Re: Comparative Advantage,Trade and Employment

[Warren Mosler <mosler@xxxxxxxx>]

Paul Davidson wrote:

> Henry wrote regarding the argument that comparative advantage is not
> applicable in a world of less than full employment:
>         "The above conclusion is theoretically water tight. Since we are far from
> global full employment, not even near zero structural unemployment globally,
> and not likely to be in the foreseeable future, a condition that itself may
> be structural to the existing trade regime, does this mean that trade is in
> fact counter-productive economically unless full employment is set as a
> pre-condition?  Anti traders have made the argument that the net effect of
> trade on employment is in fact negative in many economies, even though
> positive in the export sector.  The AFL-CIO thinks it is true even in the
> US.  What is the post Keynesian view on this?"
>
> Keynes's response (and I hope the Post Keynesian response) is:

Keynes assumed a fixed exchange rate/gold standard, I presume?

w

(see 'Exchange Rate Policy and Full Employment at
http://www.warrenmosler.com)

>
>
> Free trade, free mobility of capital and full employment are
> incompatible.  This is Keynes's so called "incompatibility thesis" (See my
> plumber vs architecture article in  a minisymposium involving Irma Adelman,
> Barry Eichengree, Stanley Fischer, Jim Tobin, and myself in WORLD
> DEVELOPMENT, June 2000 issue ( My article is available on my web page).
>
> Ther Post Keynesian view, I believe, should be that as in a closed economy,
> there is a necessity for governmental controls of liquidity in order to
> bring effective demand up to full employment (in a global economy-- global
> full employmernt). Apart from such central controls (as suggested in my
> IMCU proposal for an international clearing union), then we need not
> interfere in the economy to achieve both private and public advantage....
>
> Paul

--
Warren Mosler
Director of Economic Analysis
III Finance

http://www.warrenmosler.com