Free Markets Deserve Protection; By Definition!
By Wayne Bereman
Many conservatives today are facing what seems to be a conundrum. They see the neo-con led GOP, and
particularly the White House, moving rapidly along a path toward globalism. The White House wants open
borders so that cheap labor can be imported as quickly as possible. The White House appears ready to support
building a superhighway to transport people and imported products right through the heart of the United
States. The traditional conservative might also be struggling to reconcile his nationalist beliefs with the so-
called conservative leadership that supports free trade, open borders, and expanded international
government. Conservatives already know not to trust most of the socialist globalists in the Democrat party,
but the market driven globalists at the GOP might seem appealing to some conservatives, if they possess only
a surface level understanding of the crown jewel of globalism; free trade. Free trade *seems great the way it’s
presented to them: freedom from government intervention in the global market. Without a more critical
examination, well meaning people are easily duped into supporting this dangerous philosophy. Soon you’ll see
why.
But first, let’s establish a rule. In any honest, intellectual discourse, it is required that everyone agree upon
the definitions of any terms being used. If when I speak of a free market you picture in your mind a
supermarket grocery store, or a black market for illegal drugs, or a commodities market for soy beans, or a
stock market, or more commonly something meaningless (due to its imprecision) such as “the sum total of all
exchanges”, and instead I am using the scientific meaning, we will not be able to communicate in an honest,
intellectual way. Indeed, to consider a supermarket to be the same as a Free Market as used in economic
science could be compared to a person that cannot distinguish between a dinner plate and a tectonic plate.
They are different not in degree, but in kind. So allow me now to pose to you the scientific definition of a free
market, which shall govern this essay:
Market economy, the free or unhampered.
Utilizing this definition we can see that a grocery store supermarket is simply a location where buyers
purchase groceries, and may or may not be part of a free market. Utilizing this definition, we can see that a
black market for illegal drugs is not a free market, as there is no government to enforce contracts or prevent
fraud; quite the contrary, government will seek to destroy the black market. Utilizing this definition we can
see that a stock market is not a free market economy, again, it is simply a facilitation of some exchanges that
may occur within a free market. Finally, utilizing this definition, we can see that the “sum total of all
exchanges” may or may not be a free market economy, as these exchanges may well be taking place where
there is no private property, where there are institutional interferences, where there is no coercive government.
Can we also dispel the myth that “the world is the market”? Only by placing this statement as an a priori
universal truth, antecedent to all reasoning, can this be true. Is it not obvious that a Chinese firm, controlled
and subsidized by communist central planners exchanging with an American firm can in no way be a part of a
free market? Is the dumping of subsidized goods, being sold below the cost to produce them, anything that can
be a part of a free market by the scientific definition? Is this international transaction part of a free market if
an American firm has no recourse to compel performance of the contract (if the Chinese firm defaults, and the
Chinese government owns the Chinese firm, what recourse short of warfare has the American firm? And can
an American firm wage war unilaterally)?
When the United States was formed, it was accomplished first through a Declaration of Independence,
establishing a sovereign nation based on the inalienable rights of life, liberty, and the pursuit of happiness. It
was stated in this declaration that the role of government was limited to securing these rights, and that
government derives its just powers only by the consent of the governed. The next necessary step was to form
an economic and political system that would accomplish these goals. This system was embodied in the
Constitution of the United States, and the Hamiltonian protected free market economy. This free market
economy necessarily bound the colonies into a cohesive social nexus that could never be assimilated into a
world system. It also protected the newly formed free market economy from external institutional
interferences that would distort the fragile wage and price structure.
The founders of the United States did not believe “the market is the world”. On the contrary, they knew (long
before Von Mises so eloquently expressed this idea organizing what Hamilton created into a scientific
definition called the free market economy) that their new market must be protected from (internal and
external) interferences, just as the borders must be protected from invading armies, and the union protected
from secession. The system that they created illustrates the power of the national free market economy to
create an indissoluble union. Their system also illustrates the power of the national free market economy to be
the best and most efficient economic system ever invented, as the United States prospered and within only a
few generations became the most powerful and wealthy nation in the history of the world, whose workers
enjoyed wage rates and standards of living that might have been thought unimaginable.
