Page 16 RAIN May 1981 I i I . I I I I .. The stresses of the 1980s o~·both industrial and Third World nations, as they cope with the global transition to sustainable energy and resource-based economies, will force a major r~thinking of the traditional economics of world trade. Most current economic theorizing is still based on the experi~nce of Britain, France and other colonizing countries which in the 17th century sought raw materials and markets in order to extend their trade and empires. Adam Smith's view of the benefits of "free markets" introduced the world to the idea of comparative advantage: i.e., Smith assumed that it benefits all nations to specialize in producing those goods and services for which they are best suited and then trade these goods and the raw materials'for their production in a world marketplace. This 200-year-old comparative advantage pattern allowed for huge increases in total world production of manufactured goods and services, distributed rare raw materials, created nations' special patterns of economic development and the growth of global linkages via transportation and communications, and opened the door to many new possibilities for cultural exchange and global awareness. Yet events in the 1980s will force economists of all stripes to overhaul theories of unalloyed advantages of continually increased world trade based on their concepts of global economic efficiency. From Adam Smith to Global Chaos. We see rising evidence today of the social costs this world trade system is generating. We see the growing impossibility of managing any nation's domestic economy, as they all ride the globally-iµteractive "roller-coaster" of wo~ld trade and monetary systems, since no government can hope to keep adju~ting anew each morning as the world's currency exchange markets open. These domestic stresses are symptoms of time lags and mismatches between economists' theories and the computer-speed movements of global currency, banking transactions, and capital combined 'with the slowerpaced ·physical changes of redeployment of workers, policy machinery, and the real-world problems of structural inertia which economists' models ignore. Thus we see new debates in many nations on how to adjust to these rapid.destabilizations: U.S. agony over its auto and steel industries; Denmark's hard choices over protecting its agricultural and dairy industries; Polan_d's indebted socialist government deferring to advice from Western, capitalist bankers; and Third World countries reeling from staggering debt loads, dependency on imported oil, plus the ubiquitous crises of trade and payments imbalances. These local destabilizing effects of the existing world trade and monetary systems can no longer be grasped or debated in obsolete economic terms, where some idealized " global efficiency" (quantified and equilibrated by prices) is presumed to be the shared goal. This narrow economic view of "efficiency" (in purely money terms, whether dollars, yen, francs or rubles) ignores substantial political, social and ecological costs. This abstract "world market- "Re-i~dustrialization" suggests little more than backing into the future looking through the . . rearv1ew mirror. place" game-which addresses only "effective demand" (i.e., demand expressed in money terms) and ignores hum'an need, structural barriers, cultural, social and ecological costs-will achieve its hypothetical goals of "global economic efficiency" only by disordering every local society and ecosystem on the planet. .Such are the pitfalls of economics, a discipline which still dismisses these costly realities as "externalities," and is based on frictionless, theoretical concepts quite out of phase with the messy real-world problems of actual production, workers, institutional bottlenecks, declining resource quality and the massive structural transition required for the renewable-resource based economies of the future. Pragmatic but baffled politicians must deal with these real-world problems, confused by the obsolete terms of their economic advi-
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