Absolute Advantage vs. Comparative Advantage

In your opinion, in what way was Ricardo’s law of comparative advantage superior to Smith’s theory of absolute advantage?

                I will begin this topic with each explanation of absolute advantage and comparative advantage. Absolute advantage is the advantage which is earned by a country because of its own specialization and when there’s an extra goods, they’re focusing in it. Absolute advantage uses Labor Theory of Value. For example is Japan produce 6 units of clothing per work day while US produce 12 units and Japan produce 3 units of foods per work day while US produce 4 units. Here’s the table that I got from http://analystnotes.com/cfa-notes-describe-benefits-and-costs-of-international-trade.html:  

 It can be seen from the table that US has the absolute advantage, but if it applicable for all of goods, there will be no international trade. Besides, the Adam Smith’s theory is against mercantilist assumption (because Adam Smith developed the idea of capitalism in his book titled The Wealth of Nations) which gives states positive sum game. Next is comparative advantage by David Ricardo. Comparative advantage supports efficiency by producing more goods with a lower opportunity cost. It doesn’t matter with the absolute advantage of a country, what really matter is the comparative advantage. The system is like this, country A will produce lower cost goods in their country, but if it requires extra cost (more expensive) to process any goods in A, they’d rather import it from others (country B). Here’s a diagram for comparative advantage that I got from http://www.sy-econ.org/sse/sse-ITF-AACA.html:

Conclusion is that comparative advantage is more efficient or superior than absolute advantage cause it is more favorable in the way of amounts, trading and costs. It also keeps the international trade going between countries until now.

Athilla Meidictine Johanita

1701350235

Trade in Structuralist Perspective

Students already discussed about three main perpectives in international trade. In your opinion, which perspective is the best to explain the international trade nowadays? Determine your position between Mercantilist, Liberalist, or Structuralist and give a strong proposition of it towards international trade pattern.

In my opinion, the best perspective to explain the international trade nowadays is Structuralist perspective. I chose it because of the present world economic system. Other people might say that the world economic system belongs to liberalist perpective because we all are liberalists. I don’t agree with that statement. I have some compatible reasons for the chosen perspective.

Structuralism was proposed by Karl Marx (18^th century) and Lenin (19^th century), it develops the idea from the below (proletariat). Here’s the graphic of structuralist perspective about world economic.

Marxist stop at capitalism and the Leninist stop at imperialism. But, the point is that the structuralists are conflicting social classes, the bourgeoisie exploits the proletariat. Class also means the ownership of capital. For structuralist, state is very weak. It’s only used as a tool by capitalist. There’s a system called dialectics. Dialectics always create new arguments by missing links.

Why is it not Mercantilist perspective? First, mercantilist says that state is the only main actor. If it’s true, then state would be able to control everything related to its national economy. But the fact is the state is not that powerful. There are private companies which control a national economic system, even world economic system. Then why is it not Liberalist perspective? I know that there’s a cooperation between countries, they build international trade and free trade. But do you realize if it’s similar to capitalist perspective?

I’m not saying that liberalist perspective same as capitalist’s. Formerly, liberalism and capitalism was far from similar, they’re totally different. Liberalist concerned about cooperations, mutual benefits and liberty, besides capitalist concerned about modals and their own (bourgeoisie) benefits. But currently, they look similar because there’s an ideological manipulation. Capitalism legitimacy as false consciousness in liberalism is considered as ideological manipulation. It seems capitalists rule the world. But for structuralist, it’s not only capitalism which influents the world economic, colonialism is also take a role in it, for examples of MNCs and TNCs. Without any direct purpose, the colonialist practice colonialism which always exploits. It’s very smooth until we don’t realize it exploits.

There are 2 theories relate to current world economic. First is Dependency Theory which was  proposed by Johan Galtung. It is divided into 2 categories, core (developed countries) and periphery (developing countries). Based on http://www.economicsonline.co.uk/Global_economics/Dependency_theory.html,  the core will always exploit the periphery. The forms of exploitation are cheap labor and resources and the core return it by giving technologies to the periphery. That’s why the periphery will always depend on the core. Next theory comes from Immanuel Wallerstein called Modern World System Theory. Based on The Modern World-System: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century. New York: Academic Press, 1976, pp. 229-233., this theory is divided into 3 categories, core, semi-periphery and periphery. The core will always exploit the semi-periphery and periphery while semi-periphery and periphery depend on the core. The periphery also depends on semi-periphery. He doesn’t have a clear explanation about each category, which country categorized as the core, semi-periphery and periphery is because each country has different level of development.

The conclusion of these explanations is that capitalism and colonialism are dominate the current world economic and there’s no solution of it as the structuralist predicted. The developed countries exploit the developing countries and the developing countries depend on developed countries. It makes the developed countries getting richer while the developing countries are just staying in the same place. Of course it also makes a different social class between the bourgeoisie and the proletariat. Free trade is the form of hidden capitalism in the name of liberalism.

Athilla Meidictine Johanita

1701350235 

Globalization

Well, hello everyone. I am going to write my first post on this blog. It is about globalization. Of course we all know, globalization is derived from the word “global”. But, do you know what is the meaning of “global”? I found it on http://glosarium.org, the meaning of global is encompassing all around the world.

Usually, globalization is linked to relations between countries and any other thing which is global and it is often called internationalization. Based on the opinion of Selo Soemardjan, the Indonesian sociologist, I found on http://carapedia.com/pengertian_definisi_globalisasi_info2058.html, globalization is a system with the same regulation following by people from all around the world. Globalization is also defined as the economic relation between countries because of the fast development of technology and goods by the IMF. I agree with those opinions, but I also have my own opinion. In my opinion, globalization is the affection which comes from the outside and it might affect the inside, the affection also becomes a lifestyle for the indigenous. Once it becomes a lifestyle, it could be barely abandoned.

For example, people these days proud of their branded clothes, especially the famous international brands such as Chanel and Prada. Not only clothes, it also occurs for technology. I am sure almost everyone use Microsoft for their operation system, or maybe Android. Is it only brands that becomes the globalization issue? No, of course not. How about the movies we watch every night on the television? Or maybe the movies in the cinema? Most of them are not local movies, they are imported. Another example I will give you is food. Some people (let us say the Indonesians) love Japanese food, Korean food, and Italian food. It can be seen from some restaurants which are spreaded out in Indonesia, such as Sushi Tei and Mad for Garlic. And the last example is music. Are you a K-Popers? Or do you like Dubstep? Even Dangdut, the Indonesia’s genre of music, is influented from India and Malay. It means, the music we hear everyday is included as the part of globalization. It is obvious that globalization has been a part of our life and hard to be separated.

The conclusion is we can not afford to get rid the globalization from our life. We live for and from globalization. Since it became a part of our life, it also affects the world economy. Why is it world economy? We use money to pay everything and money is the object of economy. We are becoming consumptive and hanging our lives to globalization. Maybe, before the globalization exists, we could live without it. But, due to the globalization these days, we are definitely hard to live without it. Honestly, I can not live without music and without international movies. I am sure almost everyone neither. I also can not live without the international news, in case that I am an International Relations student. If there was no globalization, then it would be no international relations issue. If there was no international relations issue, then International Relations study would never be existed!

Thus, this is the end of my explanations about the globalization. I hope it could be informative for the readers. I also apologize if there was anything wrong in my explanations and in use of the language. Thank you for reading and do not forget to leave any comment on my post. See you next week!

Posted by Athilla Meidictine J

1701350235

02PD3

Group 10

Introduction to International Trade and Business