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Extra resources for Financial Missionaries to the World
At the same time, China’s pool of labour does provide the essential key resource for the supply of low-cost textiles that have now taken a dominant position in the US and European domestic market. Viewed from the perspective of the theory of absolute advantage, both developments are perceived as ‘beneficial’ in meeting consumer demand in the most cost-effective manner. We must, of course, remember that in using this example, we, like Smith, do not take account of the broader context in which the exchange takes place.
Governments may provide subsidies in order to promote the competitiveness of domestic industries in export markets, or to protect their domestic market position. In recent times, the issue of agricultural subsidies has been the subject of intergovernmental wrangles and accusation and counter-accusation. The European Union has claimed that the USA subsidizes its wheat industry excessively, whilst the USA argues that the European Common Agricultural Policy (CAP) similarly favours European farmers.
The ongoing social and economic poverty of these groups was seen as desirable, since any increase in their spending power, free time or levels of education was viewed as being at the expense of productivity, and hence as detrimental to the nation’s economy. qxp 22 8/7/2008 10:07 AM Page 22 International Business Within the mercantile system, the growth in prosperity of one nation was also supported by application of selective export subsidies, coupled with import duties, tariffs and other restrictions imposed by the state.