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Absent the protected domestic market, there is no guarantee that the dismantled industries are replaced by more productive domestic industries - they may instead be replaced by imports.

Ironically, I once closed a debate with Starvid with just such an example.

Tough competition in the refrigeration and freezing appliances market is forcing Danfoss to move its production of refrigerator and freezer thermostats from Nordborg to Danfoss' factory in Slovakia. The relocation, which is expected to be completed by the end of 2005, will affect around 77 employees.


This event cannot be accommodated within Ricardo's theory. Under Ricardo's theory, Danfoss would use its capital and labour in Denmark to produce something else which can be exported to Slovakia, and some Slovak company would export thermostats to Denmark. Instead, what is happening is that Danfoss moves its capital to Slovakia, and its employees have to look for other jobs in Denmark without the benefit of Danfoss' capital also staying in Denmark chasing after labour. I suppose Danfoss' 77 employees could move to Slovakia to work for Danfoss there. I wonder how many of them would relocate to slovakia with a Slovak salary and benefits, if offered the chance. And this is within the European Union. There is no free movement of persons from Europe to China.

tens of millions of people stand to see their lives ruined because the bureaucrats at the ECB don't understand introductory economics -- Dean Baker
by Migeru (migeru at eurotrib dot com) on Wed Dec 14th, 2011 at 10:26:27 AM EST
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This is due to the fact that Ricardo's theory requires capital (and other factors of production) to be immobile. Which Ricardo himself knew: "if capital freely flowed towards those countries where it could be most profitably employed, there could be no difference in the rate of profit, and no other difference in the real or labour price of commodities, than the additional quantity of labour required to convey them to the various markets where they were to be sold."

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Wed Dec 14th, 2011 at 10:36:11 AM EST
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