Carey considered himself a true disciple of Adam Smith, and he never endorsed the mercantilist premises that Smith had famously attacked—the idea that national wealth can only be increased through a positive trade balance, that is, by maximizing exports and minimizing imports. Carey fully embraced Smith’s insight into the productivity gains created by the division of labor. Yet he resisted the conclusion that seemed to follow when applying Smith’s insight to international trade: Protective tariffs artificially divert capital and labor away from the productive efforts in which the nation enjoys a comparative advantage to pursuits that are inevitably less efficient. Trade between nations, in this account, enriches both in precisely the same way that trade between a butcher and baker benefits both.
Carey, by contrast, sharply distinguished between internal “commerce” and external “trade” as fundamentally different social phenomena. “Commerce” within a community is almost always salutary, an extension of the associations and collaborations that are essential to all human flourishing. But “trade” between separate communities, particularly communities with drastically different economic, legal, and cultural institutions, is usually predatory and exploitative. Carey pointed to the slave trade and the Opium Wars as emblematic examples of external trade’s predatory nature.
The 19th century is rife with glaring illustrations of how different trade between societies at different levels of economic diversification and specialization looks from commerce within those same societies. Carey’s basic insight is that economic principles are not as timeless or immutable as the laws of physics. They are historical, which is to say they develop organically with the society in which they operate. The phrase “Indian giver” is itself a relic of the fact that Native Americans and Europeans did not understand trade exchanges in the same way. The inevitable result was misunderstanding and violence.
The key concept in Carey’s analysis was “association.” By association he meant the fruitful combination that results from the division of labor and the union of men. “The tendency of man is to combine his exertions with those of his fellow men,” Carey wrote. But these exertions are not exclusively commercial or material. They are cultural, political, intellectual, and moral—a collective striving from scarcity, savagery, and ignorance toward plenty, decency, and enlightenment.
The crucial point for Carey is that commercial networks are not separate from the other social bonds that create a community. People who belong to the same culture, obey the same laws, and rely on one another for their common defense should also be able to provide one another with all the material necessities of life. These bonds are mutually reinforcing. Interdependence is the glue of community. A heavy reliance on external trade corrodes the internal social harmony on which progress depends.