Rational Optimist. Relevant chunks:
“Frankly, we might as well be living in the 17th century, so antiquated are our current debates over trade, both here over Brexit and in America over the presidential nominations. Many current assumptions about trade were debunked more than two hundred years ago and then tested to destruction in the mid-19th century.
In the 17th and 18th centuries European governments were in thrall to “mercantilism”, the belief that the purpose of trade was (roughly) to push exports on to other countries in exchange for cash and so build up a surplus of treasure with which to pay armies to fight wars. So they sought to restrain imports with tariffs and bans, while encouraging exports with monopolies and gunboats. Britain’s Navigation Acts after 1651, and the chartering of companies such as the East India Company, were part of this policy.
Along came Adam Smith and made a different argument, that mercantilism punished consumers and the poor, while rewarding producers and the rich; that imports were a good thing because they raised people’s standard of living by giving them what they wanted at lower prices. With money to spare, consumers bought more things from producers, creating jobs and generating prosperity. If bread was cheaper, people could afford more textiles. Gradually, with the help of David Ricardo and John Stuart Mill, Britain was persuaded of this and by the time Robert Peel, William Ewart Gladstone and Richard Cobden were in charge, Britain had declared unilateral free trade and dared the world to follow.”