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Globalization and International Trade Effects on Employment and Prosperity

In: Who's Afraid of John Maynard Keynes?

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  • Paul Davidson

    (University of Tennessee at Knoxville)

Abstract

The effect of globalization and free trade on the level of unemployment in developed nations vs. employment growth in underdeveloped nations. Why attempting to stimulate employment by pursing a policy to increase exports relative to imports can lead to international competition that harms all nations engaged in international trade. Classical theory assumes changes in the exchange rate can solve all unemployment problems created by imports exceeding exports. The Keynes theory proposes a different policy to achieve a balance between imports and exports. This Keynes policy was suggested at the immediately after the Second World War Bretton Woods conference, but the policy was vetoed by the U.S. delegation. Nevertheless the relevance of correct policy was demonstrated by success of the 1948 U.S. Marshall Plan, based of the principles underlying the Keynes theory solution to resolve trade imbalances between imports and exports.

Suggested Citation

  • Paul Davidson, 2017. "Globalization and International Trade Effects on Employment and Prosperity," Springer Books, in: Who's Afraid of John Maynard Keynes?, chapter 0, pages 97-125, Springer.
    • Handle: RePEc:spr:sprchp:978-3-319-64504-9_8
    DOI: 10.1007/978-3-319-64504-9_8
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