I have a confession to make: I love being dependent on foreign oil. In fact, I love being dependent on domestic oil too. For that matter, I love being dependent on other people for all the other things I purchase in the course of my life.
It is a fundamental economic axiom that in every exchange, both sides to the transactions benefit. Each side gives up something he values less for something he values more. That’s why people trade — to improve their economic well-being. People can improve their individual standard of living simply by entering into exchanges with others.
Some people live in deep fear of being dependent on foreign citizens for the production of important items. “Energy independence” is their battle cry. The idea, I think, is that if the American people will just stop buying oil from foreigners and instead buy all their oil from American companies, Americans will be better off. The fear seems to be that foreigner producers of oil might suddenly and without warning decide to stop selling oil to the American people, leaving Americans in the dark and without gas to put into their cars. Do you ever wonder why Americans don’t get just as scared that some American company might suddenly cut them off, not only from oil, but also from the purchase of food, clothing, computers, and other important items?
The fact is that such fears are totally irrational. For one thing, foreign producers of products, including oil, are as dependent on sales as consumers are dependent on purchases. That’s the nature of continuous business transactions — mutual dependency and trust that the relationship will continue. Again, the idea is that people enter into business transactions with each other because they both perceive a gain from the transaction.
Thus, foreign producers of oil — or any other product — are highly unlikely to simply cut off oil supplies to a major world market for the same reason that consumers are highly unlikely to suddenly cut off purchases of such products. Both of them gain from the transactions; otherwise they wouldn’t enter into them.
In a complex market economy, everyone is dependent on millions of other people, most of whom he doesn’t even know. Such dependency is not cause for fear or concern. It’s an economic and sociological phenomenon that everyone should celebrate.
Suppose you decide to live a life of total self-sufficiency and independence. You move onto a farm and begin to grow your own food. What about tools? You have to make them yourself. Remember: you’re striving for total economic independence. What about electricity? You can’t use it unless you figure out a way to produce it yourself. Clothing? You’ve got to weave it all from scratch. Books — no way, unless you write and print them yourself. Computers, a tractor, and television — forget it. You lack the capacity to produce them, including all their internal parts.
So, you decide to abandon your quest for economic independence. You decide it’s easier to buy your eggs from a neighbor who is specializing in that area. You buy your milk the same way. You order your books on the Internet with your computer. All of a sudden, you have made yourself dependent on countless people all over the world. But that’s not a reason to live in fear over the fact that you have now made yourself dependent on others. It’s a way that the free market enables you to live a better life by trading with others. And the same holds true for them as well. And if someone decides to cut you off, you simply adjust and look for alternatives.
One of the keys to a peaceful and harmonious world is the interdependencies that come with trade between people, regardless of citizenship. When people of different nations are dependent on each other with respect to trade, it makes going to war much more difficult. It’s when their respective governments have adopted “trade independence” policies that war becomes easier, at least in an economic sense.
Thus, what is the ideal trade policy for the United States (and every other nation)? A unilateral abolition of all trade restrictions on the American people. No negotiated trade agreements or mutual lowering of tariffs with other nations. Instead, simply drop all barriers to trade here in the United States, including all U.S. government-imposed embargoes and sanctions that punish Americans for trading with foreigners. Not only would such action liberate the American people to freely trade with the people of the world, not only would it bring the interdependencies that are the key to rising standards of living and peace, it would also serve as a model for the rest of the world to follow.