There should be no surprise that national wealth, which is expressed as the annual produce of a nation, is best
promoted by a protected, national free market. Writing in 1776, Adam Smith famously expressed this point in
The Wealth of Nations.
“a capital employed in the home trade, it has already been shown, necessarily puts into motion a greater
quantity of domestic industry, and gives revenue and employment to a greater number of the inhabitants of
the country, than an equal capital employed in the foreign trade of consumption; and one employed in the
foreign trade of consumption has the same advantage over an equal capital employed in the carrying trade.”
He continues on:
“every individual who employs his capital in the support of domestic industry, necessarily endeavors so to
direct that industry, that its produce may be of the greatest possible value.”
Smith is certainly no free trader. He finishes his point:
“By preferring the support of domestic to that of foreign industry, he intends only his own security; and by
directing that industry in such a manner as its produce may be of the greatest value, he intends only his own
gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part
of his intention.”
Can we not also see that the division of labor is defined by the protective tariff that prevents external
interferences into the fragile wage and price structure? Can an American worker, who is situated in the
United States where the fragile wage and price structure has been established over a long period of free
market operations including long periods of high levels of capital investment making the American worker the
most productive and efficient in the entire world, be suddenly thrust into a shared division of labor with a
Chinese worker who is situated in China where long periods of little capital investment have been made?
Further, can an American worker who is situated within the American wage and price structure and requires,
say, $35,000 in gross earnings in order to maintain a family be expected to compete with a Chinese worker
who is situated within the Chinese wage and price structure and requires only, say, $2000 in gross earnings
in order to maintain a family? Is there any doubt that capital will be invested in the Chinese worker and
Chinese industry? By requiring an appropriately sized protective tax on the importation of Chinese
manufactures, the American worker is not forced to share in the division of labor. There is no incentive for the
profit making corporation to invest their capital in foreign land and labor with the intention of then exporting
to the richer consumer market. Any Chinese exports after an appropriately sized tariff is implemented will not
destroy the fragile wage and price structure, and will not negatively impact the operations of the national Free
Market Economy. On the contrary, the tax levied upon their importation will fund domestic government and
contribute to the welfare of the people.
Indeed, there is no requirement in the definition of a free market economy that the borders be open to free
trade (a shared division of labor). In fact, the opposite is true. Should the borders of a nation be opened to the
untaxed importation of products, which creates a shared division of labor with all nations, the free market
economy is not realized until the other 3 requirements of that free market are instituted. A government, in
this case a world government, must be established to enforce contracts and prevent institutional interferences
(this time the only interferences are internal, as the there are no external parties remaining). By definition, to
realize the stated goal of a world market, a world government must follow.
Although this idea is sometimes lost on those economists that begin from the unquestioned assumption of a
world market, the founding fathers of the United States and many great patriots that followed were well
aware of this truth. They knew that a nation with a protected free market could never be assimilated into a
world system (which has been evidenced by the fearsome independence of the United States prior to the
globalist liberal policies of Wilson and the free trade treaties that have led to an opposite shift in sentiment,
and also evidenced by the failure of the Articles of Confederation to bind the colonies into a cohesive social
nexus), and they knew that an unprotected market will necessarily result in the loss of independence and
sovereignty (which has been evidenced by the transition of a free trading Europe into a regional government
and the destruction of the sovereignties of the former European states. Once the *given of a global market is
established, as free traders continually attempt to reinforce, reason requires that interferences within that
market, such as sovereign governments, currency exchanges, borders, etc be eliminated. Many of the people
advocating these changes don’t even understand why they are opposed to these interferences!).
