"Comparative advantage" in international trade sounds well enough, but not all countries have one.
In classical economics every country would have one. It wouldn't matter if they had a absolute disadvantage in very area they would still have a comparative advantage somewhere. If each "unit of input" in China could produce 10 DVD players or 10 VCRs, and each in Bangladesh could produce 1 DVD player or 2 VCRs, than Bangladesh would have a comparative advantage in VCRs even though it would have an absolute disadvantage in both.
Of course classical economics (like all models for something so complex) is an enormous simplification of the real world, and doesn't always perfectly describe it, it still has some relevance here.
When the industrial revolution in England cut the cost of making cotton fabric by a factor of 300, famine overcame formerly prosperous Bengal. The Indians turned to farming opium for sale to China, to the detriment of both countries but the enrichment of the British East India Company.
Apparently India had a comparative advantage in Opium production. Having a comparative advantage doesn't mean that producing the product will not have negative effects nor does it mean that you will get rich by producing it, it only means that you can more productively (in terms of getting money growing opium was productive for India) spend your time producing one good or service and trading it for another than you can trying to produce everything yourself.
Comparative advantage can shift and those shifts can cause a lot of dislocation in the economy and people's lives. It's all part of "creative destruction", which in at least the long run benefits the majority, but esp. in the short run can really be destructive to some or sometimes even many.
. By assisting the birth of China as an economic superpower, America has shut the door to prospective challengers. The more populous Muslim countries - eg Indonesia, Pakistan, Egypt and Iran - have missed the boat and will remain poor for at least another generation.
I would say that to the extent that they have missed the boat it has more to do with their own internal problems that it has to do with China.
Tim |
