The Bankruptsy of the 'Theory of Comparative Advantage' (toward the Developing of a Fundamental Theory of Foreign trade)

The article sets out to develop a fundamental theory of foreign trade, the bases for which are to be found in Karl Marx’s Capital. It is argued that David Ricardo’s theory of comparative advantage, which fails to take account of how the law of value operates in international dealings, is unsustainable. The theory of comparative advantage orients Russia toward the exporting of natural resources, while encouraging a curtailment of scientific research and retarding the development of high-technology export production. According to Ricardo, foreign trade does not increase the wealth of a country in value terms. His theory is based on the value equivalence of international exchange, with productivity growth failing to alter the value of the exported/imported commodity mass even though the value per unit of each commodity is reduced. According to Marx, more productive labour is taken into account by the world market as more intensive labour; the unit value of a commodity does not decline until competition forces a lowering of its sale price to the point where this corresponds to its value. Developing a fundamental theory requires an analysis of the operation of the law of value and of the law of the formation of the general rate of profit through competition, as applied in the national and international contexts (see volumes I and III of Capital). The motor of external trade is not comparative advantage, but the search for a higher rate of profit. For Russia, the way to maximise profits is through exporting high-technology goods, which in turn presumes the development of education and science. Foreign trade can and should increase the wealth of the country in value terms. Windfall revenues gained from the exporting of natural resources should not be sterilised, but should be transformed into investments.