Adam Smith (1776) argued against a focus on a trade surplus or even a balance of trade, asserting that a country’s prosperity does not stem from its ability to amass wealth through exports; instead, it was trading itself and freedom unhindered by government macroeconomic trade policy that enriched people. Russia's and Trump's ideas were called mercantilism, but they were inefficient and abandoned during the Age of Empires. Yet Trump proposes to follow the Russian economic model, which could lead to hardship.
Instead, Smith championed free trade, individual economic freedom, and open markets as the foundation for a thriving economy. According to Smith, when nations prioritize trade barriers and strict control over exports and imports, they misallocate resources and stifle economic growth. He advocated for a natural economic order where countries should trade freely, specialize in industries where they hold a comparative advantage, and engage in mutually beneficial exchange.
In contrast, the economic policies of both the Trump administration in the United States and Russia’s current economic approach diverge sharply from Smith’s vision. These policies emphasize export-driven growth with a protectionist undertone, reminiscent of mercantilist strategies Smith critiqued. By boosting exports and reducing imports through trade barriers and incentives, these policies aim to secure a favorable trade balance but overlook the adverse effects on domestic markets and individual buying power. If the United States were to persist in policies prioritizing a trade surplus at the expense of economic openness, it would contradict Smith's model of wealth creation.
Following a path similar to Russia's economic policy could lead to unintended consequences, including a decline in real wages, diminished consumer purchasing power, and reduced economic flexibility. Over time, these effects could mirror the economic stagnation observed in economies that embrace protectionism. As a result, a U.S. economic policy that mirrors Russia’s export-driven focus risks contributing to domestic economic strain and global instability. The compounded effects of such policies could impede the "Wealth of Nations" by restricting the dynamic economic forces that foster long-term growth and resilience, potentially precipitating a widespread economic downturn.
We want to make the world a better place, which means freedom of economics, choice, and transparent democracy are ideals to live by to make this a better humanity.
"Nothing, however, can be more absurd than this whole doctrine of the balance of trade, upon which, not only these restraints, but almost all the other regulations of commerce are founded."
Smith, A. (1776). An inquiry into the nature and causes of the wealth of nations (Vol. 2). London: W. Strahan and T. Cadell.
"It is the maxim of every prudent master of a family never to attempt to make at home what it will cost him more to make than to buy… What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom."
Smith, A. (1776). An inquiry into the nature and causes of the wealth of nations (Vol. 1). London: W. Strahan and T. Cadell.
