Skip to main content

Free Trade Again

So I've been writing a bit more than often on trade issues. One important conclusion of a paper I co-authored a few years ago was that: "absolute advantage, determined ultimately by low costs of production and/or depreciated currencies, seems to be far more important than comparative advantage in the determination of trade patterns. Developing countries that pursue 'neo-mercantilist' policies to enhance the competitive position of their firms may in fact be doing something rational, leading to higher rates of growth and higher levels of productivity that would imply higher living standards for their population. Also, the avalanche of financial crises in the 1990s, shows that the prescriptions of pop liberals were unfounded; and that balance of payments disequilibria are seldom benign and self-adjusting. Crises are cumulative and the costs of adjustment severe. The Asian crisis and the more recent one in Argentina make the point very clear." Interestingly enough since the Argentine crisis in 2001-2, developing countries have grown considerably faster, and rebounded from the Great Recession pretty fast. It has been the advanced economies, that should not have problems with their balance of payments that got stuck. But the causes for that are fundamentally political. The full paper is here (the title should have said only Principle in the singular). Another paper with similar arguments here.

Comments

  1. Very nice paper with Jesus Felipe.

    Also, where does the second one appear?

    ReplyDelete
  2. A book called "Political Economy and Contemporary Capitalism: Radical Perspectives on Economic Theory and Policy," edited by Dawn Saunders, Ron P. Baiman and Heather Boushey, published by Sharpe in 2000.

    ReplyDelete

Post a Comment

Popular posts from this blog

A few brief comments on Brexit and the postmortem of the European Union

Another end of the world is possible
There will be a lot of postmortems for the European Union (EU) after Brexit. Many will suggest that this was a victory against the neoliberal policies of the European Union. See, for example, the first three paragraphs of Paul Mason's column here. And it is true, large contingents of working class people, that have suffered with 'free-market' economics, voted for leaving the union. The union, rightly or wrongly, has been seen as undemocratic and responsible for the economics woes of Europe.

The problem is that while it is true that the EU leaders have been part of the problem and have pursued the neoliberal policies within the framework of the union, sometimes with treaties like the Fiscal Compact, it is far from clear that Brexit and the possible demise of the union, if the fever spreads to France, Germany and other countries with their populations demanding their own referenda, will lead to the abandonment of neoliberal policies. Aust…

A brief note on Venezuela and the turn to the right in Latin America

So besides the coup in Brazil (which was all but confirmed by the last revelations, if you had any doubts), and the electoral victory of Macri in Argentina, the crisis in Venezuela is reaching a critical level, and it would not be surprising if the Maduro administration is recalled, even though right now the referendum is not scheduled yet.

The economy in Venezuela has collapsed (GDP has fallen by about 14% or so in the last two years), inflation has accelerated (to three digit levels; 450% or so according to the IMF), there are shortages of essential goods, recurrent energy blackouts, and all of these aggravated by persistent violence. Contrary to what the press suggests, these events are not new or specific to left of center governments. Similar events occurred in the late 1980s, in the infamous Caracazo, when the fall in oil prices caused an external crisis, inflation, and food shortages, which eventually, after the announcement of a neoliberal economic package that included the i…

What is the 'Classical Dichotomy'?