Samuel Gregg recently gave a lecture at West Virginia University. Gregg is an engaging speaker and a good antidote to the Christian right’s slide toward Christian nationalism or Catholic fundamentalism. However, we should be skeptical of some of his arguments regarding free trade. Gregg argues that the Constitution was a free trade agreement between the states, which in part enabled the subsequent recovery of growth in the United States. Even if this is partially true, the Constitution is a double-edged sword.

On the one hand, interstate trade restrictions were removed, but on the other hand, the power to impose trade restrictions was transferred to the new central government. One could imagine a scenario in which a state would have relatively low rates, but in the aftermath of the Constitution, rates would be increased by federal decree. This appears to be what happened.

Patrick Newman states that at the time of the Articles of Confederation, “state revenue from tariffs was small, so most of this money came internally from excises and property taxes” and that ” in reality, New York’s rates were around 5 percent, similar to the state’s. to those of other states, and New York City enjoyed little competition with neighboring ports. Tariffs in states like New York, South Carolina and others have not exceeded 10%. Everything changed in 1789, just two years after the Constitution was ratified.

Newman states: “The Tariff Act of 1789, passed in July by an unrecorded vote. The law was intended to raise revenues and protect industry, and rates as a percentage of total imports averaged 12.5 percent. About two years after ratification of the Constitution, most states saw their average tax rate increase. increaseand, from 1790 to 1810, the U.S. tariff rate ranged from 12% to approximately 35%.

Newman helps us understand why this happened:

Other business interests have suffered setbacks. Inefficient Northern manufacturers and shippers called for tariffs and shipping laws to block products from other states as well as British goods and ships. However, interstate competition minimized actual regulations: if one state imposed high restrictions, other states undercut them to acquire additional imports. Additionally, limitations on manufacturing and shipping in the South have prompted the region to adopt softer regulations. At the national level, the requirements of unanimity and supermajority neutralized mercantilist proposals: New York had defeated the 1783 tax and Congressman Lee succeeded in defeating a navigation law in 1785. Northern manufacturers and shippers wanted to prohibit state competition and establish a wide net to ensure uniform protection.

Newman continues,

The convention banned interstate tariffs, granting vague interstate regulatory oversight (the Commerce Clause) to only a simple majority in both houses. This made it easier for Congress to cast a mercantilist net over all states to benefit certain business groups.

Due to interstate competition, policymakers have had difficulty granting benefits to business interests through state legislatures. They therefore decided to support the creation of a new central government, which requires neither unanimous consent of the states nor a qualified majority to adopt cronyism policies. Of course, this does not cancel out the positive consequences of the ban on customs duties between states, but the establishment of a centralized commercial decision-maker goes against the gains obtained through the creation of a trade zone. free interstate trade.

Libertarians should also be careful to embrace the Constitution’s “free trade” agreement for normative reasons. It is one thing for a state to support free trade, but another for a central authority to impose it.

The Constitution established a new federal government over the state governments, thereby increasing the size and scope of aggressive interventions in the affairs of Americans, and although there was a decrease in the scope of state aggression, States with respect to interstate commerce, the result is the transfer of the power to implement trade restrictions into the hands of a central power.

This power implies that if a state implements a trade restriction without the agreement of the federal government, then the federal government has the right to forcibly oppose that restriction. Even if state trade restrictions are undesirable, imposing free trade by force is also undesirable, because it requires the state to raise a police force through taxation, debt issuance, inflation, conscription or any other aggressive means to threaten or invade a state. . The citizens of said state will be victims of a military invasion. All this for the unjust application of an illegitimate pact concluded between governments. Evaluated in these terms, the power to set rates – although illegitimate – should be decentralized. This would enable competition between states and remove a layer of institutionalized aggression.

None of this is to say that Gregg is completely wrong, but free-market advocates should be more skeptical of the Constitution’s free-trade benefits.

Much of what Gregg says is correct. He shares somewhat Rothbard’s skepticism about so-called “trade deals.” Gregg says free trade agreements are actually “managed trade” agreements that are “filled with conditions and restrictions agreed by governments.” He suggests that free traders should “criticize trade agreements because they add complications to free trade and create new opportunities for cronyism” while cautiously promoting the agreements and minimizing these unfree conditions.

Gregg also argues for other explanations for American growth after ratification of the Constitution. The Constitution established political certainty, thereby allowing businesses to be more secure about the future of their long-term investments, perhaps leading, in part, to the growth in the number of corporations. Anyone familiar with the uncertainty theory of Robert Higgs’s regime should be sympathetic to this view. Gregg also suggests that the move away from complex UK regulations has allowed businesses to thrive.

Gregg is clearly right about much of it, but his view of the American Revolution and the Constitution is more statist than a libertarian should accept. We should be skeptical of the American Revolution and its aftermath for a number of reasons, some of which are summarized here by Gary North. We should also be informed about how cronyism influenced the Revolution and the subsequent adoption of the Constitution. To have a more complete economic assessment of the Constitution, we must consider the negative consequences and motivations of cronyism, and from a free market and libertarian perspective, it seems that the history of the Constitution is more of a hodgepodge than the portrait painted by Gregg.

Regardless of Gregg’s support for the Constitution, his defense of a liberal economic order from an economic and moral perspective should be praised in the era of Patrick Deneens and Michael Antons. His recent book The next American economy corrects the errors of these new nationalists and proposes an alternative economic program. I recommend reading the book, especially the chapter on industrial policy, to anyone who is enamored of the current nationalist political movement.

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