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Free Trade Is Fairer Than You Think

Blog Post | Trade

Free Trade Is Fairer Than You Think

Capitalism fosters impartiality, not unfairness.

Summary: Free trade is often accused of being unfair and corrosive to democratic institutions, concentrating power in the hands of elites while leaving ordinary people behind. The evidence suggests the opposite. Participation in markets cultivates norms of fairness, impartiality, and trust that strengthen democratic institutions and expand individual rights.


In earlier essays, I argued that trade makes us more prosperous, more trusting, and less corrupt. But isn’t trade unfair? Doesn’t the constant churn of global competition take power out of the hands of ordinary people and place it in the hands of wealthy individuals and corporations? Is democracy dying a slow death from the disease of globalization? As I show in this essay, the answer to each of these questions is an emphatic no. Trade, it turns out, strengthens democratic institutions and encourages more impartial treatment of one another. Overall, the complexity of the globalized economy has made us a much fairer bunch.

The French philosopher Montesquieu wrote, “The spirit of commerce produces in men a certain feeling for exact justice.” As Middlebury political scientist Keegan Callanan notes, Montesquieu believed that everyday trade trains us in habits of fair dealing. Over time, these small, routine acts of fairness cultivate a broader sense of exact justice that extends far beyond the marketplace. And researchers have tried to test this philosophical hunch.

Take the Ultimatum Game as an example. In this experiment, two participants are provided a specific sum of money. One participant is granted the power to divide the sum between the two. If the other player accepts the division—whether it is 50:50 or 99:1—both players keep their share. If the receiver rejects the offer, both go home empty-handed. Harvard anthropologist Joseph Henrich has found that proposers from industrial societies (e.g., United States, Indonesia, Japan, and Israel) tend to make offers between 44 and 48 percent, while the Machiguenga of the Peruvian Amazon offer only 26 percent.

Experiments by Henrich and fellow researchers involving 15 small-scale agrarian societies—consisting of hunter-gatherers, horticulturalists, nomadic herders, and sedentary farmers—have also shown that groups more heavily immersed in trade and market exchange with outsiders are less likely to make inequitable offers. Later experiments confirmed “that fairness (making more equal offers) in transactions with anonymous partners is robustly correlated with increasing market integration.”

Within the Ultimatum Game, however, there is still a risk for the proposer: the possibility of going home with nothing if the offer is too small. A proposer might therefore make a more generous offer out of self-interest simply as a strategy to avoid missing out on free money. To explore how deeply rooted this sense of fairness is, Henrich and his colleagues added the Dictator Game to their experiments. In this economic game, the receiver has no opportunity to reject the offer: they get whatever they are given. Yet even under these new rules, Henrich reported that  

people living in more market-integrated communities again made higher offers (closer to 50 percent of the stake). People with little or no market integration offered only about a quarter of the stake. Going from a fully subsistence-oriented population with no market integration…to a fully market-integrated community increases offers by 10 to 20 percentile points [see Figure 1].

Even when fairness and generosity have no strategic payoff, market integration predicts more equal treatment.

Figure 1. Dictator Game offers and market integration

As Montesquieu observed, the habits of fairness developed through everyday trade can extend well beyond the marketplace. Over time, they spill into our civic and political institutions. Democratic governments, in particular, seek to concretize fairness through their procedures and protections. This may help explain why the 2025 Index of Economic Freedom report finds a positive relationship between economic freedom and democratic governance (see Figure 2). Economic freedom, it argues, is “an important stepping stone on the road to democracy.”

