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360 • International trade■ Capital Mobility and Comparative AdvantageBut suppose we still have a net gain. Can we then conclude that the argumentfor free trade on the basis of comparative advantage holds true?In fact, there is an often-overlooked provision of the theory, one of greatrelevance today in the debate over globalization, that suggests that it doesnot hold true. Note that our numerical demonstration of comparative advantageimplicitly assumes factor (labor and capital) immobility betweencountry A and B. Only coal and wheat crossed borders. Labor and capitalstayed at home and were reallocated domestically between coal and wheataccording to the principle of comparative advantage. Since it is usually thecapitalist who makes the investment allocation decisions, let us just focuson capital and its mobility or lack thereof. Clearly our model implicitlyassumes that capital is mobile between sectors within each country butimmobile between countries. Capitalists cannot even compare costs orprofitability between A and B because, thanks to our veil of ignorance,they cannot compare a-units with b-units. Therefore they could not possiblyknow whether investment in the other country would be profitableor not.One other way to show the implicit assumption of immobile capital inmodern texts is to note that the examples, like ours, are usually in termsof barter—wheat for coal, with no money involved. Barter trade is alwaysnecessarily balanced. No monetary or short-term capital flows are neededto balance the differences in exports and imports of bartered goods. Thecurrent account is the difference between the monetary value of importedand exported goods and services. If imports are greater than exports, thecurrent account is in deficit. If exports are greater than imports, the currentaccount is in surplus. Capital accounts are the difference betweenmonetary flows, used to purchase various assets, into and out of a country.Such assets include stocks, bonds, real estate, and other assets that remainin the country. When more money flows into the country than out,the capital accounts are in surplus. The current account of the balance ofpayments is always balanced in barter, so there is no need for a compensatingimbalance on capital account. Therefore, barter examples assumebalanced trade, and balanced trade means no capital mobility.Immobile capital does not mean that producer goods cannot be exchangedon current account. Machines and tractors, “materialist capital,”can be traded just like shoes and sugar. What is immobile is capital in the“fundist” sense, money, or liens on the future product of the deficit country.Immobile capital in the fundist sense is the same thing as balancedtrade on the current account, or trade that requires no compensatingtransfer of fundist capital on capital account. In other words, immobilityof capital does not prevent Brazil from importing machines and tractors