A nation that has the necessary labor force and raw materials to produce all the necessaries of life has no need
to freely trade and cannot benefit from freely trading; and should therefore establish a national market
system. George Washington remarked: “A free people—should promote such manufactories as will render
them independent on others for essentials—I shall give every encouragement in my power to the
manufacturers of my country”. Alexander Hamilton, the creator of the American free market economy said
“Let the thirteen states bound together in a strict and indissoluble union, concur in erecting one great
American system superior to the control of all transatlantic force or influence.” It is clear that the protected
free market economy designed by Hamilton was intended to long endure as a free and independent nation.
Henry Clay saw the American system as inseparable from the establishment of a protective tariff: “Poverty
befalls any nation that neglects and abandons the care of its own industry, leaving it exposed to the action of
foreign powers. There is a remedy, and that consists in adopting a genuine American system accomplished by
the establishment of a tariff. – with the view of promoting American industry. The cause is the cause of the
country, and it must and it will prevail.”
Without a protective tariff which acts to define the division of labor and establish the boundaries of the free
market economy, there will be no force preventing the assimilation of all regions sharing a division of labor to
form a common market by establishing a common government. Men act in such a way as to promote their own
self interest from their own point of view at all times.[ii] Rational and intelligent men, reasoning from the
establishment of a regional or global market by virtue of a regional or global shared division of labor (free
trade treaty) will invest their capital in such a way as to maximize profit. They will purchase products that
appear to them in the short term to be the cheapest. They will advocate for those institutions and provisions
which prevent the distortions of the now regional or global free market economy. The social nexus becomes
more and more powerful and over time secession from such a system will become nearly impossible. Over time,
within the division of labor, wage rates and standards of living will be equalized universally.[iii] Specifically
for the United States, the wage rates and standards of living of Americans will decrease steadily until they are
equalized with those of the rest of their shared division of labor. However, without the establishment of this
shared division of labor, the wage rates and standards of living of Americans would once again tower above
the rest of the world.
It has been shown utilizing the definition of the free market economy that the term is a scientific term, with a
specific meaning. It has been shown that the American system of political economy is called a national,
protected free market economy, and was the means employed to achieve the goals of the Declaration of
Independence and the Constitution of the United States, namely to separate from the rest of the world into a
sovereign nation, to form a more perfect union, establish justice, insure the domestic tranquility, provide for
the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our
posterity. This essay does not attempt to put forward the entire case for a protected free market economy, for
that task would require a lengthy discourse commensurate with the complexity of such a topic. Further, that
decision is a subjective decision which cannot be answered by the science of economics. Economics can only tell
us what means can be employed to promote the pre-established goals of a society. For a thorough examination
of the supremacy of the free market economy, one should begin with the most complete and tightly reasoned
treatise on the subject; Human Action by Ludwig Von Mises with only one warning; do not fall into the trap of
reasoning from the conclusion of a global market (at least, not unless you also desire the ensuing global
government and destruction of the United States). The reader should then move on to The Wealth of Nations
by Adam Smith, particularly regarding the long proof of the superiority of investing domestic capital for
domestic consumption. For a factual account and full understanding of the goals of the United States and the
argument for its founding, one should study The Federalist Papers, and of course the founding documents and
debates surrounding them; The Constitution of the United States and the Declaration of Independence.
The true question that is being asked and debated is not an economic question at all. The Free Market
Economy has already won the economic debate. The question now is how to organize politically. Shall there
be one global free market, or shall there be sovereign nations where the people determine for themselves how
they will be governed? For a nationalist American, the answer is the latter. The question now is not
capitalism vs. socialism. It is nationalism vs. globalism.
