David Ricardo’s Comparative Advantage and Developing Countries: Myth and Reality

ABSTRACT

This article examines David Ricardo’s trade theory, which emphasises that if protection is removed, resources would be expected to move away from high cost to low-cost products and as a result productivity would rise. His comparative advantage trade theory advocates in favour of a free trade, the argument implied generally to defend laissez faire. This study discusses the mainstream arguments relating to static and dynamic gains from trade liberalisation which seem to be based on weak theoretical and empirical grounds. It will also briefly discuss free trade and its impact on the industrial and agricultural sectors and how the performance of both sectors could have a long-term impact on local industrialisation, food security, employment and well-being of the people in developing countries. This article builds on this political economy and looks in particular at free trade policies and their impact on the economies of developing countries. Free trade theory, which has wide support among international financial institutions, namely, the IMF (International Monetary Fund), World Bank, WTO (World Trade Organisation) draws on David Ricardo’s theory. The study has found that free trade policy will deepen further the process of uneven development and unequal exchange.

KEYWORDS:

• Comparative advantage
• developing countries
• capitalist expansion
• WTO and free trade

Acknowledgements

The author would like to thank Hugo Radice and Stanislaw Owsiak for helpful comments on an earlier draft of the paper as well as for more general discussions related to the topic. I wish also to thank two anonymous referees for their valuable comments on an earlier version.

Disclosure Statement

No potential conflict of interest was reported by the author.

Notes on Contributor

Kalim Siddiqui teaches International Economics in the Department of Accounting, Finance and Economics at the University of Huddersfield, UK. He is also member of a number of international economic bodies including: Association for Heterodox Economics, International Initiative for Promotion of Political Economy (IIPPE), and the World Association for Political Economy (WAPE). He has spoken at several conferences in Germany, Portugal, Norway, UK, Pakistan and India and regularly contributed articles in journals such as International Journal of Political Economy, World Review of Political Economy, Journal of Asian Public Policy, Research in World Economy, Journal of Economics and Political Economy, Asian Profile, Social Scientist, and Economic and Political Weekly.