Figure 2. Economic freedom and democratic governance

Research has consistently shown trade and market exchange to be champions of democracy. Economists Marco Tabellini and Giacomo Magistretti found that economic integration with democratic countries significantly boosts a country’s democracy scores (see Figure 3). Trade not only transmits goods and services across borders, but also democratic values and institutions. Studies by University of Maribor sociologist Tibor Rutar have also found a positive relationship between trade openness and democracy. Economic freedom has been shown to improve the durability of democratic institutions, while democratic backsliding is often preceded by restrictions on the economy. Political and civil liberties struggle to survive under a heavy-handed state, yet flourish with the expansion of economic freedom (see Figure 4). All in all, democracy and global capitalism appear to be two peas in a pod. As AEI’s Michael Strain explains:

It is no surprise that the rise of populism and economic nationalism has coincided with growing skepticism toward liberal democracy and growing comfort with political violence. The erosion of economic liberalism – free people, free markets, limited government, openness, global commerce – reflects a loss of respect for the choices people make in the marketplace. If we devalue choices made in markets, why wouldn’t we devalue choices made at the ballot box?

Figure 3. Trade with democracies and democratization

Source: Marco Tabellini and Giacomo Magistretti, “Economic Integration and the Transmission of Democracy,” Harvard Business School Working Paper 19-003, March 2024, p. 42.
Note: The y-axis (Polity 2) shows democracy levels. The x-axis (Log) measures trade with democratic countries (relative to GDP).

Figure 4. Economic freedom and personal freedom

Source: Robert Lawson, Ryan Murphy, and Matthew D. Mitchell, “Economic Freedom of the World in 2023,” in Economic Freedom of the World: 2025 Annual Report, eds. James Gwartney, Robert Lawson, and Ryan Murphy (Fraser Institute, 2025), p. 25.

Consider a specific case of unfairness: gender inequality. Generally, fairness is about impartial treatment between various groups. Gender inequality, however, is about impartiality within a group. In Sex and World Peace, Texas A&M’s Valerie Hudson and her colleagues argue that women are often treated as “the boundaries of their nations” because “women physically and culturally reproduce their group.” Far from being outsiders that are merely tolerated, women are seen as the creators and perpetuators of the group itself. “Indeed,” Hudson and her coauthors explain, “this is one of the reasons why the symbol of a nation is often personified as a woman, in order to elicit these deep feelings of protection. A woman becomes a ‘protectee’ of the men of the group, especially those in her own family.”

Unfortunately, the desire to protect women often translates into controlling them. In order to preserve the supposed cultural integrity of the in-group, women’s freedom is restricted. Their behavior becomes closely bound to the honor of their family and community—especially the men of both.

Greater exposure to the global economy, however, weakens this unfair patriarchal hold. For example, political scientists David Richards and Ronald Gelleny explored the effects of economic globalization—measured by foreign direct investment, portfolio investment, trade openness, and IMF and World Bank structural adjustment policies—on what they termed “women’s status” or women’s ability to fully exercise specific rights found in the corpus of international human rights law. Overall, they found that “sixty-seven percent of the statistically significant coefficients indicated an association with improved women’s status.” Similar measures—along with additional indicators such as the number of McDonald’s restaurants and IKEA stores per capita—are associated with improvements in women’s decision-making power within households, freedom in movement and dress, safety from physical violence, ownership rights, and declines in son preference and the number of “missing women.”

Supporting these findings, political scientists Eric Neumayer and Indra de Soysa have shown that increased trade openness reduces forced labor among women and increases their economic rights, including equal pay for equal work, equality in hiring and promotion practices, and the right to gainful employment without the permission of a husband or male relative. Other studies reach similar conclusions. Analyzing global data from 1981 to 2007, Neumayer and de Soysa also found that increased trade openness improves both economic and social rights, including the right to initiate divorce, the right to an education, and freedom from forced sterilization and female genital mutilation.

A study published in the journal International Organization examined four measures of women’s equality: (1) life expectancy at birth, (2) female illiteracy rates among those over age 15, (3) women’s share of the workforce, and (4) women’s share of seats in parliament. The study found that international trade and investment led to improvements in women’s health, literacy, and economic and political participation. The evidence makes clear that economic freedom matters for the well-being of women everywhere (see Figure 5).

