Against the Conventional Wisdom: A Primer for Current Economic Controversies and Proposals

By Douglas Dowd | Go to book overview

3
International Production, Trade, and Finance

What's Good for Great Britain

Two years after the first cotton textile factory in England began production, David Ricardo published his Principles of Political Economy and Taxation ( 1817). As a London stockbroker, Ricardo was tuned in to the waves of the future more than those of the past; his ideas, like Adam Smith's but with a different focus, were designed to foster industry. Though less well known than Smith, Ricardo's theory, his method, and his policy aims have been at least as effective and durable. Again like Smith, Ricardo's positions have taken on a new life in recent decades.

The "taxation" of Ricardo's magnum opus was that of the "Corn Laws" -- tariffs (taxes) on imported grain (called "corn" in Britain). The tax favored the landed gentry, who could get a higher price (which Ricardo termed a "rent," an "unearned income") for their crops, and it harmed manufacturers, whose costs were thus artificially higher: higher grain prices meant higher bread prices. If we assume, as Ricardo (and, later, Marx) did, that workers' wages were set by their subsistence needs (and that bread was their major purchase), we see that the tariff on grain required higher wages, causing a shift of income away from factory owners to landowners. Thus industrialization was held back. Therefore, the slogans, Free Trade! Abolish the Corn Laws!

They were abolished in 1846, by which time industrialists -- politically Whigs -- had more political clout than the landowning Tories. Ricardo (in accord with Smith) accepted the "labor theory of value" and saw profits as well as rents as "unearned"; but profits favored industrialization, and so did he, so he didn't object to that form of unearned income. Marx did, of course; Using Ricardo's logic, he demonstrated that profits, like rents, were a reward

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Against the Conventional Wisdom: A Primer for Current Economic Controversies and Proposals
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Preface and Acknowledgments ix
  • 1 - Mouths and Realities of the Free Market 1
  • 2 - Fiscal Policy 15
  • 3 - International Production, Trade, and Finance 28
  • 4 - Jobs and Joblessness 42
  • 5 - Income and Wealth and Power and Poverty 55
  • 6 - Welfare and Social Securlty 73
  • 7 - Health, Education, and Housing 90
  • 8 - Environmental Deterioration 112
  • 9 - Expenditures on the Military and Crime 129
  • 10 - Needs and Possibilities 142
  • Notes 159
  • About the Book and Author 192
  • Index 193
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