Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
By coincidence I am slowly reading Gomory and Baumol's Global trade and conflicting national interests (Cambridge, Mass. c2000), and at least cursorily Chang's Bad Samaritans ([London, 2007] New York, 2008). Both are pertinent and make worthwhile reading. Chang makes the point that current trade and developmental policies are fundamentally flawed, and that this is, in principle, well known. He writes convincingly and engagingly, drawing on his personal experiences as a Korean whose life parallels the rise of the Korean economy, as well as on a wealth of historical sources, sometimes quite funny ones. He makes it quite clear, nevertheless, that we, the rich countries, are not acting in good faith towards the developing world, a fact that needs to be more widely propagated. – Highly recommended.

Gomory/Baumol show that Ricardo's argument is predicated on conditions of decreasing marginal productivity and a small capital base that prevailed in agrarian societies and thus fails for modern economies. In lieu of one global equilibrium, that cannot be improved, there are as many equilibria as there are (historically contingent) distributions of industries among countries. Thus the Invisible Hand lost its bearing. QED

In addition they show that international trade may leave a country worse off than no trade at all (!), and that while a degree of development is clearly beneficial to all, there is a rivalry between the  more developed countries, a zone of conflict, where the maximum total output (income) requires mutual consideration and restraint.
[But beware, I'm only at p.40.]

Now, with Ricardo debunked, perhaps one could reframe the Free Trade issue?

  • Is the whole universe necessarily the optimal size of an economic area?

  • Is the current incongruence between political and economic organisation a good idea?

  • Is there a limit to the inhomogeneity that the politico-economic order can accommodate?

by Humbug (mailklammeraffeschultedivisstrackepunktde) on Thu Jul 24th, 2008 at 12:27:58 PM EST

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