From Poverty to Power Green, Oxfam 2008 - weman

3 POVERTY AND WEALTH GOING FOR GROWTH30 per cent, and EU members 20 per cent, far higher than the levelscurrently being contemplated in today’s trade negotiations. 184The lesson of history is that trade liberalisation should be asymmetric:rich countries should liberalise more than poor ones,not as a ‘concession’but in recognition of the fact that optimal trade regimes evolve alongwith national economies. The correct balance between liberalisationand protection will vary between countries, and evolves as a countrydevelops. Effective states have been able to pursue a judicious combinationof the two, a task that now however is being complicated by thenature of globalisation and the proliferation of international rules ontrade and investment.BOX 3.8THE DISADVANTAGES OF COMPARATIVE ADVANTAGEThe World Bank and other advocates of trade liberalisation indeveloping countries draw heavily on economic theories ofcomparative advantage, which were first advanced in 1817 byDavid Ricardo in his book The Principles of Political Economyand Taxation. Many of today’s fervent controversies about globalisationare debates with the ghost of this nineteenth-centuryEnglish economist.Using a simple numerical example, Ricardo demonstrated thattwo countries could arrive at a higher level of wealth by stickingto producing those goods that had a ‘comparative advantage’over other alternatives (broadly, those goods that were relativelymore efficient), then trading those goods with other countries,rather than trying to produce all goods for themselves. At a timewhen trade was widely viewed as a zero-sum game, Ricardo’swas an idea with revolutionary implications.Applied crudely, as it often is in current debates on trade liberalisation,the theory is of limited value. What Ricardo created wasa static model that encouraged countries with a particular mix ofskills and resources to focus on those. But skills and resourcesare not fixed in time. If they were, the USA would never havemoved beyond its comparative advantage in land, and would haveremained an agricultural economy. South Korea and Taiwanemerged as major industrial powers because they transformed187