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The Foundations of Free Trade Theory and their Implications for the Current World Recession

In: Unemployment in Western Countries

Author

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  • Nicholas Kaldor

    (Cambridge University)

Abstract

Traditional theory, both classical and neo-classical, asserts that free trade in goods between different regions is always to the advantage of each trading country, and is therefore the best arrangement from the point of view of the welfare of the trading world as a whole, as well as of each part of the world taken separately.1 The purpose of this paper is to show that these propositions are only true under specific abstract assumptions which do not correspond to reality. I want to show that conditions can exist (and indeed are likely to exist) in which unrestricted trade may lead to a loss of welfare to particular regions or countries and even to the world as a whole — the world will be worse off under free trade than it could be under some system of regulated trade.

Suggested Citation

  • Nicholas Kaldor, 1980. "The Foundations of Free Trade Theory and their Implications for the Current World Recession," International Economic Association Series, in: Edmond Malinvaud & Jean-Paul Fitoussi (ed.), Unemployment in Western Countries, chapter 4, pages 85-100, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-1-349-16407-3_4
    DOI: 10.1007/978-1-349-16407-3_4
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    Cited by:

    1. Claudius Gräbner-Radkowitsch & Dennis Tamesberger & Philipp Heimberger & Timo Kapelari & Jakob Kapeller, 2022. "Trade Models In The European Union," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 67(235), pages 7-36, October –.
    2. Claudius Gräbner & Philipp Heimberger & Jakob Kapeller & Bernhard Schütz, 2018. "Structural Change in Times of Increasing Openness," wiiw Working Papers 143, The Vienna Institute for International Economic Studies, wiiw.
    3. Kapeller, Jakob & Hubmann, Georg, 2023. "Dilemmata marktliberaler Globalisierung: Globale Freiheit durch globalen Wettbewerb?," ifso working paper series 27, University of Duisburg-Essen, Institute for Socioeconomics (ifso).
    4. Claudius Gräbner & Philipp Heimberger & Jakob Kapeller & Bernhard Schütz, 2020. "Structural change in times of increasing openness: assessing path dependency in European economic integration," Journal of Evolutionary Economics, Springer, vol. 30(5), pages 1467-1495, November.
    5. Yin-Wong Cheung & Sven Steinkamp & Frank Westermann, 2020. "A Tale of Two Surplus Countries: China and Germany," Open Economies Review, Springer, vol. 31(1), pages 131-158, February.
    6. Gräbner, Claudius & Hafele, Jakob, 2020. "The emergence of core-periphery structures in the European Union: A complexity perspective," ZOE Discussion Papers 6, ZOE. institute for future-fit economies, Bonn.
    7. Jakob Kapeller & Claudius Graebner & Philipp Heimberger, 2019. "Economic Polarisation in Europe: Causes and Policy Options," ICAE Working Papers 99, Johannes Kepler University, Institute for Comprehensive Analysis of the Economy.

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