Article Summary: The Theory Of International Trade

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(i) The main arguments of the author. The article has several argument, following are more stand out point: 1) The theory of international trade cannot provide a proper explanation of why international economic inequalities exist in the trade. Moreover, the current tendencies show that those inequalities are growing, and also those processes cannot be explained with the theory of international trade. 2) The movements of labor, resources and capital between countries are huge, but they do not lead to equalization, though they should according to the theory. 3) An important issue with the theory of international trade is that it was developed on the abstract assumption that all factors of production are not mobile and remains in the particular…show more content…
The modern variant of that theory should include the international movements of capital and labor. Only after this change, the theory can be applied to modern global economic conditions and processes. 5) The theory of international trade is unable to explain the huge economic inequalities between modern countries. Moreover, the theory is contrary to the facts. However, many scientists continue to base their research on old theory, and it leads to issues in understanding. 6) One should be interested in the explanation of isolation of the theory of international trade from the real situation in the global economy. The main explanation is that the theory of international trade is among the theories that remained based on the classical economic approach, though the modern situation changed a lot between each country. For instance, because of unequal economic and technological development in different countries, their economic inequality increased, and it is not considered in the theory. 7) One more issue with the theory of international trade is that it does not consider non-economic factors that influence production, but in modern economy, they can influence the efficiency a…show more content…
The first basis includes the real situation in the global economy and its inequality. According to the theory of international trade, factors of production and prices should be equalized due to the processes of international trade. It should happen because the different countries have different advantages in production, and the country produces goods, or provide service that are require the lowest amount of resources and wage to be made. Due to that, price and factor of production equilibrium occurs in the global economy. Nevertheless, the real situation in modern global economy is opposite. The important issue in the theory of international trade is that this theory assumes that all factors of production and labor sources and stable and do not move between countries. In the life, the situation is opposite. The movement of labor, natural resources and capital between countries becomes more and more intensive. The most intensive movements can be noticed between the developed and developing countries. Nowadays, many developed countries shift their capital and resources to the developing countries because production is cheaper there. At the same time, labor force from the developing countries moves to the developed countries because wages are higher there. As a result, inequality between the developing and developed countries grows. It happens because increased revenues and cheap labor force move to the developed countries,
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