Comparative Advantage, Monopoly, Money, John Maynard Keynes, and Anwar Shaikh

According to Russian Foreign Minister Sergey Lavrov, the “collective West” launched a “total hybrid war” against Russia. The shooting war in the Donbass and Ukraine is only part of it. Thousands of dead Ukrainian and Russian soldiers are bad enough. But this is only the beginning of the story. The disruption of trade as well as grain and fertilizer production — of which both Russia and Ukraine are critical suppliers — is threatening to create global food shortages and, in some areas, full-scale famine. Food shortages bring death to people of the Global South and beyond. Deaths occur not only from starvation but also from weakening immune systems making them more susceptible to COVID and other infectious diseases. But the biggest threat is that it could end in nuclear war. What has led to this dangerous, disastrous state of affairs in the relationship between the two powers?

Anyone who has taken college-level economic courses has run into the theory that claims that comparative advantage, not absolute advantage, rules international trade. This theory holds that free trade is equally in the interests of all nations regardless of their degree of economic development. Yet the governments of underdeveloped nations showing any independence from imperialism often follow policies neoclassical economists call neo-mercantilist. Comparative advantage supporters claim that such policies are harmful to both developing and developed countries alike.

Left-wing economists who reject neoclassical economics generally support neo-mercantilist policies for developing countries. These economists learned the theory of comparative advantage from neoclassical teachers. But, unlike orthodox neoclassical economists, they admit the law of comparative advantage doesn’t work out as the textbooks say it should.

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