By Wayne Bereman
Many conservatives today are facing what seems to be a conundrum. They see the neo-con led GOP, and
particularly the White House, moving rapidly along a path toward globalism. The White House wants open
borders so that cheap labor can be imported as quickly as possible. The White House appears ready to support
building a superhighway to transport people and imported products right through the heart of the United
States. The traditional conservative might also be struggling to reconcile his nationalist beliefs with the so-
called conservative leadership that supports free trade, open borders, and expanded international
government. Conservatives already know not to trust most of the socialist globalists in the Democrat party,
but the market driven globalists at the GOP might seem appealing to some conservatives, if they possess only
a surface level understanding of the crown jewel of globalism; free trade. Free trade *seems great the way it’s
presented to them: freedom from government intervention in the global market. Without a more critical
examination, well meaning people are easily duped into supporting this dangerous philosophy. Soon you’ll see
why.
But first, let’s establish a rule. In any honest, intellectual discourse, it is required that everyone agree upon
the definitions of any terms being used. If when I speak of a free market you picture in your mind a
supermarket grocery store, or a black market for illegal drugs, or a commodities market for soy beans, or a
stock market, or more commonly something meaningless (due to its imprecision) such as “the sum total of all
exchanges”, and instead I am using the scientific meaning, we will not be able to communicate in an honest,
intellectual way. Indeed, to consider a supermarket to be the same as a Free Market as used in economic
science could be compared to a person that cannot distinguish between a dinner plate and a tectonic plate.
They are different not in degree, but in kind. So allow me now to pose to you the scientific definition of a free
market, which shall govern this essay:
Market economy, the free or unhampered.
- A pure or unhampered (i.e., free) market economy is an imaginary construction which assumes:
- 1. The private ownership (control) of the means of production. 2. The division of labor and the
consequent voluntary market exchanges of goods and services. 3. No institutional interferences with the
operation of the market processes which generate prices, wage rates and interest rates which reflect the
actual conditions of supply and demand for all goods and services. 4. A government, the social apparatus
of coercion and compulsion, which is intent on preserving market processes while protecting peaceful
market participants from the encroachments of those who would resort to the threat or use of force or
fraud.[i]
Utilizing this definition we can see that a grocery store supermarket is simply a location where buyers
purchase groceries, and may or may not be part of a free market. Utilizing this definition, we can see that a
black market for illegal drugs is not a free market, as there is no government to enforce contracts or prevent
fraud; quite the contrary, government will seek to destroy the black market. Utilizing this definition we can
see that a stock market is not a free market economy, again, it is simply a facilitation of some exchanges that
may occur within a free market. Finally, utilizing this definition, we can see that the “sum total of all
exchanges” may or may not be a free market economy, as these exchanges may well be taking place where
there is no private property, where there are institutional interferences, where there is no coercive government.
Can we also dispel the myth that “the world is the market”? Only by placing this statement as an a priori
universal truth, antecedent to all reasoning, can this be true. Is it not obvious that a Chinese firm, controlled
and subsidized by communist central planners exchanging with an American firm can in no way be a part of a
free market? Is the dumping of subsidized goods, being sold below the cost to produce them, anything that can
be a part of a free market by the scientific definition? Is this international transaction part of a free market if
an American firm has no recourse to compel performance of the contract (if the Chinese firm defaults, and the
Chinese government owns the Chinese firm, what recourse short of warfare has the American firm? And can
an American firm wage war unilaterally)?
When the United States was formed, it was accomplished first through a Declaration of Independence,
establishing a sovereign nation based on the inalienable rights of life, liberty, and the pursuit of happiness. It
was stated in this declaration that the role of government was limited to securing these rights, and that
government derives its just powers only by the consent of the governed. The next necessary step was to form
an economic and political system that would accomplish these goals. This system was embodied in the
Constitution of the United States, and the Hamiltonian protected free market economy. This free market
economy necessarily bound the colonies into a cohesive social nexus that could never be assimilated into a
world system. It also protected the newly formed free market economy from external institutional
interferences that would distort the fragile wage and price structure.
