From simple screws to global prosperity: rethinking trade in uncertain times

By Lorenzo Bona

As we navigate a period characterized by persistent debates on global trade and uncertainty regarding the future regulation of international commerce—including for example the use of measures like tariffs on imported goods—it is appropriate to reflect further on these issues.

In one of our previous Insights*, we had already emphasized the importance of the idea, derived from the general and abstract principles of economic theory, that free trade fosters competition, stimulates innovation, and strengthens economic resilience.

An additional consideration is whether potential obstacles or frictions to trade—such as for instance the introduction or increase of tariffs and duties—might stem from ancient fears that have accompanied humanity for centuries

A re-examination of key research at the intersection of history and economic theory suggests that, since ancient times, trade has often been viewed with suspicion and considered somewhat inferior to the production of material goods.

In primitive societies, organized into small groups, physical effort likely held a higher status than intellectual effort.

This notion seems to have been passed down, as a kind of cultural legacy, to the societies that followed over time.

For example, in feudal societies, it may have been intuitive to believe that the labor of a farmer or a blacksmith visibly and tangibly increased available goods and wealth. Consequently, differences in wealth between groups and individuals could be easily attributed to understandable causes, such as physical effort.

Conversely, in those societies, the benefits that trade is able to generate—through simple exchanges that merely rearrange the distribution of existing goods or relocate items for sale based on their different profit margins—would have remained less clear and comprehensible for a long time.

In this regard, one of the most influential economists in the study of how markets tend to operate, Friedrich von Hayek, suggested that, in ancient times, the ability to create wealth through trade might have been perceived as the result of almost magical or supernatural forces, capable of generating prosperity not only for individuals but for society as a whole.

An interesting aspect highlighted by his research is that even in environments traditionally supportive of markets and business, there can sometimes be a tendency to underestimate the productive importance of trade.

In other words, just as in ancient times, sometimes there seems to be a persistent inclination to place greater value on what can be clearly explained through cause-and-effect logic, compared to more subtle yet equally powerful dynamics intrinsic to the nature of markets and trade.

Hayek’s research underscores this aspect with extraordinary clarity.

He seemed to place special emphasis on the idea that productivity growth in modern societies cannot be explained solely through striking examples, such as the case of Henry Ford. While Ford was able to satisfy a readily observable need, achieving personal success that simultaneously improved the living conditions of many, economic progress is often the result of much more indirect and imperceptible processes.

Hayek invites us to consider that much of our well-being depends on improvements that remain largely out of our direct observations and are difficult to trace back to simplistic reasoning patterns based on direct cause-and-effect relationships. Examples of such improvements can be found in innovations in relatively simple industrial materials, such as stronger metal screws, more efficient glass, or higher-quality paper—seemingly minor advancements, yet capable of spreading their effects in ways that are both broad and difficult to perceive in everyday life.

In this context, the importance of trade seems at risk of being overlooked even by those who declare themselves supporters of markets and entrepreneurial dynamics. As a result, it seems often forgotten that trade—even when it involves small quantities of finished or semi-finished products imported from distant places—is a prerequisite for increasing the production of goods within a given economic system.

In other words, more attention should perhaps be directed to the fact that the local production of a given good may depend on the availability, however minimal, of resources from distant locations.

The ability to trade over long distances thus becomes an essential factor for productive efficiency.

Consequently, the fact that much of wealth creation depends on activities that are not immediately observable—such as the ongoing search for new information and knowledge (for example, locating raw materials or redistributing them according to demand)—can be difficult to grasp. And, as often happens with things that are not fully understood, this situation may generate distrust or fear.

Analyzing these aspects, Hayek seems to suggest that many of the resistances to trade development may reflect not only fear of the unknown but even fear of knowledge itself—a fear that dates back to the origins of human history and finds a powerful symbolic representation in the biblical story of Genesis, regarding the expulsion of Adam and Eve from the Garden of Eden.

In a time of ongoing trade debates and uncertainty, it is essential to recognize trade and international commerce as key drivers of economic resilience and innovation. While this recognition may not lead us back to the Garden of Eden, it can open the doors to something equally remarkable: expanded access to goods and resources, strengthened global connections, increased collaboration, and the continued advancement of our societies toward greater prosperity—after all, history seems also to suggest a cautious optimism, reminding us that it is precisely in times of uncertainty that the bold and relentless spirit of entrepreneurs drives innovation forward.

Notes:

*The reference is to an analysis that appeared on January 27, 2025 on this website with the title “The tariff debate: rethinking the concepts of open and closed economy and other related ideas”.