The Strait of Hormuz and the price of mercantile war

The New York Post reports that President Trump has demanded the Strait of Hormuz be reopened, called off what he described as a massive military operation, and offered Iran what he terms a 'last chance' to conclude a deal. I will not pretend to remember the sequence of events that brought us to this moment — I died in 1790, and the Persian Gulf was then a remote theatre of Company trade, not the central artery of global oil commerce it has since become. But the structural question before us is one I know intimately: what happens when a narrow passage between two coasts becomes the toll-gate through which the commerce of many nations must pass?

In The Wealth of Nations I observed that the defence of trade is a legitimate and primary function of the sovereign. The carrying of goods across open water is not merely a private convenience; it is the material condition on which the division of labour among nations depends. When that passage is threatened — whether by a pirate, a hostile navy, or a state that has concluded it can extract tribute by threat of closure — the cost falls not on any single merchant but on every consumer in every country whose supply chain runs through that water. The consumer, as I have always insisted, is the person whose interest is most consistently neglected in these calculations.

There is, however, a danger I must name plainly, because it is the oldest error in political economy: the confusion of national commerce with national power, and the willingness of those who hold power to use the language of free trade while practising something rather closer to mercantile coercion. If the United States secures the reopening of the Strait on terms that advantage American oil exporters over their rivals, that is not free trade — it is a protected passage dressed in the rhetoric of liberty. The institutional question is whether the framework that governs the Strait serves all trading nations equally under law, or whether it serves the strategic interest of whichever sovereign commands the largest fleet.

On the question of war itself, I am cautious and direct in equal measure. War is, as I argued, the most wasteful of all public expenditures — it destroys the capital that the labour of generations has accumulated, and its costs are invariably hidden from the public through debt rather than present taxation. A negotiated settlement that restores free passage is, from the standpoint of every consumer of goods that moves through that waterway, vastly preferable to a military campaign whose expenses will be borne by people who had no voice in its commencement. That said, the capacity for credible defence is itself a public good; I never argued that a sovereign should be defenceless. I argued only that the sovereign should be honest about the cost.

What I would ask of those who invoke my name in defence of whatever policy they prefer is this: look past the drama of ultimatum and counter-ultimatum to the institutional question underneath. Who governs the passage of ships through international straits? By what rule, enforced by what authority, made transparent to what public? A world in which a single state can close a strait at will, and another state can reopen it by threat of 'decapitation' — to use the word reported by the New York Post — is not a world governed by the rule of law. It is a world governed by force, in which commerce is a hostage rather than a foundation. The moral philosopher in me finds that intolerable; the political economist in me notes that it is also, in the long run, expensive beyond calculation.