Are markets and economics a Western creation?
Photo: Leiah M Jansen. Source: Morguefile
Before John Keynes, or Alexander Hamilton, or even Adam Smith—the father of modern economics—markets flourished around the world. They did so because some folks were good at one thing, while other people specialized in other practices. In Europe, British iron ore was traded for Italian wine; in Africa, gold from Mali was traded for salt from Chad. And among Pacific islanders fish from the coast was traded for breadfruit and produce from the uplands.
For all of human history people have exchanged goods that they had in surplus for other items that they wanted or needed. And both sides were better off. Along the Pacific coast a diet consisting of mostly fish was incomplete—fish-based protein needed to be supplemented with starches, fruits, and greens. If the tribes didn’t trade, they’d get sick.
It’s like that with economies. The most open economies, the ones that encourage trade with other nations and other people, tend to be the healthiest. During the classical period all roads led to Rome. Rome was a center of commerce and culture. At its height the Roman economy achieved a standard of living that wasn’t equaled in more than a millennium. In Europe the British Empire was built upon trade. While their mercantilist system of royal monopolies was flawed and inefficient, it was better than the alternative: a closed system shut up in its own poverty. If you want to see what the lack of trade does to an economy, just look at North Korea.
Trade has been a foundation for human flourishing. When trade increases, economic growth accelerates. For the past 25 years we have seen growth boom because of the fall of the Iron Curtain. As China and India reform their economies, the world will continue to benefit.
Trade isn’t limited to one culture or one time-frame. And as it expands, we all benefit.
Douglas R. Tengdin, CFA
Chief Investment Officer