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History of Political Economy 35.3 (2003) 573-575
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International Trade and Economic Growth in Open Economies: The Classical Dynamics of Hume, Smith, Ricardo, and Malthus. By John Berdell. Cheltenham, U.K.: Edward Elgar, 2002. xi; 186 pp. $75.00; £49.95.
This is an interesting and challenging book. The two chapters on Hume are developed from articles already published in HOPE and the Economic Journal, and John Berdell has an extraordinarily wide knowledge of the original texts and the secondary literature. His four nonmathematical chapters in part 1 have about as much in his footnotes as in his text.
The interesting question he addresses is how far his four authors, of whom Hume, Smith, and Ricardo largely established the case for open international markets, qualified the conclusion that free markets are universally beneficial. The book concerns development as much as trade, so his question is whether unlimited openness in trade is unambiguously helpful to the development of the world's poor as well as its opulent economies.
Hume saw freedom to import as unambiguously beneficial to comparatively poor countries, for these would themselves learn to produce the superior products they initially had to import, but it could be damaging to the richer economies which had nothing to learn from those from whom they imported. Berdell seeks to integrate the new endogenous growth theories (foreshadowed by Hume and Smith), and he emphasizes the passages in which Hume set out the learning benefits from trade rather than his more familiar explanation that trade is self-balancing. But the near-automatic self-correction of deficits is important to rich economies. If the opulent are convinced by Hume's specie-flow self-equilibrating theory, they should derive real benefits from the removal of inefficient and expensively discriminatory industrial interventionism.
In Berdell's account of Smith, rich countries gain an increasing lead through the cumulative impact of the division of labor. In contrast, Smith's contemporary, Josiah Tucker, emphasized the income-equalizing tendencies when economic-migrants emigrate from capital-poor to capital-rich economies, where their immigration will depress real incomes. Smith recognized that there would also be extensive emigration from wealthy countries such as Britain to capital-poor colonies, which would counteract Tucker's tendency for immigration from poorer countries to depress British wages.
Berdell points out that Ricardo subtly failed to include corn in his celebrated comparative cost example where Portugal and England trade wine for cloth. If his example had shown Britain exporting or importing corn, the rate of profit would [End Page 573] have been significantly influenced, which would have either accelerated or retarded Britain's rate of development. This is surely an example of the Ricardian vice: he often constructed examples of the utmost clarity and simplicity that disregarded a good deal of what was important. Trade in corn would have complicated his comparative costs chapter, and Ricardo therefore preferred to introduce it into his argument elsewhere. As Berdell shows, he made it abundantly clear in many places that freedom to import corn would delay diminishing returns, so that it would raise the rate of profit and the extent of development before the stationary state was reached.
Malthus was deeply concerned that it would be hazardous for a rich country to become dependent on food imports, because the manufactured exports on which it would come to rely would be undersold by formerly poorer countries that had learned to manufacture in the Humean manner. There was therefore continual tension between Malthus's recognition of the potential benefits from open trade and his belief that the happiness of the mass of the population would depend on secure and efficient production of the agricultural necessities of life, which would benefit from a degree of protection.
Berdell's mathematical modeling in part 2 includes much of the book's claim to originality and he subscribes to the "rational reconstruction" approach to modeling, where "internally consistent models . . . summarize and essentialize a past author's analysis of some particular issue(s)" (134). Berdell's rational...