This book proposes that recognising positive externalities emanating from certain production activity is the key to understanding economic development. Therefore because the production of different goods produces different outcomes and because the markets for these products are finite, an inherent conflict of interests is shown to be at the heart of international trade relationships. These two points are the basis for understanding how different countries have achieved development, where they are heading and how a new generation of industrialising countries is changing the economic landscape. The final conclusion put forward is that competition friendly protectionism carefully applied to rich and very poor countries would temper and improve the outcomes of the globalised economic system.
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Most Helpful Customer Reviews
2 of 2 people found the following review helpful
By Diziet
TOP 500 REVIEWER
Format:Paperback
As the title implies, what Ronald Stuart has tried valiantly to do here is plot a path between the Scylla and Charybdis of neoliberal free trade dogma and anti-globalisation state control. I'm not sure he quite succeeds but he certainly provides much food for thought.
The book is laid out in four sections:
1 Unintended Consequences
2 Business Is War
3 Where Are We Heading
4 Tempering Globalisation
In the first section, the main thrust of his argument concerns the role that 'positive externalities' play in developing an economy. These positive externalities are difficult to define and quantify and so are often overlooked or not fully taken into account in more mainstream economists' views. Positive externalities are sometimes generated as side-effects of particular economic activities, sometimes they are the cause of economic development. For example, if a country invests in infrastructure - roads, telecommunications etc. - this might encourage businesses to invest. On the other hand, if a business decides to invest in a region, this too can cause positive externalities as the company recruits and trains local labour. Both forms may then encourage other companies to invest, producing a virtuous circle of growth.
Set against this is the free market idea of 'comparative advantage'. This suggests that countries should do what they are good at. Germany is good at building cars and so should stick to that, Egypt is good at growing cotton and should thus continue to do so. This may be the case, Stuart points out, at a particular moment but a car industry is far more likely to generate long-term positive externalities than a commodity based business such as cotton growing.... Read more ›
The book is laid out in four sections:
1 Unintended Consequences
2 Business Is War
3 Where Are We Heading
4 Tempering Globalisation
In the first section, the main thrust of his argument concerns the role that 'positive externalities' play in developing an economy. These positive externalities are difficult to define and quantify and so are often overlooked or not fully taken into account in more mainstream economists' views. Positive externalities are sometimes generated as side-effects of particular economic activities, sometimes they are the cause of economic development. For example, if a country invests in infrastructure - roads, telecommunications etc. - this might encourage businesses to invest. On the other hand, if a business decides to invest in a region, this too can cause positive externalities as the company recruits and trains local labour. Both forms may then encourage other companies to invest, producing a virtuous circle of growth.
Set against this is the free market idea of 'comparative advantage'. This suggests that countries should do what they are good at. Germany is good at building cars and so should stick to that, Egypt is good at growing cotton and should thus continue to do so. This may be the case, Stuart points out, at a particular moment but a car industry is far more likely to generate long-term positive externalities than a commodity based business such as cotton growing.... Read more ›
1 of 1 people found the following review helpful
Format:Paperback
Competition Friendly Protectionism is a sideways look at globalisation. It's not anti-globalisation, as there are plenty of benefits to our global trade systems, but it is critical. Globalisation doesn't quite work as well as it should. It isn't delivering on its promise. Perhaps if we could look at it a little differently, we'd see some opportunities to make it better.
For that alternative perspective, Stuart takes inspiration from two key economists, Erik Reinert and Ha Joon Chang. Building on their work, he explains the limits to export-led growth as a development strategy. Since the global total of exports has to match the total of imports, it's simply impossible for every country to be exporting their way to growth at once, and yet that seems to be everyone's default plan. Global trade becomes unbalanced as countries vie for limited opportunities, gaming the system by protecting their markets to subsidising their industries, hoping to achieve that ellusive export surplus.
