Theory versus Common Sense? The case of Free Trade

[…] the [World Baseball Classic] allows Organized Baseball to sustain the structures that constitute its inner purity, maintaining the boundaries of its regular and post seasons above all against all challenge by foreign teams, all the while increasing its global reach in recruiting talent and vending its commodity […A]ll the champions and perennial powers of the world’s other leading leagues need not apply.

[…] To call [Organized Baseball] an empire, or even a monopoly, is to seriously underestimate it. It is to fail to see the form of power it wields in shaping the separateness of its own commodious world, controlling access, avoiding and deflecting competition, limiting liability, sustaining and elaborating fictions of separate but equal, and mostly separate.

[…] For all of our ease in understanding objections to racism, for all that we can see the flaws in separate but equal when it generated the Major Leagues and the Negro Leagues, most of us now, not only but especially Americans, have no inkling how strange and immoral will someday seem our sanguine acceptance of the legal fortresses of limited liability and nation-state self-determination. (170-172)

These passages are from the last few pages of American anthropologist John D Kelly’s short book The American Game: Capitalism, Decolonization, World Domination, and Baseball. You can read it for yourself, but my short summary of the book is that it pleads for free trade. Not the theoretical free trade of economists, mind you, but of a practical free trade that opens up borders to labor (Kelly points out that it is really hard to play in the Majors if you are not an American, but shortsightedly blames US policy when other nation-states harbor just as much of the blame; if anything, the US has one of the more open immigration policies in the world today) and to marketplace competition (i.e. capital) in the realm of goods and services. I don’t know if this is a conclusion that Kelly would be comfortable being associated with, given that he is a man of the Left, but what would you call a world where baseball teams from Cuba, the US, the Netherlands, Japan, etc. compete with each other on an even playing field for labor, fans, and prestige?

The stubbornness of the Left is sometimes astounding. Kelly is right to lament the fact that the American baseball league (“Organized Baseball”) wields so much power in international baseball, but he doesn’t spell out an explicit remedy for solving this issue. Instead, it seems as if he is mystified as to how this could possibly happen. He understands and acknowledges that Organized Baseball derives much of its power from being located in the world’s most powerful nation-state, but he also understands that free trade (of labor and capital) is the answer to this issue without explicitly acknowledging this fact.

It seems to me that this is an issue where libertarians and internationalist Leftists can work together, provided we clarify a few concepts. Free trade is the answer for a lot of problems in the world today. Internationalists on both the Left and the Right realize this (see also Delacroix). The New Left intelligentsia, though, wants a practical free trade, and it often accuses economists of arguing for a theoretical free trade. But this critique is made in bad faith: Because economists are more familiar with the theoretical version of free trade, they are, as a whole, more willing to make compromises in the form of small steps towards more free trade. The New Left intelligentsia, instead of taking into account all the various options that can be done to move toward a freer world, including political limitations on what can be done to open societies up more to each other, has decided instead to poo-poo the small steps advocated by economists, and all in the name of practicality!

I agree with Kelly and others about the nation-state being a tool of segregation in today’s world. Unlike the New Left, though, I wholeheartedly embrace the pragmatic steps being taken to erode this segregation through the peaceful medium of free trade, even if it is not True Free Trade.

What is a nation?

I know Michelangelo has already asked and answered this question, and NOL has dealt extensively with “the nation” before, but:

Nations are now defined not as races or peoples but by their possession of a state, and states are legitimate only if they express political will of a nation. The strange new idea of nation-building was born, the other side of the coin of state-building in the decolonizing world. It is a game played by given rules, above all that no other forms of political will and action were legitimate, especially wars of conquest.In outcome, the poor, the small, and the marginal gain the freedom of self-determination, the telos of independence, but their democratic rights extinguish utterly at the border. They have right of influence anywhere else.(137-138)

I have just two thoughts about this nugget of insight from American anthropologist John D Kelly, writing on the Wilsonian ideal in his book The American Game: Capitalism, Decolonization, World Domination, and Baseball. 1) The “given rules” Kelly writes of are still a factor in today’s world. You can most clearly see them via international governing organizations (IGOs) like the UN, World Bank, IMF, WLO, etc. Given rules are handed down to former colonies by IGOs not as a way to control these colonies but to guide them gently into the modern era. This may seem quaint, but this is how Wilson and his ilk viewed their rules and their fellow man in the colonies of Africa and Asia. If you think about institutions, even weak ones like IGOs, you know that the rules and ideals that such institutions were created to embody are hard to break; often a critical juncture is needed to do so. So the given rules of the international system are, I would argue, still based on condescending early 20th century notions about non-European peoples. This is partly why Scots and Catalonians are allowed to vote on their secessionist arguments while Kurds and Balochs and Biafrans are labelled terrorists or rebels, and states like Montenegro and Kosovo are allowed to enter the international system with virtually no hiccups while Kurdistan, Balochistan, and South Ossetia are ignored by IGOs and only informally recognized when an official state like the US requires an ally to fight an enemy.