Figure 5. Economic freedom and gender equality

Source: Rosemarie Fike, Moving Closer to Gender Equality?, Women and Progress Report, Fraser Institute, 2023, p. 11.
Note: Countries are divided into four quartiles based on their Economic Freedom of the World Index (EFW) scores, from most to least economically free. The EFW measures the size of government, rule of law and property rights, currency stability, trade openness, and regulation. The bars show the average Gender Disparity Index (GDI) score for each quartile. The GDI measures women’s freedom of movement, property rights, freedom to work, and legal status. A higher GDI score indicates greater gender equality.

Unfairness is one of the most common criticisms leveled against commercial society, often accompanied by claims that it undermines democracy and fosters partiality. The evidence presented here suggests the opposite. Engaging in trade and market exchange teaches us to treat others more generously and impartially. The natural outcome of these values is the institutional protection of certain rights. Fair treatment for all becomes the name of the game. We begin to trust one another’s choices and to believe in our shared ability to build society together.

The Economist | Democracy & Autocracy

Global Democracy Is in Better Shape than You Think

“Grumbling about the health of democracy can sound abstract. But its decline shows up in wars, coups, contested elections and curbs on civil liberties across the world. EIU, our sister organisation, has tracked that slide since 2006. But the latest update to its democracy index suggests a modest break in the trend: the scores of nearly three-quarters of countries held steady or improved over the past year, and the global index rose by 0.02 points—one of the biggest increases since 2012…

The most improved region was Latin America and the Caribbean. After nine years of decline, scores rose in more than half the region’s countries, helped by higher political participation. That trend may happen elsewhere, too. Asia and sub-Saharan Africa have young populations, and recent protests in Nepal, Kenya and Madagascar have drawn large numbers into politics.”

From The Economist.

Blog Post | Democracy & Autocracy

More Reasons to Distrust Contemporary Feudal Fantasies

Romantic visions of feudal life bear little resemblance to the historical reality.

Summary: Recent praise for feudalism overlooks the grim reality of life under it. Far from being a system of mutual care, it was defined by hardship, hunger, and oppression for the many and insecurity even for the few in power. History shows that markets—not monarchs—turn self-interest into shared prosperity.


“Feudalism is so much better than what we have now. Because at least in feudalism, the leader is vested in the prosperity of the people he rules,” declared Tucker Carlson recently on The Tucker Carlson Show. His guest, writer Auron MacIntyre, agreed enthusiastically. Carlson added, “If all your serfs die, you starve.” McIntyre replied, “Yeah. There’s a true incentive to care for those people.”

The conversation sparked ridicule online, but it also reflected a broader, bipartisan trend. As Amanda Mull observed in The Atlantic, social media has grown “strangely nostalgic for life in the Middle Ages.” Samuel Matlack of The New Atlantis noted the puzzling frequency of the argument that the preindustrial past may have been superior to modernity.

Carlson’s reasoning implies that feudal lords, out of self-interest, nurtured the well being of their serfs. Yet the system he imagines has more in common with modern markets than with medieval Europe. Adam Smith explained the principle long ago: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” If customers are displeased, businesses collapse. Markets channel self-interest into mutual gain in ways that feudalism never could.

History makes that clear. Start with life expectancy. Even kings in the feudal era rarely lived into old age. Between the 11th and early 15th centuries, most European monarchs died young. Alfonso VI of Castile and León, who reached 79, was the outlier. Only a few others across England, Aragon, Germany, and France managed to live into their 60s. For most rulers, living to 70 was unattainable, and commoners fared far worse.

The average European life expectancy in the 11th century hovered around 25 years, driven down by staggering child mortality. Historian Richard Hoffmann notes that of 1,000 children who survived infancy, as many as 250 died by age seven. Only between 40 and 70 percent ever reached adolescence. In contrast, life expectancy in Europe today exceeds 80 years.

Nor were feudal peasant lives leisurely. A persistent myth claims medieval peasants worked less than modern people. This misconception stems from an early estimate by historian Gregory Clark, who suggested peasants worked only 150 days annually, an estimate he later revised upward to about 300. That number is higher than today’s 260 working days, even before accounting for paid holidays and vacation. Serfs’ labor was grueling and often damaging to their health. They were legally bound to the land, compelled to work their lord’s fields in addition to their own, and held few rights against mistreatment.

