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Christian Economics in One Lesson: Chapter 12

Written by Gary North on June 20, 2015

The Drive for Exports

And the LORD spake unto me, saying, Ye have compassed this mountain long enough: turn you northward. And command thou the people, saying, Ye are to pass through the coast of your brethren the children of Esau, which dwell in Seir; and they shall be afraid of you: take ye good heed unto yourselves therefore: Meddle not with them; for I will not give you of their land, no, not so much as a foot breadth; because I have given mount Seir unto Esau for a possession. Ye shall buy meat of them for money, that ye may eat; and ye shall also buy water of them for money, that ye may drink (Deuteronomy 2:25)

This should be familiar. You read it in Chapter 11: “Who’s ‘Protected’ by Tariffs?” Why do I reprint it here? Because this chapter raises the same issue: the nation-state’s violation of free trade. Chapter 11 dealt with legal limits on goods coming in: sales taxes. This chapter deals with tax subsidies on goods going out. In both cases, the laws subsidize special interest groups at the expense of customers.

God made it clear to Moses, who in turn made it clear to the Israelites, that there was to be free trade between the people of Israel and the people of Esau. There was to be no coercion. The people of Esau had goods that the Israelites wanted: meat and water. The people of Israel had what the people of Esau wanted: money. There were possibilities for voluntary exchange. The people of Israel were not in need of “protection” against the meat and water of Esau, meaning tariffs.

There is no mention of any export subsidy in the history of Israel in the Old Testament. There is none in the New Testament, either. The Roman Empire was a huge free trade zone. Its wealth rested on this fact. The Mediterranean had been cleared of pirates in 66 B.C. by Pompey. This increased trade. All roads led to Rome. This also increased trade.

1. Owners
In this incident, the owners were on both sides of the national border of Esau. There were the people of Esau, who possessed water and meat. There were the people of Israel, who possessed money. Because they had legal title to their property, they could pursue the best options available to them because of their property.

Because they owned their property, they possessed the legal right to disown it. Every piece of property was accompanied by a bundle of rights. This is the meaning of ownership: the right to use property in particular ways. One of these ways is exchange. The owners of these rights sought ways to increase their possession of more desirable goods through exchange. Who decided which goods were more desirable? Their owners.

Today, there are owners who are affected by export subsidies. Buyers (customers) on both sides of a national border are owners of money. Sellers (producers) on both sides are owners of goods. They are beneficiaries of a moral and legal order that allows them to do what they want with whatever they own, including the surrender of ownership.

There are also producers of goods on both sides of the border who face competition from sellers on the other side. They own resources. They seek to maximize their income from these resources. They have an incentive to get a government subsidy.

2. Window
The window was the legal system governing each of these nations. In the area of exchange, each civil order allowed the exchange of goods across the national border. Neither system of laws authorized tax subsidies for exchange. This is what free trade means.

(For the rest of the chapter, click the link.)

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