HEW HYPERTEXT TOPIC: Comparative Advantage vs. Managed Trade and Delinking

 Editor: Geoff Schneider 

(1) A PowerPoint presentation lays out the basic issues with respect to the Theory of Comparative Advantage, and some of the restrictive assumptions that cause problems when it is applied to the real world.

(2) Readings (Including Heterodox Theoretical Content):

• Dollars and Sense, Real World Globalization, various articles; especially “The ABCs of the Global Economy,” “The ABCs of Free-Trade Agreements,” and “Who Gains from Trade.”
• Greider, William. "Why The Global Economy Needs Worker Rights," Working USA. May/June 1997, pp.32-44. 
• Kuttner, Robert, "Managed Trade and Economic Sovereignty." Economic Policy Institute, 1989.

On Delinking

• Amin, Samir. Delinking: Towards a Polycentric World. St Martin's Press, 1990, ISBN 0862328039. ("Delinking is not synonymous with autarky, but rather with the subordination of external relations to the logic of internal development ... Delinking implies a "popular" content, anti-capitalist in the sense of being in conflict with the dominant capitalism, but permeated with the multiplicity of divergent interests.")
• Bond, Patrick, "Global Economic Crisis: A View From South Africa," Journal of World-Systems Research, Vol V, 2, 1999, 413-455.

(3) Articles:

• Longworth, R.C., “Democracies Paying the Price: Globalization Survey Reveals U.S. Corporations Prefer Dictatorships.”  Chicago Tribune, November 19, 1999.  Available on the web at http://www.shareholderpower.com/bucksinsteadofbulletsorbombsA.htm. 

(4) Films (see Film Reviews for details regarding the films below):

• Free Trade Slaves (Sweatshops in free trade zones, and their human and environmental impact.  Also see When Children Do the Work on this topic.)
• Trading Democracy (Bill Moyers on NAFTA and its ability to usurp US laws and regulations.)
• Globalization and Human Rights (Investigates whether or not globalization undermines basic human rights).
• Cappuccino Trail: The Global Economy in a Cup (Notes the difficulties Third World countries have when they specialize, and argues for “Fair Trade” instead of “Free” Trade. 

(5) Internet Links:

• Global Economic News: http://www.btinternet.com/~pae_news/GEN.htm (Post-Autistic Economics Network.)
• United Nations News Service: http://www.un.org/News/
• Institutionalist Theories of International Trade (Afeemail discussion): http://afit.cba.nau.edu/Word/Discussions/AfeemailDiscussionInternationalTrade1998.doc 

(5) Exercises:

• Exercise 1: Institutionalist vs. Neoclassical Theories of Trade.  Synopsis: Explain the theory of comparative advantage as spelled out in a standard textbook. Pay careful attention to the assumptions behind the theory of comparative advantage.  Then read about “Institutionalist Theories of International Trade” on the website listed above.  Respond to the discussion questions at the beginning of that document.
• Exercise 2: International trade and sweatshops.  Synopsis: the theory of comparative advantage dictates that countries should specialize and produce those goods which they can make for the lowest opportunity cost.  For 3^rd world countries, this often means producing clothes in sweatshops.  Do some research on where the clothes you own were made.  For 1 garment, try and find out what factory in what country made your clothes, and what the conditions were like in that factory.  How responsive was the company that made your clothes to your inquiry?  Does any of this undermine the theory that all countries (and the citizens of those countries) benefit from trade? 

(6) Key tables and charts:

• US Exports and Imports, Balance of Trade, 1970-1998.