Another common misconception is that feudal societies provided security in exchange for labor. In reality, medieval Europe was marked by frequent famine, war, and violence. Crop failures were devastating, and local lords often demanded their share of harvests regardless of whether peasants had enough left to survive. Raids and small-scale wars were constant features of life, and the people at the bottom had little protection when armies swept through their fields. Unlike citizens in modern states who benefit from the rule of law and relatively impartial modern justice system, peasants depended on their lords for protection but had no meaningful recourse when those same lords were the source of oppression. For most peasants, daily life combined backbreaking labor with exposure to hunger, violence, and disease, far from the idyllic stability sometimes imagined today. (I explore these harsh realities in my forthcoming book, The Grim Old Days: An Introduction to the Preindustrial Past).

In Russia, where serfdom endured until 1861, abuse could be extreme. Serfs were frequently beaten or killed without legal consequence. The notorious case of Darya Saltykova, who tortured more than 100 of her serfs to death, was unusual only in that she faced punishment.

Material conditions were equally bleak. In 1300, the United Kingdom’s average income was about $1,657 in today’s dollars. That represented one of the wealthiest regions in Europe at the time. Even kings lived in poverty by modern standards, while ordinary peasants experienced deprivation that is difficult to imagine today.

When Friedrich Hayek titled his classic The Road to Serfdom, he did not mean it as praise. He used “serfdom” to warn against a return to systems that crushed freedom and prosperity. Carlson’s romantic vision of feudal life bears little resemblance to the historical reality.

Modern economic systems, for all their flaws, have delivered longer lives, safer working conditions, and unprecedented prosperity. The record of feudalism offers no reason to wish for its return.

This article was originally published at LA Progressive on 9/22/2025.

Blog Post | Democracy & Autocracy

Open Societies and Closed Minds | Podcast Highlights

Marian Tupy interviews Matt Johnson about historicism, progress, and how tribalism and the “desire for recognition” are testing the foundations of open societies.

Listen to the podcast or read the full transcript here.

Today, I’m very lucky to speak to Matt Johnson, who recently had a fascinating essay in Quillette titled “The Open Society and Its New Enemies: What Karl Popper’s classic can teach us about the threats facing democracies today.”

So Matt, could you tell us who Karl Popper was and what this big book is about?

Popper is mainly known for his scientific work, especially his ideas around falsifiability. He published a book called The Open Society and Its Enemies in 1945. He started writing it right after the Nazi annexation of Austria. It’s a very powerful and clarifying set of principles for anybody interested in liberal democracy and the broader project of building open societies around the world today.

So, why talk about liberal democracies and openness? It is our conjecture here at Human Progress that openness is very important. Have you ever thought or written about the connection between openness, liberal democracy, and the scope and speed of human progress?

That’s been a major theme of my work for a long time. I think there is a strong connection between the development of liberal democracy and open societies throughout the 20th century and human progress. Liberal democracy, unlike its authoritarian rivals, has error correction mechanisms built in. It allows for pluralism in society. It allows people to cooperate without the threat of violence or coercion. There’s also the economic element: Liberal democracy facilitates free trade and open exchange because it’s rule-based and law-bound, which are important conditions for economic development.

Human Progress also assumes that there is some directionality in history. We can say that living in 2025 is better than living in 1025 or 25 AD. But you begin your essay by raising the dangers of what Karl Popper called historicism, or a belief in the inevitability of certain political or economic outcomes. Can you unwind that for us? What is the difference between acknowledging the directionality of human history and historicism?

Popper regarded historicism as extremely dangerous because it treats human beings as a means to an end. If you already know what you’re working toward—a glorious worker state or some other utopia—then it doesn’t matter how much pain you have to inflict in the meantime. You’re not treating your citizens as ends whose rights must be protected; you’re treating them as raw material, as characters in this grand historical story.

The second concern is that historicism is anti-scientific because you can hammer any existing data into a form that fits your historicist prophecy.

