In This Review
How Nations Grow Rich: The Case for Free Trade

How Nations Grow Rich: The Case for Free Trade

By Melvyn Krauss

Oxford University Press, 1997, 140 pp.

This short book is a highly readable tract urging free trade, denigrating foreign aid, and dismissing economic sanctions as ineffectual -- in short, making the case for international laissez faire. It is uncompromising, forcefully argued, and scrupulously nonpartisan in exposing both Democrats and Republicans who espouse what the author considers foolish views. It offers trenchant and persuasive criticisms of the numerous fallacies that have been advanced in recent years to support restrictions on imports, both by self-interested parties and increasingly by well-meaning social groups that erroneously view imports as a threat to their favored social programs, from Social Security to environmental protection. Krauss is no fan of the welfare state, seeing too much generosity as a threat to growth, but he correctly and cogently argues that diverse national welfare or environmental objectives are not incompatible with free trade.

One problem with tract writing is that forcefulness of expression and simplicity of argument may sacrifice important nuance or, even worse, distort facts or produce ludicrous statements. Krauss scores relatively well here, but he is not immune. In his diatribe against the state, he tells us that spending on education and health in East Asia truly is investment in human capital, but where education and health are financed by high tax rates, they often turn out to be consumption. In general, of course, they are both. And he is evidently unaware that South Korea's top marginal income tax rate was 70 percent right through its period of rapid growth, dropping to a still high 55 percent in 1989.