In the interconnected world economy, the flow of goods, services, and capital depends heavily on the freedom to trade and the flexibility of currencies.
Exchange controls, often introduced to shield domestic industries or stabilize currencies, have historically been the first step toward economic authoritarianism. By restricting foreign currency transactions, governments limit individuals’ and businesses’ freedom to engage internationally, leading to quotas, tariffs, and bureaucratic interference.
Floating exchange rates, by contrast, allow currency values to adjust automatically to market forces. This flexibility prevents rigid imbalances and reduces political tensions. For example, when a country faces a trade deficit, its currency depreciates, making exports cheaper and imports more expensive, naturally correcting the imbalance without government intervention.
Unilateral free trade—removing tariffs and barriers regardless of other countries’ actions—maximizes economic freedom and growth. While critics fear losing competitive advantages, evidence shows that openness fosters innovation, efficiency, and cooperation.
Want to explore more insights from this book?
Read the full book summary