The last word in the battle over Trade may be here. Ian Fletcher has vocalized most of my misgivings about Free Trade, though I will state my main complaint about Free Trade consists of the tendency of Wages to flow downwards to the lowest common denominator, with the corresponding loss of Standard of Living. Labor Gains, hard earned in one economy, are destroyed by simple purchase from other countries where such Gains were never realized. Labor in both nations are left without the Income which they should be earning. I should examine Fletcher’s rationales and explain.
No Trade is sustainable in the long-run. It is only dependent on the length of Time it takes for that lack to appear. Trade Advantage only lasts as long as the current level of Technology, and Technology itself has only the Shelf-Life of Capital, which at most is about 30 years. New Capital will always flow to the areas of greatest potential Profitability, which is almost never in the areas of direct competition with older Technology still in use. This tendency is also required to make the Stopler-Samuelson theorem work to full advantage. There is never developed Job replacement under conditions of Free Trade, and negative externalities are never computed as subtraction from the gains of Free Trade; something which has never be proven effectively as yet. The positive externalities are even trickier; Industries are robbed for Capital which flows to the new higher-Profit industries, creating higher Wages in the high-Profits new industries while Wages are suppressed in the older industries, all within the Context of All competing with the influx of new low-Wage labor from foreign sources through Imports; this relatively the only long-term capacity to pay for the purchase of Exports.
Fletcher possibly explains the problems with Ricardo’s Comparative Advantage far better than I could. The thing to remember consists that the problem with Ricardo’s theorem all revolve around the mobility of resources; none of which move perfectly, and of those which temporarily do move perfectly, they preform to create a vacuum within the shifting economy with bulge in the recipient economy. Both economies suffer from adverse alterations in Wages and Profits. My final Statement would be that Perfect Competition can never exist–even in the Short-Run. As long as there is transition from older Technology to newer Technology with competition between the Two, there can never be full production; Ricardo’s Comparative Advantage can never work fully because of the Costs of Transition, and the life of Capital insists that the Costs of Transition never cease. Advocates of Free Trade would insist that Comparative Advantage exceeds those Costs of Transition, but I would contend they do not when found operating across the entire cycle of Capital life. lgl