The Theory of Comparative Advantage

The International Economics Study Center ^ | Unknown | Steven Suranovic

[WRhine]

It does not call for anyone to "meekly" do anything, but it does create a positive business environment as well as illustrating that one nation can achieve economic gains even if they are inferior on every level in their production capacities with other countries.

Implicit throughout your reasoning is the assumption that every country embraces our values, our business customs, our beliefs in trade and that they will play by our rules. The reality is that most countries, particularly in Asia, reject free trade, practice protectionism and are, unlike us, consumed with building UP the industries they deem important with the absolute intention of dominating those industries. Again, this is completely outside the notions and assumptions of comparative advantage.

China, for example, proves this on a daily basis. They are not interested, long term, in being a supplier of components for higher end U.S. manufacturing. They want and seek, to have firm top to bottom control of their OWN industries and will do whatever they can to achieve this, including pirating patents, copyrights and engaging in industrial espionage. And Oh, when it comes to American Made products that have comparative advantages what does China do? They put up trade barriers or, as often the case, require that the American Company build its facilities in Mainland China or No Deal.

The notion that America benefits by freely collaborating with a nation that practices such merticantism and trade protectionism with the ever objective of taking over critical American industries is just plain naive. Our massive trade deficit with China (and others) should to testament that.

In the end, Free Trade only works when nations have compatible trade laws, customs, and standards of living.

For all the wishful thinking about China and that they are moving away from their statist/communist form of government, many people seem to forget that it was just 3 years ago that the ChiComs threatened to Nuke LA.

This is not to say we should not trade with China or any other nation for that matter. It is to say that when dealing with 3rd world nations, particularly collectivist, closed-end countries, trade safeguards have to put in place to assure critical technologies, developed in the U.S. by Americans, are not wantonly given away that could have grave repercussions in reducing our military and technological superiority. It also means that we should not reward China for its slave labor practices and its absence of any basic labor laws and environmental regulations (to name a few) by letting them use these huge cost advantages in putting U.S. industries out of business.

Trade in the Real World is not explained well by some Warm Fuzzy concepts that ignore the history of nations and presumes wars are a thing of the past.

[CrucifiedTruth]

Again, no one, including Adam Smith, is suggesting that the manufacturing of our weapons, and defense systems, can be offshored or even outsourced, that's suicidal.
All the points contained apply to consumerism, not national defense.

Wrong. The Soviet Union failed because it developed only national defense and for consumer goods relied largely on imports. They could not develop any other industries because automation was a big NO-NO. See, the worker class was the source of political power. Stagnating consumer industries and suppressed innovation led to the fallout. But we are seeing the same here. Manufacturing feeds engineering with problems and money, that is what fuels science in turn. The US is starting to look quite like the SU before the fallout - an eroded manufacturing base with engineering and science employed only by the military. It ain't pretty.

[Willie Green]

Karl Marx said that free trade was destructive, and would lead the world to communism...Karl Marx's Soviet Union self destructed Willie, not that you've noticed.
I don't think his theories worked out as well as he would have hoped they would.
Do you?

C'mon, Louie...
I gave you an easy one to rant about...
I'm eagerly awaiting your explanation.
All my research indicates that U.S. businesses held significant investment interests in Cuba and enjoyed the support of the Batista government.
How could Castro ever possibly come to power when Cuba had all that "comparative advantage" working in it's favor?

[CrucifiedTruth]

America will fall because leftist greed mongers oppose paying for training so that people can be creative (public schools love affair with evolution convincing children they have no greater purpose than to be a corralled animal "school to work"). Recognizing God given creativity propels people to reach for new levels of production. America's greatest contribution to history! The "Source" of creativity must be acknowledged in order for a nation to continue to progress.

Merits repeating.

[Luis Gonzalez]

"Is "protectionism and nativism unbound" what gave Castro to Cuba?"

Absolutely Willie, Castro did not promise to nationalize industry to get into power, he did the exact opposite.

There were no economic issues in Cuba, other than in your Marxist theories...lawyers (Fidel), and doctors (Che), did not rise up in the best interest of the working class, they did it in their own best interest.

Fidel Castro was a known communist since the 1940's Willie.

Of course, you will bad mouth America, and embrace the communist revisionist lie that American industry was at fault for abusing Cuba's proletariat (trying to use words you're familiar with here), and that this "abuse" gave rise to Castro's revolution.

You're just another leftist fool romanticizing Castro.

[WRhine]

I wonder if the Japanese whine about outsourcing going on in American Honda.

Why should they? Japan manufactures the vast majority of the high value parts and components that goes into their cars including most all of the engineering. Their so-called auto manufacturing plants in the U.S. are little more than assembly shops designed to get around Reagan's threatened tariffs in the 80s. They aren't stupid.

[Luis Gonzalez]

"The Soviet Union failed because it developed only national defense and for consumer goods relied largely on imports."

Excuse me?

The Soviet Union failed because they embraced more of Marx's theories, just like Willie Green does.

The main fault with the Soviet system was Marx's Labor Theory of Value.

