The purpose of this research paper is to assess reasonability of free trade and protectionism concepts based on the empirical test of two opposing theories that are associated with free trade and protectionism respectively. The two theories that will be analyzed within the conceptual framework of this research are liberalism and mercantilism. We will first briefly outline the concepts of free trade and protectionism and their contradictory postulates, to be followed by elaboration on their effective implementation in the empirical setting.
The dichotomy of free trade versus protection has been an important building block for contemporary economics. During the nineteenth century a highly influential and long-standing proposition was fabricated in which free trade as an overreaching political goal-and as a slogan-was said to have originated with Adam Smith. (Goldman, 1989) Moreover, this proposition stated that free international trade, including radical tariff reforms, and so on, was something that inevitably and naturally followed from Adam Smith’s famous theory of the market process. In contrast, protectionism was connected with the mercantile system and with such ‘mercantilist’ writers as Thomas Mun and James Stewart. (Irwin, 1996)
Free trade became a standard illustration of the basic free market principle of classical as well as modern micro-economics: by trusting the free interplay of market forces-the invisible hand-a maximization of wealth would occur. (Maneschi, 1998) Before the Keynesian revolution and the controversies over full employment in the 1920s and 1930s, the debate over free trade and protection during the nineteenth century was certainly the most important popular debate in which economists had been involved, hence, the discussion of the pros and cons of free trade-in which the free-traders, at least in principle, won the day due to what seemed to be a superior logical argument-offered an identity for economics and professional economists. (Maneschi, 1998)
The rise of liberalism in Europe at the end of the nineteenth century makes it clear that liberalism is but one vision among others. However, the success of the West after 1945 allowed this realization to be down-played, even forgotten. But the realization was true, as more serious attention to Marxism would have made clear; thankfully the recent revival of Islam is again making people in the West aware that their world faces competitors.
In consequence, it becomes necessary to spell out what it is about liberalism — defined in terms of the moral worth of every individual and of the attractiveness of negative liberty as a consequent social practice — as an ideology that makes it preferable to other alternatives. This version is, in some ways, ‘mundane’, and this will not please everyone; however, good reasons for excluding more ‘generous’ views are available and will be noted.
When reasons for liberalism as an ideology are offered, what precisely is happening? Are we simply trying to give members of liberal societies a better conscience about themselves? This is not an ignoble aim, and there is no reason to repudiate it. However, to stick at that position is to endorse relativism, to accept that liberals are trapped inside a particular world just as others are trapped in theirs. That is not an acceptable resting place; the discussion of rationality and relativism that this entails shows, moreover, that it is not a necessary resting place. The arguments in favor of liberalism are made in the belief that they have the power to sway judgment. It is as well to be absolutely clear that, in a sense, a sleight-of-hand is being performed here.
A move is being made from a recognition of the relativity of beliefs to an insistence that liberalism is more universalizable than others; liberalism may recognize itself as one ideology