The Divide: A Brief Guide to Global Inequality and its Solutions

by Jason Hickel

Based on the theory of comparative advantage, free-trade advocates lead us to believe that trade liberalisation will ultimately boost economic development in poor countries. But while it may be true that free trade increases efficiency in some abstract, mathematical sense, and perhaps even boosts consumption in the short term, it is not a meaningful strategy for long-term economic development. In fact, the theory itself never pretends to make this claim – it is merely a fancy bit of rhetoric that gets wheeled out by people who stand to benefit from it. In order for real economic development to occur, poor countries need to build their capacity for capital-intensive industry. This means intentionally insulating their industries from global competition until they are fully prepared to compete on the open market – just as Britain and the United States did during their own periods of economic development, along with every one of today’s rich countries. It’s surprising, and perhaps even offensive, then, that rich countries have now turned around and denied this strategy to poor countries. They insist that poor countries should be liberalised as quickly as possible in order to expose them to competition, so that they will have an incentive to develop their most competitive industries in order to survive. Protection, they say, only induces laziness and complacency.