Mihail Manoilescu: An Appreciation and a Critique

On the 70th anniversary of the German-language edition of his book published in French in 1929 as Théorie du protectionnisme et de l’échange international (followed by an English translation of 1931 with the title The Theory of Protection and International Trade), Mihail Manoilescu became a pioneer in the theory of international trade by elaborating on an important market failure that violated the assumption of perfect competition in all commodity and factor markets postulated by the standard neoclassical trade models, in the form of a wage paid in a country’s manufacturing sector that exceeds that paid in agriculture. Manoilescu argued that the country would be subject to “unequal exchange” in trade unless it protects its manufacturing sector. Following Manoilescu’s lead, a market failure of this type was incorporated in neoclassical trade models by Everett Hagen in 1958 as a prototype of the market distortions that became an important part of the postwar trade literature. It is regrettable that Manolescu’s pro-fascist sympathies subsequently led him to abandon his views in favor of Romania’s becoming a supplier of primary commodities to the Third Reich.