nations of the world. It is always advantageous for each nation to concentrate all its efforts to produce things it is best at, even if it could produce some other lesser goods better than the next best producer.
So why does this idea meet such resistance? Why do we allow crony capitalists and other vested interests to get a privileged, protected position — such as the European Union farmers when they argue for the Common Agriculture Policy (CAP) — that allows them to push up the prices of their goods and services at the expense of you and me, the consumer?
The Irrefutable Case for Free Trade
David Beckham is a super star football player, who also learned the skills of his father the gas fitter.
His father, Beckham senior is a gas fitter who wanted to be a superstar football player
Let’s say that David can hire a gas fitter for £20 per hour. With a little practice, he could be twice as efficient as his father. We will imagine that he could market his own gas fitting services for £40 per hour.
By playing football, we will suppose that Beckham can earn £10,000 per hour. Meanwhile, his father the gas fitter couldn’t make more than £1 an hour playing football.
Beckham Jnr has a 2-to-1 advantage as a gas fitter, but a 10,000-to-1 advantage football star.
If he divides his time equally between gas fitting his own house and playing football, his total output for the week can be valued at:
10 hours gas fitting x £40 per hour = £400
10 hours football x £10,000 per hour = £100,000
Total output: £100,400
If David’s father divides his time the same way we could value his production as follows:
10 hours gas fitting x £20 per hour = £200
10 hours football x £1 per hour = £10
Total output: £210
Between them, David and father have produced £100,610 worth of output.
The Law of Association (Mises) or the Law of Comparative Advantage (Ricardo)
Now let’s examine the situation if, as we expect, David hires his father. David’s production can now be valued at:
20 hours football x £10,000 per hour = £200,000
Total output: £200,000
And his father’s at:
20 hours gas fitting x £20 per hour = £400
Total output: £400
Their total output has risen to £200,400.
The Greatest Protectionist Block in European History: The European Union
With this case proven, our politicians should use the irrefutable law of association to call for the dismantling of fortress Europe as it price gouges its hapless taxpayers.
The Taxpayers Alliance report “Food for Thought” by Dr Lee Rotherham shows us that the EU protectionist food policies costs the UK £10.3 bn per year or £400 of net disposable income per household.
CAP is one aspect of the protectionism sponsored by the EU depriving us of a higher living standard; the real cost of all their interventions is many thousands of pounds per year for the EU taxpayer.
Cobden and Peel
For those interested in free trade, one of Cobden’s finest orations was delivered in the House of Commons on March 13, 1845, and described by John Morley as “probably the most powerful speech he ever made:
Men on the Tory benches whispered to one another, “Peel must answer this.” But Peel crushed in his hand the notes he had made and remarked, “Those may answer him who can.”
The Corn Laws were abolished by persuasive, clear, rational and logical argument. I hope some of the politicians here today will be able to do the same with the protectionist EU, and have that abolished.