The founders of the United States did not believe “the market is the world”. On the contrary, they knew (long
before Von Mises so eloquently expressed this idea organizing what Hamilton created into a scientific
definition called the free market economy) that their new market must be protected from (internal and
external) interferences, just as the borders must be protected from invading armies, and the union protected
from secession. The system that they created illustrates the power of the national free market economy to
create an indissoluble union. Their system also illustrates the power of the national free market economy to be
the best and most efficient economic system ever invented, as the United States prospered and within only a
few generations became the most powerful and wealthy nation in the history of the world, whose workers
enjoyed wage rates and standards of living that might have been thought unimaginable.
There should be no surprise that national wealth, which is expressed as the annual produce of a nation, is best
promoted by a protected, national free market. Writing in 1776, Adam Smith famously expressed this point in
The Wealth of Nations.
“a capital employed in the home trade, it has already been shown, necessarily puts into motion a greater
quantity of domestic industry, and gives revenue and employment to a greater number of the inhabitants of
the country, than an equal capital employed in the foreign trade of consumption; and one employed in the
foreign trade of consumption has the same advantage over an equal capital employed in the carrying trade.”
He continues on:
“every individual who employs his capital in the support of domestic industry, necessarily endeavors so to
direct that industry, that its produce may be of the greatest possible value.”
Smith is certainly no free trader. He finishes his point:
“By preferring the support of domestic to that of foreign industry, he intends only his own security; and by
directing that industry in such a manner as its produce may be of the greatest value, he intends only his own
gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part
of his intention.”
Can we not also see that the division of labor is defined by the protective tariff that prevents external
interferences into the fragile wage and price structure? Can an American worker, who is situated in the
United States where the fragile wage and price structure has been established over a long period of free
market operations including long periods of high levels of capital investment making the American worker the
most productive and efficient in the entire world, be suddenly thrust into a shared division of labor with a
Chinese worker who is situated in China where long periods of little capital investment have been made?
Further, can an American worker who is situated within the American wage and price structure and requires,
say, $35,000 in gross earnings in order to maintain a family be expected to compete with a Chinese worker
who is situated within the Chinese wage and price structure and requires only, say, $2000 in gross earnings
in order to maintain a family? Is there any doubt that capital will be invested in the Chinese worker and
Chinese industry? By requiring an appropriately sized protective tax on the importation of Chinese
manufactures, the American worker is not forced to share in the division of labor. There is no incentive for the
profit making corporation to invest their capital in foreign land and labor with the intention of then exporting
to the richer consumer market. Any Chinese exports after an appropriately sized tariff is implemented will not
destroy the fragile wage and price structure, and will not negatively impact the operations of the national Free
Market Economy. On the contrary, the tax levied upon their importation will fund domestic government and
contribute to the welfare of the people.
Indeed, there is no requirement in the definition of a free market economy that the borders be open to free
trade (a shared division of labor). In fact, the opposite is true. Should the borders of a nation be opened to the
untaxed importation of products, which creates a shared division of labor with all nations, the free market
economy is not realized until the other 3 requirements of that free market are instituted. A government, in
this case a world government, must be established to enforce contracts and prevent institutional interferences
(this time the only interferences are internal, as the there are no external parties remaining). By definition, to
realize the stated goal of a world market, a world government must follow.
Although this idea is sometimes lost on those economists that begin from the unquestioned assumption of a
world market, the founding fathers of the United States and many great patriots that followed were well
aware of this truth. They knew that a nation with a protected free market could never be assimilated into a
world system (which has been evidenced by the fearsome independence of the United States prior to the
globalist liberal policies of Wilson and the free trade treaties that have led to an opposite shift in sentiment,
and also evidenced by the failure of the Articles of Confederation to bind the colonies into a cohesive social
nexus), and they knew that an unprotected market will necessarily result in the loss of independence and
sovereignty (which has been evidenced by the transition of a free trading Europe into a regional government
and the destruction of the sovereignties of the former European states. Once the *given of a global market is
established, as free traders continually attempt to reinforce, reason requires that interferences within that
market, such as sovereign governments, currency exchanges, borders, etc be eliminated. Many of the people
advocating these changes don’t even understand why they are opposed to these interferences!).