There has to be a better way to distribute trade in the global economy, but that still preserves the efficiencies of competition and keeps markets free and fair. Stuart suggests that 'competition friendly protectionism' is possible when you look at the correct scale. Sectors can be protected when the scale of the domestic market is large enough to allow internal competition. The sectors you want to protect are the ones where there are the biggest positive externalities, in the form of networks, skills and infrastructure. "GDP generated by nominally growing economic activity alone is an empty, perishable and reversible activity if it does not engender solid, irreversible steps of positive externality growth.... Read more ›
For that alternative perspective, Stuart takes inspiration from two key economists, Erik Reinert and Ha Joon Chang. Building on their work, he explains the limits to export-led growth as a development strategy. Since the global total of exports has to match the total of imports, it's simply impossible for every country to be exporting their way to growth at once, and yet that seems to be everyone's default plan. Global trade becomes unbalanced as countries vie for limited opportunities, gaming the system by protecting their markets to subsidising their industries, hoping to achieve that ellusive export surplus.
There has to be a better way to distribute trade in the global economy, but that still preserves the efficiencies of competition and keeps markets free and fair. Stuart suggests that 'competition friendly protectionism' is possible when you look at the correct scale. Sectors can be protected when the scale of the domestic market is large enough to allow internal competition. The sectors you want to protect are the ones where there are the biggest positive externalities, in the form of networks, skills and infrastructure. "GDP generated by nominally growing economic activity alone is an empty, perishable and reversible activity if it does not engender solid, irreversible steps of positive externality growth.... Read more ›
1 of 1 people found the following review helpful
By M. Mainelli
Format:Paperback
Competition Friendly Protectionism sounds nice and woolly, like Labour's Third Way, but Ronald Stuart makes a strong case for economists to rethink overly simplistic approaches to free-trade versus protectionism arguments. The book is an easy read that synthesises current thinking, then takes it a small step further. Stuart's own style is fluid, but he uses an interesting and effective technique of stringing together lengthy and well-selected quotes from the dozen or so principal economists' on which his argument is founded, weaving them together quite smoothly.
His main argument centres on the way economists shy away from trying to evaluate positive externalities arising from industrial policy and often ignore the real case for restricting trade flows in search of a quiet life among the simplicities of free trade theory. Stuart examines five basic positive externalities that can accompany trade restrictions, critiques comparative advantage in the extreme, explores the richness of the conflict of trade interests and demonstrates how ignoring these factors leads to environmental and developmental paradoxes. Stuart advances a richer model that maps market scope against the strength of potential positive externalities to decide where protectionism, still with some competition I hasten to add, might be appropriate.
Stuart is certainly not recommending protectionism in all cases, nor simplistically applied, and his model tries to map appropriate measures taking into account different markets. Stuart is not anti-competition, far from it, but he does point out "that not all markets need maximum world free trade in order to meet a competition threshold ... only so much of it [competition] is required to achieve its beneficial effects".... Read more ›
His main argument centres on the way economists shy away from trying to evaluate positive externalities arising from industrial policy and often ignore the real case for restricting trade flows in search of a quiet life among the simplicities of free trade theory. Stuart examines five basic positive externalities that can accompany trade restrictions, critiques comparative advantage in the extreme, explores the richness of the conflict of trade interests and demonstrates how ignoring these factors leads to environmental and developmental paradoxes. Stuart advances a richer model that maps market scope against the strength of potential positive externalities to decide where protectionism, still with some competition I hasten to add, might be appropriate.
Stuart is certainly not recommending protectionism in all cases, nor simplistically applied, and his model tries to map appropriate measures taking into account different markets. Stuart is not anti-competition, far from it, but he does point out "that not all markets need maximum world free trade in order to meet a competition threshold ... only so much of it [competition] is required to achieve its beneficial effects".... Read more ›
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Most Recent Customer Reviews
4.0 out of 5 stars
Good critical introduction to the economics of international trade
The author is to be congratulated for a thorough, jargon free, comprehensively argued book about international trade. Read more
Published 11 months ago by Jezza
4.0 out of 5 stars
It's not going to end well !
Not this book, I must stress, which concludes beautifully with well-structured, cogent analysis, but I fear the economy of the West. Read more
Published 13 months ago by Duncurin
5.0 out of 5 stars
Very useful study with sensible proposals for reform
This useful and well-argued book proposes that countries should adopt a kind of protectionism. Stuart deals fairly and patiently with opposing arguments, and his proposals are... Read more
Published 14 months ago by William Podmore
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