World Trade

Capitalist production is based on the world market. To understand the laws governing the capitalist system, one must understand those governing world trade. The orthodox or neoclassical theory of foreign trade is based on the theory of comparative advantage. [See “World Trade and the False Theory of Comparative Advantage” and “Comparative Advantage, Monopoly, Money, John Maynard Keynes, and Anwar Shaikh”]

The theory of comparative advantage holds that in national trade: the industrial capitalist with the lowest cost price when producing a commodity of a given use value and quality prevails in competition. In international trade: the capitalist with the comparative advantage prevails.

The view that different laws govern national and international trade precedes neoclassical economics. The originator of this theory is the classical British economist David Ricardo, who formulated the comparative law more clearly than neoclassical economists. This is because of his labor-based theory of value, where the value of a commodity of a given use value and quality is determined by the quantity of labor necessary to produce it.

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