International Industrial Structure

The international structure of industry is no less affected by changes in the rates of profit not only among the sectors of a given economy but internationally. The less capitalistic sectors can move internationally more freely compared to the more roundabout processes but the formation of a national industrial structure is not independent or isolated from the international shifts of funds that take place as the result of changes in all relative prices. On a world scale, economic growth and the dominance of more roundabout processes depends primarily on the prices relative to the consumer goods sectors—or the sectors closer to them in term of durability—and the international relative prices for the same type of equipment. In a frictionless world funds would tend to move to production where prices and profit rates are higher taking into account the variable costs but this movement is limited although it materializes through international trade. A rise in the demand of consumer goods in one country will tend to be supported by raw materials or capital of low durability either from the domestic market or through imports if that proves to be advantageous. During a short-run period which is determined by the time requirements of placing new orders and delivering the local industry can expand to accommodate the increase demand but eventually imports will prevail if the foreign markets can supply at significantly lower prices (after taxes, tariffs, transportation costs, etc.).