At 22:37 -0400 1/10/99, Michael Gurstein wrote:
>---------- Forwarded message ----------
>Global Intelligence Update
>Red Alert
>January 11, 1999
>
>It is Time to Start Thinking About the Ukraine
[snip]
Funny, I just sent someone the following message:
[Stratfor's writing]
>The central assumption behind capitalism is that competition
>serves as a goad to maximize performance. Among nations, this
>theory manifests itself in the theory of comparative advantages.
>Every nation has a comparative advantage in some area. There are
>some things that each nation does best and if every nation sticks
>to it, then every nation will maximize its income. Competition
>forces a nation to find and stick to its comparative advantage.
>It is an excellent theory except in the case of nations whose
>advantage is insufficient to sustain a minimal, politically
>acceptable standard of living. When the borders of the old
>Soviet Union were thrown open, they now had to discover
>comparative advantages not in relation to each other, but in
>relation to Germany, France or the United States. The results
>weren't pretty.
[my comment]
This paragraph obscures the difference between comparative advantage and
absolute advantage. It also neglects to mention the difference between the
flow of goods and the flow of capital. Comparative advantage as an economic
principle doesn't make much sense in a world where capital can move freely.
David Ricardo specificially excluded the free movement of capital from his
model. All this is explained lucidly and simply in Herman Daly and John
Cobb *For the Common Good* and H. Daly *Beyond Growth* and *The
Steady-State Economy*. The problem with Russia is not international trade
in goods but uncontrolled flows of capital. There is a profound difference
in the two.
_____________________________________________________________________
Tom Lowe Judge a moth
Jackson, Mississippi by the beauty of its candle
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