Marx wrote that the unfolding of history is inevitable. In his view, leaders were just responsible for making that unavoidable transition easier. That’s the central conceit of historicism. If you take a Popperian view, you’re much more modest. You have to ground every policy in empirical reality. You have to adjust when things don’t work. You’re not just birthing a new paradigm you already know everything about. You don’t know what the future holds.

Stalin would say, anytime there was a setback, that it was all part of the same plan. It was all just globalist saboteurs attacking the Soviet Union, or it was some part of the grand historical unfolding that moving toward the dictatorship of the proletariat. There’s no sense in which new information can change the course of a government with historicist ideas.

That differs from a general idea of progress. We have a lot of economic data that suggests that people have escaped poverty at an incredible rate since the middle of the 20th century. We’ve seen democratization on a vast scale around the world. We’ve seen interstate relations become much more tranquil and peaceful over the past several decades. I mean, the idea of Germany and France fighting a war now is pretty much inconceivable to most people. That’s a huge historical victory, it’s unprecedented in the history of Western Europe.

So, there are good reasons to believe that we’ve progressed. And that’s the core difference between the observation and acknowledgment of progress and historicism, which is much less grounded in empirical reality.

Right. The way I understand human progress is backward-looking. We can say that we are richer than we were in the past. Fewer women die in childbirth. Fewer infants die. We have fewer casualties in wars, et cetera. But we don’t know where we are going.

Yeah, absolutely. There were moments during the Cold War that could have plunged us into nuclear war. It makes no sense to try to cram every idea into some existing paradigm or prophecy. All we can do is incrementally move toward a better world.

This brings us to another big name in your piece: Frank Fukuyama. Tell me how you read Fukuyama.

Fukuyama is perhaps the most misread political science writer of our time. There are countless lazy journalists who want to add intellectual heft to their article about some new crisis, and they’ll say, “well, it turns out Fukuyama was wrong. There are still bad things happening in the world.” That’s a fundamental misreading of Fukuyama’s argument. He never said that bad things would stop happening. He never said there would be an end to war, poverty, or political upheaval. His argument was that liberal capitalist democracy is the most sustainable political and economic system, that it had proven itself against the great ideological competitors in the 20th century, and that it would continue to do so in the future.

I think it’s still a live thesis, it hasn’t been proven or disproven. I suppose if the entire world collapsed into totalitarianism and remained that way, then yeah, Fukuyama was wrong. But right now, there’s still a vibrant democratic world competing against the authoritarian world, and I think that liberal democracy will continue to outperform.

You use a phrase in the essay I didn’t quite understand: “the desire for recognition.” What does it mean, and why is it important to Fukuyama?

The desire for recognition is the acknowledgment that human desires go beyond material concerns. We want to be treated as individuals with worth and agency, and we are willing to sacrifice ourselves for purely abstract goals. Liberal democracies are the only systems so far that have met the desire for recognition on a vast scale. Liberal democracies treat people as autonomous, rational ends in themselves, unlike dictatorships, which treat people as expendable, and that’s one of the reasons why liberal democracy has lasted as long as it has.

However, there’s a dark side. Because liberal democracy enables pluralism, people can believe whatever they want religiously and go down whatever political rabbit holes they want to. And, oftentimes, when you have the freedom to join these other tribes, you find yourself more committed to those tribes than to the overall society. If you’re a very serious Christian nationalist, you might want society organized along the lines of the Ten Commandments because that, in your view, is the foundation of morality. So, pluralism, which is one of the strengths of liberal democracy, also creates constant threats that liberal democracy has to navigate.

I noticed in your essay that you are not too concerned. You note that democracy is not in full retreat and that, if you look at the numbers, things are not as dire as they seem. What is the argument?

If you just read annual reports from Freedom House, you would think that we’re on our way to global authoritarianism. However, if you take a longer historical view, even just 80 years versus 20 years, the trend line is still dramatically in favor of liberal democracies. It’s still an amazing historical achievement. It’s getting rolled back, but in the grand sweep of history, it’s getting rolled back on the margins.