A nation that has the necessary labor force and raw materials to produce all the necessaries of life has no need
to freely trade and cannot benefit from freely trading; and should therefore establish a national market
system. George Washington remarked: “A free people—should promote such manufactories as will render
them independent on others for essentials—I shall give every encouragement in my power to the
manufacturers of my country”. Alexander Hamilton, the creator of the American free market economy said
“Let the thirteen states bound together in a strict and indissoluble union, concur in erecting one great
American system superior to the control of all transatlantic force or influence.” It is clear that the protected
free market economy designed by Hamilton was intended to long endure as a free and independent nation.
Henry Clay saw the American system as inseparable from the establishment of a protective tariff: “Poverty
befalls any nation that neglects and abandons the care of its own industry, leaving it exposed to the action of
foreign powers. There is a remedy, and that consists in adopting a genuine American system accomplished by
the establishment of a tariff. – with the view of promoting American industry. The cause is the cause of the
country, and it must and it will prevail.”
Without a protective tariff which acts to define the division of labor and establish the boundaries of the free
market economy, there will be no force preventing the assimilation of all regions sharing a division of labor to
form a common market by establishing a common government. Men act in such a way as to promote their own
self interest from their own point of view at all times.[ii] Rational and intelligent men, reasoning from the
establishment of a regional or global market by virtue of a regional or global shared division of labor (free
trade treaty) will invest their capital in such a way as to maximize profit. They will purchase products that
appear to them in the short term to be the cheapest. They will advocate for those institutions and provisions
which prevent the distortions of the now regional or global free market economy. The social nexus becomes
more and more powerful and over time secession from such a system will become nearly impossible. Over time,
within the division of labor, wage rates and standards of living will be equalized universally.[iii] Specifically
for the United States, the wage rates and standards of living of Americans will decrease steadily until they are
equalized with those of the rest of their shared division of labor. However, without the establishment of this
shared division of labor, the wage rates and standards of living of Americans would once again tower above
the rest of the world.
It has been shown utilizing the definition of the free market economy that the term is a scientific term, with a
specific meaning. It has been shown that the American system of political economy is called a national,
protected free market economy, and was the means employed to achieve the goals of the Declaration of
Independence and the Constitution of the United States, namely to separate from the rest of the world into a
sovereign nation, to form a more perfect union, establish justice, insure the domestic tranquility, provide for
the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our
posterity. This essay does not attempt to put forward the entire case for a protected free market economy, for
that task would require a lengthy discourse commensurate with the complexity of such a topic. Further, that
decision is a subjective decision which cannot be answered by the science of economics. Economics can only tell
us what means can be employed to promote the pre-established goals of a society. For a thorough examination
of the supremacy of the free market economy, one should begin with the most complete and tightly reasoned
treatise on the subject; Human Action by Ludwig Von Mises with only one warning; do not fall into the trap of
reasoning from the conclusion of a global market (at least, not unless you also desire the ensuing global
government and destruction of the United States). The reader should then move on to The Wealth of Nations
by Adam Smith, particularly regarding the long proof of the superiority of investing domestic capital for
domestic consumption. For a factual account and full understanding of the goals of the United States and the
argument for its founding, one should study The Federalist Papers, and of course the founding documents and
debates surrounding them; The Constitution of the United States and the Declaration of Independence.
The true question that is being asked and debated is not an economic question at all. The Free Market
Economy has already won the economic debate. The question now is how to organize politically. Shall there
be one global free market, or shall there be sovereign nations where the people determine for themselves how
they will be governed? For a nationalist American, the answer is the latter. The question now is not
capitalism vs. socialism. It is nationalism vs. globalism.
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