World Peace through Codependency?
I’m writing my second paper on how “free trade” (not just trade) can lead to world peace. This is a pretty hefty goal to put on free trade’s shoulders but it is only an ideal. It’s what freer trade tends toward. I will break the paper down as follows:
• Ricardo is a Good Start
• Why Free Trade?
• Patrick McDonald’s Thoughts
Ricardo is a Good Start:
When I first thought of writing this paper I was thinking very simply of specialization leading to world peace through codependency (hence the title).
Basically, David Ricardo talked about gains from trade through comparative advantage and specialization. When countries specialize in goods that they have a comparative advantage in, each country benefits from trade. This statement is also a way that specialization could lead to peace through codependency.
For example: Guns and Butter; let’s say that Japan has Comparative Advantage (CA) in making guns and the U.S. has CA in making butter. The U.S. would tend towards making more butter and exporting it to Japan and Japan would do the same with guns. If this were to go on unchecked then Japan might make all of the guns and the U.S. might make all of the butter. Guns are obviously tools of intimidation and butter is harmless yet necessary for food. In this example, once the U.S. completely stopped making guns and devoted all of its resources to butter Japan could just point their guns at the U.S. and demand butter for free.
This example is of course extreme but it has historical significance. Is the example of Japan turning their guns on the U.S. for free butter much different than the story of Cortez and the Aztecs? I don’t think so. I know that given current technology and current politics this situation seems preposterous but I’m sure the Aztecs felt the same way before they were killed. What I’m getting at is a point made by Adam Smith who believed that certain industries need to be protected for the sake of national defense. We can’t allow another nation to make all of our weapons or defense systems. But, if you change the two goods in this example to something else like automobiles and computers or rice and corn the potential results aren’t as catastrophic. If Japan made all of the rice and the U.S. made all the corn we’d each have monopolies but desire for the other’s product would push prices down to a reasonable level.