Still, it’s a dangerous and frightening trend. And you’re in a dangerous place when you see a country like the United States electing a president who is expressly hostile toward the exchange of power after four years. So, the threats to democracy are real, but we need to have some historical perspective.

So, we are more liberally democratic than we were 40 years ago, but something has happened in the last 15 to 20 years. Some of the trust and belief in liberal democracy has eroded.

How is that connected to the issue of recognition?

In the United States, if you look at just the past five or six years, there has been a dramatic shift toward identity politics, which is a form of the desire for recognition.

On the left, there was an explosion of wokeness, especially in 2020, where there was a lot of authoritarianism. People were shouted down for fairly anodyne comments, and editors were churned out of their roles. And on the right, there’s this sense that native-born Americans are more completely American than other people. All of these things are forms of identity politics, and they privilege one group over another and drive people away from a universal conception of citizenship. That’s one of the big reasons why people have become less committed to pluralism and the classic American idea of E pluribus unum.

Have you ever thought about why, specifically after 2012, there was this massive outpouring of wokeness and identity politics? Some people on the right suggest that this is because America has begun to lose religion, and, as a consequence, people are seeking recognition in politics.

I think it could be a consequence of the decline of religion. I’ve written a lot about what many people regard as a crisis of meaning in Western liberal democracies. I think, to some extent, that crisis is overblown. Many people don’t need to have some sort of superstructure or belief system that goes beyond humanism or their commitment to liberalism or what have you.

However, I also think that we’re inclined toward religious belief. We search for things to worship. People don’t really want to create their own belief systems; they would rather go out there and pick a structure off the shelf. For some, it’s Catholicism or Protestantism, and for others, it’s Wokeism or white identity politics. And there were elements of the woke explosion that seemed deeply religious. People talked about original sin and literally fell on their knees.

We also live in an era that has been, by historical standards, extremely peaceful and prosperous, and I think Fukuyama is right that people search for things to fight over. The more prosperous your society is, the more you’ll be incensed by minor inequalities or slights. The complaints you hear from people today would be baffling to people one hundred years ago.

I also think the desire for recognition gets re-normed all the time. It doesn’t really matter how much your aggregate conditions have improved; when new people come into the world, they have a set of expectations based on their surroundings. And it’s a well-established psychological principle that people are less concerned about their absolute level of well-being than their well-being relative to their neighbors. If you see your neighbor has a bigger house or bigger boat, you feel like you’ve been cheated. And this is also the language that Donald Trump uses. It’s very zero-sum, and he traffics in this idea that everything is horrible.

You raised a subject that I’m very interested in, which is the crisis of meaning. I don’t know what to make of it. Everybody, including people I admire and respect, seems to think there is a crisis of meaning, but I don’t know what that means.

Is there more of a crisis of meaning today than there was 100 years ago or even 50 years ago? And what does it really mean? Have you thought about this issue?

You’re right to question where this claim comes from. How can people who claim there is a crisis of meaning see inside the minds of the people who say that they don’t need religion to live a meaningful life? There’s something extremely presumptuous there, and I’m not sure how it’s supposed to be quantified.

People say, well, look at the explosion of conspiracism and pseudoscience. And there are people who’ve become interested in astrology and things like that. But humanity has been crammed with pseudoscience and superstition for as long as we’ve been around. It’s very difficult to compare Western societies today to the way they were a few hundred years ago when people were killed for blasphemy and witchcraft.

And look at what our societies have accomplished in living memory. Look at the vast increase in material well-being, the vast improvements in life expectancy, literacy, everything you can imagine. I find all that very inspiring. I think if we start talking about democracy and capitalism in that grander historical context, then maybe we can make some inroads against the cynicism and the nihilism that have taken root.

The Human Progress Podcast | Ep. 61

Matt Johnson: Open Societies and Closed Minds

Marian Tupy speaks with writer and political thinker Matt Johnson about historicism, progress, and how tribalism and the “desire for recognition” are testing the foundations of open societies.