Walker Wright is a think tank policy
manager with a forthcoming book, In Trade We Trust: How Commerce Makes
Us More Social, which will be published by Bloomsbury. Over the past
several months, he has posted five essays exploring different aspects of trade
and how it benefits societies. I will summarize and review each essay in
sequence.
The Rising Tide: How Trade Lifts All Boats: Free exchange
turns scarcity into abundance for rich and poor alike
This one explores how trade
enriches us. He first cites Matt Ridley’s book The Rational Optimist,
which asserts that economic progress began when trade began. “By
exchanging,” he explained, “human beings discovered ‘the division of labour,’
the specialisation of efforts and talents for mutual gain…”
Wright notes that surveys
report that 95% of economists agree that tariffs tend to reduce economic
welfare, and another 90% think the United States should not restrict
outsourcing.
“…the globalization of the market system has brought
global extreme poverty to its lowest levels in human history.”
The graph below shows that all global citizens, but especially citizens of China, have benefited from and reduced extreme poverty via trade.
He notes that the evidence
clearly shows that the benefits of trade do not exclude those at the bottom,
although they may also benefit from other help, such as social welfare.
“Critics sometimes claim that growth leaves those at the
bottom behind. It may improve the average, they say, but only because of large
income boosts at the top.”
“That talking point is simply untrue. Economic freedom,
including openness to trade, and growth have been shown to improve incomes
across the board. A rising tide truly does lift all boats, not just the yachts
of the wealthy. Growth positively touches every tier of the economic ladder. A
bigger economic pie means better living standards for everyone involved, making
economic growth pro–poor.”
He cites the Indian economist
Arvind Panagariya, who documented the role of trade in the economic success of
Hong Kong, Singapore, Taiwan, South Korea, India, China, and other countries
throughout Asia, Africa, and Latin America. Panagariya found that trade
increases per capita income. He also cites Dartmouth’s
Douglas Irwin, who noted that trade liberalization has been “remarkably
consistent,” fostering growth in productivity and standards of living.
Tariffs do the opposite, and this is acknowledged by an overwhelming bipartisan
majority. Wright gives long lists of many studies that concluded that trade
increases economic growth and productivity. It is undeniable. He also notes
that not only growth, but also other positive effects are associated with
trade:
“Open market economies have higher adult literacy rates,
longer life expectancies, lower infant mortality rates, better environmental
stewardship, and greater life satisfaction than closed economies do.”
He also suggests that despite
the deep income inequality of the super-rich, overall global income inequality
has remained fairly steady since the early 1900s but has reduced a bit since
2000, according to the Gini index.
Wright gives data that shows
that while the poorest of economically free and economically not free countries
get more or less the same share of the proverbial economic pie, between
2.26 and 2.78%, however, the amount actually earned by the poorest in free
economic countries is eight times that of non-free economies.
The American economist
Deirdre McCloskey has referred to enrichment through trade as ‘The Great
Enrichment.’
Wright concludes:
“It’s not that we suddenly figured out how to slice up
the economic pie just right. We made the pie 2,900 to 10,000 percent bigger
through commercial exchange. When the pie is bigger, there’s more pie to go
around. And we’re all richer for it.”
Some Contrasting Views
For this
essay, I am giving some contrasting views from an anti-capitalist social media
acquaintance who posted the following meme, some comments to the post, and my
own unexpressed comments. This section has nothing to do with Wright’s analysis
but does involve views on the ability of capitalism to build wealth for all.
The meme
suggests that capitalism does not promote merit-based or talent-based wealth.
That is not true since many in those professions listed are quite wealthy, even
if not the richest of the rich. The meme also suggests that those who work hard
at menial jobs work harder than others. That may be true in general. ‘Working
hard’ is a kind of subjective phrase. Cleaning a bathroom may be harder
physically than solving a problem on a computer, but it does not generate the
same value. Most people are able to clean a bathroom, but few may be able to
solve a particular problem on a computer. Of course, we should value hard work
and appreciate the hard work of others. We should pay them enough to have a
decent quality of life.
