Economic Colonization

Throughout this election cycle, we have heard Trump, Sanders, Clinton, and many others decry free trade.  Trump and Sanders in particular have discussed how America is “losing” because we import more than what we export.  They would want America’s trade deficit to shrink by reducing imports (through tariffs or bans) and increasing exports.  They claim this is the way to make America great again and bring back prosperity.

There is already a term used to describe an economic system where one organization comes along, strips the resources of another, and provides little or nothing in return.  It’s called “Colonization.”

Colonization is almost pure mercantilism.  The colony has a near-perfect trade surplus and the colonist has a near-perfect trade deficit.  And yet, it is the colony that suffers economically from this transaction, not the colonist.  The European colonization of Africa, or Japanese colonization of Korea and China, are perfect examples of this.

There are examples of colonies that were more successful and less destitute, such as New England.  But the main difference between the two is not the political system, but rather the economic system.  New England exported a lot of goods to England.  If they did not import, they’d have been just as poor as Africa or Korea during their colonization.  Instead, New England could import goods and improve their lives.

The short version of this is the same message that Adam Smith has been saying since 1776: it is not the exports that generate wealth for a people, but rather what they can consume.