Migeru: Also, Ricardo did not envisage the ability of capital to move freely in pursuit of absolute advantage. His was a world of trade, not of foreign direct investment and offshore funds.

Colman: The consequence of that is?

Migeru: That free trade is no longer win-win for the countries involved, since the least efficient country is decapitalized and its economy ruined.

Colman: Right. Thanks.

I'd like to know a little bit more about exactly how this would work. So, farther down there is this exchange:

dvx: Perhaps this is slightly OT (and somewhat naive), but has anyone ever actually verified comparative advantage empirically?

As I understood it, comparative advantage was the reason why globalization was going to make us all so much more prosperous (or at least boost employment in those sectors that enjoy the comparative advantage). Given the actual outcome, I can't avoid wondering if this assumption is (still) warranted.

Migeru: That is assuming that what globalization does is encourage us to divest from the sectors where we are at a comparative disadvantage and invest in the sectors where we have a comparative advantage.

What is actually happening is that capital is divested from our entire economy and invested in the other country to produce goods for our consumption. We don't produce jack shit for the Chinese market, and we don't buy the products that China used to produce before. Our capital is using Chinese resources to produce our products, sort of like a virus subverts a host cell for its own purposes. Supposedly Europe has a comparative advantage in high-quality, low-volume goods, made for the Western markets.

So, globalization with outsourcing is not Ricardian comparative advantage, it's something else.

dvx: Thanks for the clarification!

Migeru: Now you need a real economist to answer your question.

And that's exactly what I am looking for. Has any real economist written about these things?

(And I'd like to add that I do not agree with us not exporting anything useful to China, as the current boom  in Sweden is partly driven by exports to places like China of pretty advanced industrial products like trucks, mining equipment, pipes, compressors, generators, power line solutions, high quality steels, and also raw materials like iron ore and copper. I even believe we have a trade surplus with China.)

Migeru: We are assuming that what needs to happen is that labour needs to move to where the capital is, and so that mobility of labour is the limiting factor. This is consistent with the (now obsolete) system where capital was tied to its home country.

Ricardian comparative advantage makes sense when goods are more mobile than both capital and labour. When capital is the most mobile (as it is today, and the margin seems only likely to increase with peak oil) you have a different mechanism at play.

What mechanism? Where can I read about it?

Peak oil is not an energy crisis. It is a liquid fuel crisis.