The following
three quotes come from commenters who seem to agree with the meme:
“If intelligence mattered, I should have a 25 year
career under my belt, not 25 years of unemployment and multiple periods of
homelessness.”
“It's the same crusty families that have been robbing
people for centuries and all thier grandchildren. Some were lucky enough to be
adopted into the class but they had to pay with thier souls (that's what it
looks like to me)”
“Capitalism is the enemy of humanity, because it
triggers human greed and blocks sympathy and compassion, for money. Fuck
capitalism. It MUST have guardrails to block human greed if it's going to
function properly. Here, it doesn't.”
I would strongly
disagree with the third commenter. While it may trigger greed in some, it does
not block sympathy and compassion. Often, it does the opposite by promoting
better opportunities for sympathy and compassion. If the rich are to give to
the poor, they have to be rich first. Otherwise, it’s the poor giving to the
poor. A socialist may argue differently that if there were no rich people, there
would be no poor people, but that may not be true in many cases. It’s true, as
the second commenter noted, that some inherit wealth and everyone starts out at
different economic levels. That may seem unfair, and indeed it is, but there is
not much we can do about it without punishing people. We do have a welfare system
that can help, and we should “punish” the super-wealthy with higher taxes. However,
taxing the super-wealthy alone will not help alleviate poverty like free trade
and capitalism can. There are, of course, people who fall through the cracks
and do not benefit from the system. That is unfortunate, but there are some
resources available to those people.
Below is the
best quote on the thread, in my opinion:
“Capitalism doesn't PAY anyone. All it does is allow
people to pay each other and trade with each other relatively freely. Therefore
the people that get paid the most are those that create the most value that the
most people are willing to pay for.”
“The world is full of smart people who don't do much
with their intelligence. Those that do become neurosurgeons, engineers, and
scientists are indeed rewarded with significant incomes usually.”
“Talent is also something that the world is full of and
needs to be applied. And again, those with exceptional talents AND who work
hard, also make money”
“Hard Labor is an easy commodity to come by and so
supply and demand don't reward it highly.”
“Capitalism doesn't PAY anyone. It allows people freedom
to innovate and work without compulsion and to pay each other for what they
find valuable.”
There were two
comments on that comment. The first is given below:
“WOW That is a LOT of propaganda in a very short space.”
“Capitalism is a system where people with capital, ie
money, land, connections, and the ability to navigate the system are allowed to
amass more capital.”
“Unrestricted capitalism leads to monopolies and
oligopolies wherein those who amass very large amounts of capital control the
entire system.”
I would comment
here that this commenter and some others have suggested that our form of
capitalism is “unrestricted” and our markets have no guardrails. That is not true.
Our economic system in the U.S. is a mixed economic system, a regulated form of
free market capitalism with taxation based on income and social welfare. While
people may disagree about the degree and types of regulation, we do not have
anything near pure free market capitalism. I agree that the super-rich should
be taxed more and that it is important to bring all people above poverty levels
and to satisfactory prosperity.
The second
comment to the comment is below:
“hard labor is necessary for capitalism to survive. It's
not that we're "easy to come by," it's that we all have to have
income, and those with large amounts of capital take advantage of that fact.
It's also easy to create value when you have... capital. Hundreds of millions
of people are disenfranchised from the system because they weren't born into
money. They never have an opportunity to create anything. A bank won't even
give you a loan to start a small business unless you've labored at the same job
for 20 years and been EXTREMELY good with your money, and even then now you've
got a loan against your one very small business.”
“If everyone had the same opportunities I'd for sure be
pro-capitalism.”
There are some
fair arguments here. Our system does advantage those who already have wealth and
is often very difficult for those at the bottom. Opportunity can be hard to
come by, but it is probably out there if one can position oneself to find it.
That is the goal of social welfare – to help fill the gaps made in part by the lack
of opportunities for some.
References:
The
Rising Tide: How Trade Lifts All Boats: Free exchange turns scarcity into
abundance for rich and poor alike. Walker Wright. HumanProgress.org. August 15,
2025. The
Rising Tide: How Trade Lifts All Boats - Human Progress
