Academic journal article Journal of Economic Issues

Game, Set, and Match for Mr. Ricardo? the Surprising Comeback of Protectionism in the Era of Globalizing Free Trade

Academic journal article Journal of Economic Issues

Game, Set, and Match for Mr. Ricardo? the Surprising Comeback of Protectionism in the Era of Globalizing Free Trade

Article excerpt

One of the central aspects of economic globalization is increasing free trade. Since Adam Smith [1776] and David Ricardo [1817] armed advocates of free trade with the theorem of comparative advantage, they have been "winning every battle in the textbooks" [Pen 1967, 104]. Today, opponents of protectionist policies and proponents of globalized free trade are claiming victory [IMF 1997; Irwin 1996; Krueger 1997]. However, public anxiety about globalization and free trade is rising [Rodrik 1997]. In an increasing number of grassroot movements and Non-Governmental Organizations [NGOs], proposals for new forms of protectionism against the social and ecological consequences of free trade and increased capital mobility are being discussed.

This paper discusses some contemporary debates about free trade and protectionism. After a very brief look at the genesis of the classical theory and major criticisms raised at the time, especially from a national [List 1841] or class conflict [Marx 1848] perspective, I take up today's criticism of the free trade paradigm. It will be argued that the case for free trade is not at all as strong in today's globalizing world as its proponents claim. In the last section, I discuss the rationale and conditions for certain types of protectionist policies in today's globalized world. The possibilities for such policies to be implemented are closely linked to the answers of new and already existing social movements to the current globalization of competition and neo-liberalism.

The First Victory of Free Trade

As every economist knows, Smith and Ricardo were the first to make the case for the principle of free trade in a coherent way. Smith challenged mercantilist doctrines and succeeded in defending free trade as being not only important for a particular industry or class, but as a general interest. The case for free trade was further strengthened by the theory of comparative costs or comparative advantage, which is generally credited to Ricardo [1817]. He introduced the idea that even countries that are superior in producing all goods in comparison with potential trading partners will benefit from trade. He basically went one step further than Smith, because he took into consideration that productivity levels between industries differ from one country to the next [Altvater and Mahnkopf 1996, 201]. By incorporating that aspect, he succeeded even more than Smith in showing that free trade is in the interest of every country, because there is always something that can be traded. Neither Smith nor Ricardo propagated free trade for general cosmopolitan or unselfish reasons, but did so because the extension of the international exchange of goods is more in each nation's interest than protectionism. In fact, they explained that there is no contradiction between the national interest and free trade [Irwin 1996; Weiss 1968, 33; Robinson 1968, 117].

Smith and Ricardo argued the case for free trade from--what today would be called--a "win-win" perspective, in which there are no losers but only winners. They consider international economic relations as "essentially harmonious" [Gilpin 1987, 188] and benevolent for all, as long as trade is allowed to take its "natural or spontaneous course" [Mill 1874, 21]. But Friedrich List and Karl Marx challenged the assumption that the world is like a "harmonious world republic." List [1841] strongly opposed the "bottomless cosmopolitanism" of the free trade school. He argued that the state has an important role to play in coordinating and carrying through policies for industry and the economy and that unrestricted free trade, as propagated by the classical school, should be opposed. His basic argument is that nations have to protect themselves temporarily against imports from more developed countries until they have the time and means to develop to the highest possible stage of development. For Marx [1848] the debate about free trade was neither timeless nor a discussion about principles in general. …

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