Understanding Karl Marx on Free Trade
What do David Ricardo, Ben Shapiro, and Karl Marx have in common? They’re all free traders.
No, this is not a tongue-in-cheek jab designed to smear Ricardo or Marx. I’m serious. Karl Marx—the father of communism, and intellectual progenitor of the horror-show that is postmodern relativism—was a free trader. Why?
Marx believed that international free trade, or perhaps more accurately, Ricardian economic globalization, would pave the way for a glorious proletarian revolution. Specifically, Marx thought that free trade would increase wealth inequality and reduce wages for the majority of people, and that this tension would inevitably lead to conflict.
While I hate to admit it, Marx is broadly right on this point. International free trade has indeed increased wealth inequality and reduced wages for the majority of Americans. In fact, the median American household was richer in the 1980s than today (better technology aside). Part of this is explained by the recent influx of low-wage immigrants and decreasing household sizes—but even so, globalization remains the single largest contributing factor.
Likewise, Marx was correct that increasing inequality degrades social cohesion, setting the stage for violence and revolution. As it turns out, people are not hyper-rational automatons like economists assume: jealousy is real, and most people would rather lose money than see someone else get rich relative to them, even if they would themselves get (slightly) richer.
a tale of two speeches
The primary historical documents showing that Karl Marx supported international free trade are two renderings of a speech he delivered to the Democratic Association of Brussels in 1848—ironically, the “Year of Revolutions”. Although the two renderings make basically the same point, they are distinct enough to warrant separate investigations.
The first rendering of the speech was published in German by Joseph Weydemeyer, a friend of Karl Marx and Friedrich Engels. This version is probably the more historically accurate, and is traditionally appended to The Poverty of Philosophy, which was first published in 1885.
After speaking at length about the injustices of capitalism (to be expected), Marx turns to the question of free trade. He argues in favor of international free trade because he believes that it will exacerbate the “antagonism between industrial capitalists and wage workers.” This antagonism (manifested in growing economic inequality) will hasten the worker’s revolution and the final installation of a communist utopia.
Basically, Marx thinks things must get worse before they get better—and free trade will make them worse.
This is consistent with Marx’s teleological (goal-oriented) understanding of history. Marx sees history as a series of clashes between the rich and poor, and each clash brings us closer to the end of history—a communist utopia where such distinctions are erased. For example, ancient Greco-Roman slavery, medieval feudalism, and modern capitalism are all just different versions of this underlying conflict, and each is a necessary step towards communism. For Marx, history is not simply a chain of causality dangling in empty space: it’s a bridge to a known destination, and this bridge is built by revolution. This teleology is why Marxists are so keen to sow discord whenever possible—conflict is a means to an end.
But it’s not just about economics. Marx sums up his case for free trade with the following passage:
. . .in general, the protective system of our day is conservative, while the free trade system is destructive. It breaks up old nationalities and pushes the antagonism of the proletariat and the bourgeoisie to the extreme point. In a word, the free trade systems hastens social revolution. It is in this revolutionary sense alone, gentlemen, that I vote in favor of free trade.
The key phrase here is “breaks up old nationalities.” Remember, Marx does not see communism as simply an economic system—it’s an entirely new social, political, and economic order that must be wrought on a global scale. Communism is all or nothing. Thus, nationalism is a major roadblock because it unifies and divides people on a dimension other than wealth. In the end, there can be no proletarian revolution unless people see themselves as proletariats—not as Englishmen or Americans—first.
On the whole, this speech reveals that Marx supports global free trade for two reasons. First, by increasing inequality is sows the seeds of revolution. Second, economic integration undermines nationalism and replaces it with a global (proletarian) culture.
flesh on the bone
A second version of Karl Marx’s speech on free trade (this time from 1847) was published by his friend and patron Frederick Engels in The Northern Star, a British journal. What makes this (otherwise inferior) version of the speech interesting is that it contains a direct refutation of David Ricardo’s theory of comparative advantage.
The theory of comparative advantage states that countries should trade things they are relatively good at making for things they relatively bad at making—even if they are better at making all things in absolute terms. This ensures that labor is divided efficiently, and thus the maximum number of things are made. While comparative advantage sounds good on paper, the theory (like so many other academic speculations) collapses when applied to the real world.
Marx’s refutation turns Ricardo against himself. To begin, Marx assumes that comparative advantage works as Ricardo describes. Next, he states that “labour is a commodity as well as any other commodity.” That is, the price of labor is subject to the law of supply and demand—just like the price of apples or oil. Finally, Marx puts two-and-two together:
We accept every thing that has been said of the advantages of Free Trade. The powers of production will increase, the tax imposed upon the country by protective duties will disappear, all commodities will be sold at a cheaper price. And what, again, says Ricardo? “That labour being equally a commodity, will equally sell at a cheaper price” — that you will have it for very little money indeed, just as you will have pepper and salt.
Essentially: if free trade decreases the price of goods, it will also decrease the price of labor. But if this is true, then who actually benefits from free trade? After all, costs are always measured relative to income—if the price of bread halves, but so does your wage, you’re no better off than if nothing changed.
To his credit, Ricardo was actually aware of this problem, and proposed that capital immobility would prevent the hypothesized collapse of labor prices. However, in today’s world (and to some degree, Marx’s), capital is mobile, and therefore comparative advantage doesn’t work. This is one of the rare occasions that Marx was right.
a hill to die on
Milton Friedman and Karl Marx both support free trade, but for very different reasons. In his book Free to Choose, Friedman argues vociferously that free trade is the key to enriching everyone. Meanwhile, Karl Marx supports free trade for precisely the opposite reason: free trade impoverishes people so badly that they’d rather fight and die in a bloody revolution than live with its consequences. Who’s right?
As usual, the truth lies somewhere in between. There is no doubt that America has benefited from elements of economic globalization. For example, everyone likes buying fresh strawberries year-round. Likewise, many American industries undoubtedly profit from higher trade volumes—primarily American exporters and financial markets.
The problem is that not everyone benefits. In fact, the vast majority of Americans have seen their wages stagnate—real median wages actually peaked in 1973—and their quality of life deteriorate (better technology aside). Likewise, large swaths of the nation have been turned into ruined, rusting husks, a consequence of deindustrialization. Millions of Americans are chronically unemployed, and millions more have turned to drugs, crime, and suicide.
Free trade is to blame. Or more specifically, Ricardian economic globalization and its ugly stepchild offshoring. Both the economic logic and historical data bear this out.
If America does not soon redress its trade imbalances, things will only get worse for the common man—inequality will continue to increase, and nations will continue to grow evermore economically (and thus legally) integrated. Do we really want to put the rest of Marx’s thesis to the test?