The toll no merchant agreed to pay

The BBC reports this morning that Iran has claimed to close the Strait of Hormuz — a waterway through which a substantial share of the world's traded oil passes — while simultaneously, the United States disputes that claim and diplomats from both nations sit down to talk in Switzerland. Whatever the precise facts of whether the strait is truly shut, the episode instructs us in something I argued at length in The Wealth of Nations: the gains from exchange are not a gift of nature. They depend, at every moment, on the security of the passages — literal and legal — through which goods travel.

Consider what the strait actually is in economic terms. It is not owned by the merchants who use it. It is not maintained by the consumers who depend on it. It is a geographic chokepoint whose openness is, in the language I would have used, a public good — one whose benefits are enjoyed by all and whose protection cannot be left to any single private interest. When it closes, the cost is borne not by the sovereign who ordered it shut, nor by the negotiators in their Swiss resort, but by the workman in Manchester or Mumbai who pays more to heat his home, and the farmer who pays more to fuel his machinery, and ultimately the consumer who pays more for nearly everything.

This is the mercantilist error in its most concentrated form. Those who think of trade policy as a contest between nations — in which one side wins what the other loses — fail to see that the loser of a strait closure is not a rival government. It is ordinary people on every shore, most of whom had no voice in the dispute. I argued in The Wealth of Nations that restrictions on trade, whether imposed by chartered monopolists or by sovereign decree, are in practice a tax levied on the many for the benefit or the strategy of the few. A closed strait is the most brutal version of that tax: blunt, indiscriminate, and falling heaviest on those least able to bear it.

I do not pretend to know the engineering of modern petroleum markets, the architecture of futures contracts, or the precise military calculus at work here — these are matters beyond what I could have known in my own century, and I will not feign expertise I lack. But the institutional question I can ask is the one that always matters: what framework disciplines this exchange? The answer, in the case of international waterways, is imperfect and fragile: a combination of treaty, naval deterrence, and diplomatic convention that requires constant maintenance. The talks in Switzerland, whatever their outcome, are precisely the kind of institutional labor that makes commerce possible — unglamorous, slow, and absolutely necessary.

There is a moral dimension here that I think is too easily overlooked. The Theory of Moral Sentiments argued that the capacity for sympathy — for imagining oneself in another's position — is the bedrock on which all honest dealing rests. When a sovereign uses a commercial passage as a weapon, it treats the distant consumer not as a fellow human being with legitimate interests but as an abstraction, a pressure point. That is a failure not merely of policy but of the moral imagination. The diplomats in Switzerland are, at their best, attempting to restore the conditions under which sympathy can function — in which both parties acknowledge that the other has something real at stake. That is what negotiation, properly understood, is for. The alternative is that the world's commerce remains hostage to a geography that no one chose and a dispute that most people had no hand in making.