Why Consider Trade?

What needs to be established first is why a region that follows ENL’s principles would consider trading at all. Why not just produce and consume locally?

To gain some perspective on this question, let's see how standard economics answers it, and why the rationale it provides is inappropriate for the ENL framework.

The conventional trade story invariably begins with David Ricardo's theory of comparative advantage. Briefly stated, this is the idea that the opportunity costs of production differ among regions, and that these differences are independent of any absolute advantages (higher labor productivities) that various regions may have.

This heterogeneity among economies can be exploited by having regions specialize in the outputs where their opportunity costs are lowest and then by trading these outputs for those where their opportunity costs are high. The result is increased consumption for all.

The comparative advantage theory has been criticized both on technical grounds and because its assumptions fail to adequately reflect global realities.

For ENL the crucial point is that it justifies trade through higher overall consumption, thus ignoring both health and distribution.

Ricardo's example of comparative advantage involved the trade of English cloth for Portuguese wine. Economic historian E.K. Hunt points out the ideological bias that is inherent in this approach:

Ricardo could have suggested… that the importation of wine be prohibited until every worker had adequate clothing. Some would certainly argue that this would increase social welfare more than importing more wine for the capitalists and the landlords. But he did not do so, instead insisting that free trade should maximize the 'sum of enjoyments'.1

In this passage Hunt reflects the ENL perspective with remarkable fidelity. In brief, even if we assume that the comparative trade idea is technically accurate, increased overall consumption does not provide a valid rationale for trade within ENL.

Another possible reason for trade is that it increases consumption variety. If apples can be grown within a region, but papayas cannot, importing the latter might provide welcome relief from the limited local produce. This trade rationale has possible validity within ENL, for two reasons.

First, greater variety may improve health. If this is the case, there is a rationale for trade.

Second, variety may be justified on the basis of sanctioned wants. This would require that ecological space is available for producing the required exports, but if this requirement is met, such trade could be given the green light. Although this second possibility is acknowledged as potentially valid, it is ignored in the discussion of basic principles in this section.


<prev linear thread next>


Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-NonCommercial-NoDerivs 3.0 License