[Luis Gonzalez]

That was not only easy, but you showcased your communist beliefs and your absolute ignorance.

You've bought the communist lie, hook, hammer, and sickle.

[Willie Green]

There were no economic issues in Cuba, other than in your Marxist theories...lawyers (Fidel), and doctors (Che), did not rise up in the best interest of the working class, they did it in their own best interest.

Gee Louie. How could a doctor and a lawyer gain enough popular support to conduct a revolution if "there were no economic issues in Cuba"???

ROTFLMAO!!!

[Tribune7]

good article. thanks for the post. bump for later.

[CrucifiedTruth]

Karl Marx said that free trade was destructive, and would lead the world to communism...Karl Marx's Soviet Union self destructed Willie, not that you've noticed.

Marx was right. Marx studied the weaknesses of capitalism and was right on that. The commie bus-turds took control over half of the Earth using his teachings. Killed 70 million people. One cannot do that with a wrong theory. The mad pigs were suckered on what to do next though. The commie utopia was some mix of terror and extremely monopolistic economy - but that's another story. The truth is, lost economic independence can kill a country. There is a reason why the multiculturalists want to remove farmer subsidies. When we cannot feed ourselves a simple disruption of trade will cause riots and create revolutionaries. The financiers who control the trade may cause such disruption, the terrorists may cause it, the prevailing importer may cause it. A huge security risk.

[reg45]

You don't need an engineer to build a bridge, you need bridge builders to build a bridge.

Bridges can be built without engineers, but they can't be built without bridge builders (labor).

What a maroon! Yes labor can build a bridge without engineers, but it will not have much capacity and will probably fall down after a short time. Your bible, Das Kapital is suitable only for toilet paper!

[Luis Gonzalez]

The issues were political in nature Willia.

They did it by using the same tactic that your hero Karl Marx used...they lied.

They promised to overthrow Batista, restore the constitution, and set up free elections.

It had nothing to do with the economy.

Once they seized power, they grabbed all the guns, "nationalized" industry, then outlawed private property, private enterprise, and religion.

Just like your hero Karl Marx would have wanted them to.

Willie, Marx said our system would lead to our eventual downfall, and the our take over by his superior system.

Where is Marx's communist Utopia now Willie?

[CrucifiedTruth]

Instead of trumpeting fuzzy slogans, please, read what I said again. It's got a lot of real value in it. I repeat it here for your convinience.

The Soviet Union failed because it developed only national defense and for consumer goods relied largely on imports. They could not develop any other industries because automation was a big NO-NO. See, the worker class was the source of political power. Stagnating consumer industries and suppressed innovation led to the fallout. But we are seeing the same here. Manufacturing feeds engineering with problems and money, that is what fuels science in turn. The US is starting to look quite like the SU before the fallout - an eroded manufacturing base with engineering and science employed only by the military.

[Luis Gonzalez]

You are the moron here...look up, your friend Willie Green is nearly cannonizing Marx.

The point is that bridges can be built without engineers, but they can't be built without bridge builders.

Nothing Marxist about that, just a fact.

[Luis Gonzalez]

Our problem is that technological advances and innovation are increasing our productivity to a point where less people can accomplish more in less time.

We have led the world ion innovations, so I don't see where you get this idea that we are stagnant, we created and drove the technology boom just this past decade.

"...an eroded manufacturing base..."

We are seeing increases in industrial productivity not seen since the late 40's.

Don't let the facts get in your way here.

[CrucifiedTruth]

Luis doesn't know what age we are in. He doesn't read the tech columns either. But I digress, the issue is not labor versus engineering, the issue is national economic independence. Having the production here is the only way to have thriving labor, engineering and science. They are not separate, although labor is less and less in demand among the three. But people can retrain for any role in production - if only there is production to speak of.

[bondserv]

Strange how some view national sovereignty as communistic. It is always prudent to consider the principles of those with which we associate (trade), no matter the material cost. Trusting God is lost on those who rebel against Him. We have a record of Man's failures, and God's remedies, but most choose to ignore the Biblical guidance.

Homeschooling is bringing back the apprenticeship underpinnings of American society. Our future leaders will be home-schooled people and private schooled people, who understand individual responsibility, and how to best make use of creative freedom provided by the model of "Freedom in Christ".

The principles of scripture are completely neglected on most of our youth. The results will be future sociologists amazed at the failings of the state schools (and their worship of science), as opposed to the successes of private and home schools that honor God's word. The writing is on the wall.

[Willie Green]

The issues were political in nature Willia.
They promised to overthrow Batista, restore the constitution, and set up free elections.

Why would the Cuban peasants consider these to be important issues if they weren't already severely discontent with their economic situation?

"In general, the art of government consists in taking as much money as possible from one class of citizens and to give it to the other."

-- Voltaire - "Philosophical Dictionary" (1764)

[Luis Gonzalez]

"Marx was right."

That's an unbelieveable thing to read in a conservative American site.

In your world then, so was Hitler, Pol Pot, and Mao.

And our Founders were wrong.

You need help.