2) This is hard for me to admit as a libertarian, but the Wilsonian ideal has helped to almost entirely eliminate old-school imperialism (violent conquest followed by oppressive government and extractive economic policies) from the earth.

Coase’s “Nature of the Firm”: An Anthropological Critique

But is it a good one? Is it even made in good faith? I need help.

From American anthropologist John D Kelly’s The American Game…:

Ronald Coase’s theory of the nature of the firm rescued, for neo-classical economics, the existence of firms or corporations as rational entities […] Markets always come first, and the problem of the existence of firms is depicted as the problem of why a rational manager would rely on employees rather than markets. State planning and private firms are taking over what already exists, integrated by the price mechanism of markets, and are successful to the extent that they lower costs, since there are a variety of costs involved in market transactions. Thus marginalist analysis implies that an equilibrium will always be found between planning structures and integration by price mechanism, especially since, as Coase says in “The Nature of the Firm,” “businessmen will be constantly experimenting, controlling more or less” and “firms arise voluntarily because they represent a more efficient method of organizing production.” The rise of the firm, as Coase imagines it, is always a movement from many pre-existing contracts to a controlling structure, “For this series of contracts is substituted one.” (94)

The emphasis is mine. Kelly continues:

This imaginary fits poorly the situations that were precisely the actual origins of firms, as when banks gave mortgages to planters, or stock markets funded companies of young agents, prepared to cut plantations into captured wilderness for tropical commodities […] usually employing labor moved long distances and disciplined by direct violence. There is more in the universe than Coase’s imagination, more motives for controlling powers of firms than their cost efficiencies. (94-95)

Kelly goes on to give a brief account of 1) how corporations created commodity production out of thin air, 2) how these corporations were tied to European imperialism, and 3) how they used slaves and indentured servants even when it would have been cheaper to hire the locals.

I want to address Kelly’s summary of Coase’s paper (here is a pdf, by the way, in case you want to follow along), mostly because I’ve never read it although I know it’s important, but first I want to make a couple of digressions. Libertarians would more or less answer Kelly’s three charges listed above as follows: 1) yes, and this is a good thing, 2) state-sponsored corporations and private firms are two distinct entities with two very different incentive structures, and 3) see #2. There is also an issue of accuracy in regards to Kelly’s brief summary of world history since 1600. I don’t want to get into the details here, but I do want you to recognize that I am reading Kelly critically. My last digression is simply to point out that libertarians and Weberian Leftists like Kelly have more in common than we think.

To get back to Coase’s paper, and Kelly’s critique of it, I want to highlight one sentence from Kelly’s book in particular and then turn it over to the peanut gallery in the hopes of gaining some insight:

Markets always come first, and the problem of the existence of firms is depicted as the problem of why a rational manager would rely on employees rather than markets.

Is this the puzzle Coase was trying to grapple with in his paper? I ctrl+f’d Coase’s paper (“employe” – not a typo) and couldn’t find anything that actually confirms Kelly’s summary, but it would be an interesting project (if I am right in stating that Kelly’s summary of Coase’s paper is not accurate) to follow this line of thought and delve into Kelly’s insight about the reliance that entrepreneurs/firms have on employees (rather than markets)…

From the Footnotes: Race, Nationality, and Empire

We have more to say than space allows about ‘race’ and ‘community’ as an imperial organizing category, especially in the British Empire, and about complex transformations and incongruities in decolonization as plural, hierarchical fields of multiply ‘races’ and ‘communities’ were constituted into new nation-states. A return to the dictionaries shows that while definitions of ‘nation’ before World War II sometimes connected nations to states, they invariably defined nations as ‘races’ and made the connection to race, not state, primary. Challenges to this linkage of nation and race were available at the time, notably Renan’s 1882 lecture rejecting race, language, and territory as bases for nationality. This argument eventually became famous. But the dictionaries changed only after that crescendo of failure of nations seeing themselves as races destined to dominate empires, the global catastrophes following the German effort to found an Aryan Third Reich and the Japanese effort to build a Co-Prosperity Sphere with the Yamato race as nucleus. Benedict Anderson deserves credit for insisting upon annihilation of the shared descent definitions of nation, for insistence that the nation is first of all imagined, ideal, and realized in co-dependence with a state. Yet in this, we think, he is the theorist observing at dusk, theorizing the world-order of quiescent nation-states built decades before by the architects of a United Nations in the rubble of the Second World War – and theorizing them not as 20th-century contingencies but as a modern necessity. To Anderson, the disconnection of nation from race or descent group and its connection to the state was, ironically, not an historical development but something intrinsic to the nation. The fact of the Nazis notwithstanding, he found scholarship seeing any connection between nationalism and racism simply ‘basically mistaken’.

This from “Nation and Decolonization: Toward A New Anthropology of Nationalism” by John D Kelly and Martha Kaplan in Anthropological Theory (gated, unfortunately).