Monday, November 14, 2016

Ricardo's Fanciful Fallacy

Need just one more reason to reject Ricardo's "free trade" fallacy?

How about this one:

...[Ricardo's] argument might sound convincing, until you ask a simple question: “So how do you turn a wine press into a spinning jenny?”. Answer? You don’t.

Ricardo’s model assumed that you could produce wine or cloth with only labour, but of course you can’t. You need machines as well, and machinery is specific to each industry. The essential machinery for making wine can’t be used to make anything else, if its use becomes unprofitable. It is either scrapped, sold at a large loss, or shipped overseas. Ditto a spinning jenny, or a steel mill: if making steel becomes unprofitable, the capital involved in its production is effectively destroyed
....Forbes quoted at VoxPopuli

Plenty more at the link.  As to 'destroyed,' look no further than Janesville's GM plant.  Or Kenosha's AMC/Chrysler plant(s).  Not to mention the tens of thousands of lives.

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