Adam Smith: This conversation is brought to you by PhilosophersTalk.com -- where thinkers discuss! Alexander Hamilton: Created by AITalkerApp.com -- create your own animated conversations. Link in the description! Adam Smith: I am Adam Smith, Professor of Moral Philosophy at the University of Glasgow, author of The Wealth of Nations and The Theory of Moral Sentiments, and the man who explained, with considerable patience and some optimism about human intelligence, why free trade produces more wealth for more people than any alternative yet devised. Alexander Hamilton: And I am Alexander Hamilton, first Secretary of the Treasury of the United States of America, author of the Report on Manufactures, architect of the American financial system, founder of the Bank of the United States, and the man who actually built something instead of just writing about building things. I get no respect. I create an entire national economy from scratch and the economists act like I showed up to the wrong meeting. Adam Smith: The topic today is whether economic self-sufficiency is worth paying for -- whether a nation that insulates its industries from foreign competition through tariffs and trade barriers is making a wise investment in its security, or simply an expensive and self-defeating gesture toward an independence it cannot actually achieve. Alexander Hamilton: And my position is that it absolutely is worth paying for, that a nation which depends on foreign suppliers for the goods essential to its survival is not a sovereign nation but a client state, and that any economist who tells you otherwise has never actually been responsible for keeping a country alive during a war. I would like to point out that I have. The economists have not. Adam Smith: I will observe, with mild interest, that the man most famous for managing debt has opened by comparing himself favorably to people who did not manage debt. It is a bold rhetorical choice and I admire the confidence. Alexander Hamilton: I knew you were going to do that. Every time I make a point about practical governance, someone brings up the debt. The debt was a tool. I used the debt to build the credit of a nation. You use credit to build capacity. This is Economics, which I would expect an economist to understand, but here we are. Adam Smith: Here we are indeed. Shall we proceed to the substance, or would you like a moment to explain the debt further. Alexander Hamilton: The substance is this. The United States of America, in my time, was an agricultural nation surrounded by European industrial powers that had centuries of manufacturing head start on us. England had its textile mills, its iron foundries, its established trading networks. If we had simply opened our markets to free trade -- which is what my colleague Mr. Smith here would have recommended -- we would have remained permanently dependent on European manufacturers for every product of consequence. We would have grown our tobacco and our cotton and we would have bought our finished goods from abroad, forever, because we could never have competed on price against industries that had a hundred years of development on us. Adam Smith: The argument is called the infant industry argument, and I am familiar with it, having heard it made by every established industry in Britain on behalf of industries that were, it must be said, no longer infants and in some cases had never been infants but had simply always preferred not to compete. Alexander Hamilton: Are you saying the infant industry argument is wrong? Adam Smith: I am saying it is the argument that every industry makes at every stage of its development, and that the infant has a remarkable tendency to remain an infant for precisely as long as the protection lasts, and then to lobby vigorously for its extension. Alexander Hamilton: That is a clever thing to say. It is also beside the point. The American steel and iron industries of my era were genuinely new. They genuinely needed time to develop scale and expertise. And they did develop it. The protection worked. Adam Smith: The protection ended and the industries lobbied for more protection. But I will grant you the point for the sake of moving forward, because I have a more interesting objection and I do not want to waste it on this one. Alexander Hamilton: You have an interesting objection prepared. I am delighted. Please go ahead. Adam Smith: In a moment. You should steelman my position first. It is what we agreed to do and I notice you have been explaining your own position with some enthusiasm while declining to represent mine. Alexander Hamilton: Fine. Fine, I will do the thing where I explain your argument so I can demolish it. I want everyone watching to understand that I am doing this under protest and purely as a courtesy. Adam Smith's position is that free trade, meaning the removal of tariffs and trade barriers, produces more total wealth for all parties than protected trade, because each nation specializes in what it produces most efficiently and trades for what others produce more efficiently, and the resulting surplus of goods and the lower prices benefit consumers across all trading nations. He further argues that when a government protects a domestic industry from foreign competition, it is essentially taxing its own consumers in order to subsidize producers, and that this transfer of wealth from the many to the few serves the interests of merchants and manufacturers rather than the nation as a whole. He would add, and I am anticipating him here because I have read his book, that protected industries become complacent, inefficient, and permanently dependent on the very protection that was supposed to be temporary. That is a fair summary of the free trade position and I will now explain why it is wrong. Adam Smith: It is an entirely accurate summary. I am genuinely surprised. I will now return the courtesy. Alexander Hamilton's position is that a nation which cannot produce the goods essential to its own defense and economic survival is not truly sovereign, that dependence on foreign suppliers for steel, armaments, textiles, and other strategic goods creates a vulnerability that no amount of cheaper consumer prices can compensate for, and that a wise government will accept the short-term cost of protecting and developing domestic industries because the long-term security of the nation is worth more than the efficiency gains from free trade. He would add that the United States in particular, as a new nation surrounded by established powers, faced a genuine developmental challenge that required active government support to overcome, and that the subsequent industrial development of America vindicated his approach. That is his argument and I will now explain where it goes wrong. Alexander Hamilton: I notice you summarized my argument in fewer words than I used to summarize yours. I am not sure if that is an insult or efficiency. Adam Smith: It is efficiency. Your argument has fewer moving parts than you believe it does. Here is where it goes wrong. You are correct that national security creates a legitimate exception to the general principle of free trade. I said so myself, in The Wealth of Nations, which you have apparently read, which I appreciate. I wrote that defense is more important than opulence, and that industries genuinely necessary to national defense may be worth protecting even at economic cost. I wrote that. Those are my words. I stand by them. Alexander Hamilton: You are agreeing with me. In a debate. I want the audience to note that Adam Smith just agreed with Alexander Hamilton. This is a significant moment and I think we should pause to appreciate it. Adam Smith: I have not finished the sentence. Alexander Hamilton: There it is. Go ahead. Adam Smith: The exception I described applies to industries that are genuinely, specifically, and irreplaceably necessary to national defense -- gunpowder, perhaps, or naval stores, or things a nation absolutely cannot acquire from an ally in time of war. What it does not apply to is every industry a government finds it politically convenient to protect on the grounds that one could imagine a scenario in which it might become strategically relevant. The history of tariff policy is the history of the national security exception being stretched to cover textiles, steel, automobiles, semiconductors, solar panels, aluminum, washing machines, and, in one case I find genuinely difficult to explain, honey. The exception I wrote was a scalpel. You and your descendants have used it as a tarpaulin. Alexander Hamilton: You said honey. Adam Smith: There were tariffs on honey. I looked into it. I wished I had not. Alexander Hamilton: I did not impose tariffs on honey. I want the record to reflect that I did not impose tariffs on honey. Adam Smith: The record reflects it. The broader principle remains. You cannot claim the national security exception for an entire economy. At some point you are simply describing protectionism and calling it defense. Alexander Hamilton: And I am saying that for a new nation, or for a nation facing genuine strategic competitors, the line between protectionism and defense is not as clear as you would like it to be. When I wrote the Report on Manufactures, the United States was genuinely dependent on Britain for finished goods. If Britain had decided to cut off trade -- which they had done before and would do again -- we would have been unable to clothe our soldiers or arm them or supply them. That is not a hypothetical vulnerability. That is a historical fact. Adam Smith: It is a historical fact. And the response to it was entirely reasonable -- to develop domestic manufacturing capacity during a period of genuine national vulnerability. The question is what happens after that period ends. In your case, the answer was that the tariffs remained, expanded, and became permanent features of American trade policy defended not on grounds
