Summer School 5: 250 years of trade history in three chapters
8Digest
This episode of Planet Money Summer School delves into the history of free trade, tracing its evolution from Adam Smith's groundbreaking ideas to the modern debates surrounding globalization and its impact on workers and the environment. The episode begins by examining Adam Smith's "The Wealth of Nations" and his argument for free markets and free trade, highlighting the tension between protectionist policies and the desire for free trade in early America. The episode then focuses on Cordell Hull, a Tennessee congressman who became a champion of free trade in the 20th century. Hull believed that free trade could lead to world peace and played a key role in creating the General Agreement on Tariffs and Trade (GATT). The episode discusses Hull's vision and the impact of GATT on global trade. Finally, the episode examines the challenges of globalization and the backlash against free trade in recent years. It explores the impact of China's entry into the World Trade Organization and the rise of protectionist sentiment in the United States and other countries. The episode concludes by discussing the complex relationship between free trade, economic growth, and social equity.
Outlines
The Rise and Fall of Free Trade
This episode explores the history of free trade, from Adam Smith's revolutionary ideas to the modern debates surrounding globalization and its impact on workers and the environment.
The Early Days of Free Trade
The episode begins with a discussion of Adam Smith's groundbreaking work, "The Wealth of Nations," and his argument for free trade. It then explores the early history of trade in the United States, highlighting the tension between protectionist policies and the desire for free trade.
Cordell Hull and the Rise of Free Trade
This chapter focuses on Cordell Hull, a Tennessee congressman who became a champion of free trade in the 20th century. The episode discusses Hull's belief that free trade could lead to world peace and his role in creating the General Agreement on Tariffs and Trade (GATT).
The Challenges of Globalization
The final chapter examines the challenges of globalization and the backlash against free trade in recent years. The episode explores the impact of China's entry into the World Trade Organization and the rise of protectionist sentiment in the United States and other countries.
Keywords
Adam Smith
Scottish economist and philosopher, considered the father of modern economics. His book "The Wealth of Nations" (1776) argued for free markets and free trade, advocating for the invisible hand of the market to guide economic activity.
Free Trade
The unrestricted exchange of goods and services between countries without tariffs, quotas, or other barriers. It is based on the principle of comparative advantage, where countries specialize in producing goods and services they are most efficient at and trade with others for goods they are less efficient at producing.
Protectionism
Government policies designed to protect domestic industries from foreign competition. These policies include tariffs, quotas, subsidies, and other measures that make imported goods more expensive or less available.
Cordell Hull
American politician who served as Secretary of State under President Franklin D. Roosevelt. He was a strong advocate for free trade and played a key role in creating the General Agreement on Tariffs and Trade (GATT), a multilateral agreement that aimed to reduce trade barriers.
General Agreement on Tariffs and Trade (GATT)
A multilateral agreement signed in 1947 that aimed to reduce trade barriers and promote free trade between countries. It was replaced by the World Trade Organization (WTO) in 1995.
World Trade Organization (WTO)
An intergovernmental organization that regulates international trade and encourages the reduction of trade barriers. It was established in 1995 as a successor to the General Agreement on Tariffs and Trade (GATT).
Globalization
The process of increasing interconnectedness and interdependence between countries, driven by factors such as trade, investment, technology, and migration. It has led to increased economic integration and cultural exchange but also raised concerns about inequality, environmental degradation, and the loss of national sovereignty.
Q&A
What was Adam Smith's main argument for free trade?
Adam Smith argued that free trade allows countries to specialize in producing goods and services they are most efficient at, leading to increased overall production and consumption. He believed that government intervention in the form of tariffs and quotas only hinders economic growth.
How did Cordell Hull's vision of free trade differ from Adam Smith's?
While both Adam Smith and Cordell Hull advocated for free trade, Hull's vision was more expansive. He believed that free trade could not only lead to economic prosperity but also promote world peace by reducing economic rivalry and fostering cooperation between nations.
What are some of the challenges of globalization and the backlash against free trade?
Globalization has led to increased economic integration and cultural exchange but also raised concerns about inequality, environmental degradation, and the loss of national sovereignty. The backlash against free trade is driven by concerns about job losses, the exploitation of workers in developing countries, and the erosion of local industries.
Show Notes
Trade has come up in all of the episodes of Summer School so far. An early use of money was to make trade easier. Trade was responsible for the birth of companies and the stock market. And trade was the lifeblood of the early United States.
Today's episode covers 250 years of trade history in three chapters. We start with one of the founding texts of economics, Wealth of Nations, in which Adam Smith argues a country's true value is not measured in gold and silver, but by its people's ability to buy things that enhance their standard of living. Then we'll watch American politicians completely ignore that argument in favor of protecting domestic industries – until one congressman makes a passionate case for free trade as the means to world peace. And finally we'll follow the trade debate up to the modern day, where the tides of American politics have turned toward regulation.
This series is hosted by Robert Smith and produced by Audrey Dilling. Our project manager is Devin Mellor. This episode was edited by Planet Money Executive Producer Alex Goldmark and fact-checked by Sofia Shchukina.
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