Undoubtedly, one of the greatest success stories of the post-World War II era has been the rapid and steady development of the world economy. Northern Hemisphere or Southern Hemisphere country, newly independent nation or not, the nearly 200 countries and territories that make up the international community have experienced significant economic growth and broad social transformation.
Countries and territories whose economies were essentially primary in character – exporters of some unprocessed goods and importers of virtually all other products and services – have developed manufacturing capabilities of one degree or another and have become active participants in international commerce. There is no country or territory in today’s world that has no productive capability and does not export and import processed goods and services.
This worldwide economic transformation did not just happen. It has been the result of the operation of two basic economic precepts.
The first precept is known formally as the theory of comparative advantage. What this means in practice is that a country should concentrate on goods and services in whose production it enjoys a comparative advantage, i.e., can produce those goods and services less expensively than its competitors. The precept tells a country, in effects, that it should not try to produce goods and services that its competitors can produce at less cost.
This assumes that the competition is fair and that a country does not seek to remedy its competitive disadvantage through unfair means, such as the provision of a subsidy. When that happens, the imposition of a tariff is proper.
The second precept that has been responsible for the post-World War II transformation and growth of the world economy is the policy of cooperation and understanding that has been maintained by the industrial countries – the members of the Organization for Economic Cooperation and Development (OECD) – toward the developing countries, particularly by the erstwhile metropolitan countries, toward their former Asian, Latin American and African colonies. In order to aid the economies of the developing countries, and for competitive reasons, the industrial countries have over the years allowed, and in some instances encouraged, their businessmen to establish productive facilities in those countries.
With the specialized agencies of the United Nations acting as assertors and referees, things have been working out well for the world economy during the eight decades of the past -World War II era.
Now the second Presidency of Donald Trump has embarked upon a program of disrupting the world economic order. Trump has put in place across the- board “reciprocal tariffs” against all of the US’s trading partners, whether friend or adversary and whether developed or developing. And he has clearly indicated his desire to see American companies move their manufacturing operations back to the US to avoid having to pay the new tariffs. All in the name of Mak(ing) American Great Again.
The Trump administration also has closed down the largest and best-known governmental aid institution in the world, U.S. Agency for International Development (USAID). Besides providing health care, education and other social assistance benefits to the developing countries, USAID has over the decades been helping small businessmen get started and enter the world markets for goods and services. Apart from the cessation of the deployment of US soft power, the shuttering of USAID has left a gaping hole in the structure of First World aid to a needy Third World.
By undermining its two guiding precepts, Donald Trump’s administration has destroyed the basis upon which the post-World War II World economy’s stability and development have rested. (llagasjessa@yahoo.com)