The comparative advantage of Greece in the era of recession
Lampros Gallos National and Kapodistrian University of Athens Athens, Greece lam.gal@hotmail.com
Abstract
The aim of this paper is to investigate the export behaviour of Greece and to identify its comparative advantage. Moreover, through the conclusions of the analysis, is investigated whether the export activity of the country coincides with its comparative advantage especially in the present circumstances, those of recession. Initially, we define the comparative advantage based on the approaches of Adam Smith, David Ricardo's and Heckscher-Ohlin. Furthermore we analyze the current situation of the country, Greece’s economic structure and its trade performance, mainly the
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3.2: Greece‟s commercial shipping sector.
3.3: Greece‟s strategically position as the gateway to the EU and SEE.
3.4: Top talent at competitive rates.
3.5: The disadvantages of Greece in the era of internationalization of economies
4. Conclusions.
2
1. Historical and literature review.
International trade theory provides explanations for the pattern of international trade and the distribution of the gains from trade. The study of trade emerged in the era of mercantilism (approximately in 16th century) as a crude set of arguments about how a nation should trade. The theory of International Trade examines the reasons why different countries exchange their products, but in addition the aftermath that this process has, in the internal economy of a country involved in international trade. Adam Smith, in The Wealth of Nations in 1776, postulated that under free trade, each nation should specialize in producing those goods that it could produce most efficiently. Some of these would be exported to pay for the imports of goods that could be produced more efficiently elsewhere. Smith ridiculed the fear of trade by comparing nations to households. Since every household finds it worthwhile to produce only some of its needs and to buy others with products it can sell, the same should apply to nations. The theory of absolute advantage is based on the assumption that the nation is absolutely better (i.e., more efficient) at production of
During the eighteenth century European countries were characterized by an increased population, maintained a wealthy economy, and revolved around a new way of thinking. There have been several theories that had an impact on European societies. Two of the theories include mercantilism and Adam Smith’s viewpoints. Mercantilism came about as a way to gain power and wealth society, where as Smith relied on a laissez-faire approach. Each of these theories had a major impact on the development of the European society; although there were many struggles they became a stepping stone to the democracy, and trading connections we possess today.
The Europeans began trying to save as much money as possible by only trading with the “mother country,” and by transporting goods on their own ships. A German once said “the more silver, the stronger the state.” Nations began not letting their money leave and enrich others. The idea of “free trade” contrasts from the concept of mercantilism because free trade has imported and exported goods flow without trouble or hesitation. Adam Smith had made a non taxation system of trading. While mercantilism was a system of benefiting off the
The publication of The Wealth of Nations, the first comprehensive system of political economy, in 1776 marks the birth of economics as a separate discipline. The central theme is the growth of national wealth, which Smith, the moral and social philosopher, saw as the nation’s annual production of goods and services among the three classes: laborers, landlords, and manufacturers. Smith theorized that the liberty to trade unhindered by government intervention would result in increased abundance and wealth for all involved. Deeply opposed to mercantilist practices, which encouraged government intervention in every aspect of trade, Smith’s policy of free-trade economic liberalism, otherwise known as laissez-faire (“Let it be, let it go”) led to extraordinary economic growth, particularly in Britain and the United States.
Nations trade with one another because it is mutually advantageous for both parties when one is more efficient at producing a certain good and at a lower cost, and the other is proficient at producing a different good or service more efficiently. This is based on Ricaro’s theory of comparative advantage.
There has been a dual view of trade since the time of the ancient Greeks. The two sides of these philosophers views are the recognition of the benefits of international exchange, but that there is concern that certain domestic industries would be harmed by foreign
Which is cost difference determines the patterns of international trade. Absolute advantage is trade benefits when each country is at least cost producer of one of the goods being traded. In the 1800s, David Ricardo developed the theory of comparative advantage to measure gains from trades. This theory is based on comparative advantage and it states each nation should specialize in production of those goods for which its relatively more efficient with a lower opportunity cost.
Adam Smith was a Scottish philosopher, who wrote a book to finish the mercantilist system. In the book writing, he pointed out that the nations should sell their supplies to other countries while buying nothing in return. Smith believed having people create and exchanges merchandise as they are satisfied to open new possibilities with all markets to battles for international and even domestic. I think that is a great idea to have people sell and buy products in a free trade, in addition that will bust the economy domestically and internationality. Smith wanted people to learn how to use their money and other resources carefully
This article is useful because it further explains the ricardian model which was one of the first basis of comparative advantage. It shows how the model explains comparative advantage and the benefits of it to growth.
In his book, Wealth of Nations, Adam Smith makes arguments to support free-trade. These arguments range from having to do with war, all the way to the structure of social classes. In order to assess the morality of these arguments, David Hume’s definition of morality and Kant’s definition of morality can be used. These definitions, ultimately, serve as context for Smith’s arguments, so that there is a clearer idea of whether they are moral or not. From this, modern readers of Smith’s book can better determine the positive and negative qualities of Smith’s idea of free-trade.
The United States can make certain toys with greater productive efficiency than can China. Yet we import those toys from China. However the main reason why the U.S. has become so dependent upon China for goods is that production costs are less in China than the U.S. Reduced production costs are so attractive to companies the benefits of low-cost production are passed on to customers with lower prices on goods the relationships U.S. companies have with China are important because of the variety of products available from China. Adam Smith born in 1723 was a Scottish political economist and philosopher famous by his influential book The Wealth of Nations. Smith proposed in his book that a nation’s wealth should be judged not by this metric but by the total of its production and commerce. Smith wrote in his book that that productive labor should be made even more productive by deepening the division of labor. Smith describes the evolution through feudalism into a stage of society requiring new institutions, such as market-determined rather than guild-determined wages and free rather than government-constrained enterprise. If a foreign country can SUPPLY us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage.
A country who’s economy was devastated by the monetary exports demanded of them by the second world war, Greece has shown great financial fluctuation and vulnerability within the last 80 years, resulting in one of the most disputed economic records in the history of the European Union. Dubbed the ‘Greek Economic Miracle’, Greece showed great resilience throughout the 1950’s and 1960’s, with credit to their superior food trade and shipping industry, continuing to produce high levels of economic growth in contrast to others that had also been affected by the war. With the Treaty of Accession (1979) entering into force on 1st January 1981, Greek’s commitment to the European Communities (European Union) proved pivotal regarding it’s controversial qualification into the Eurozone in 2000. Owing to this, in an attempt to recover the unstable foundations of its economy, Greece has since been subject to various regulations and measures of austerity, leaving what was once a highly commended country both financially and socially, in a deplorable state of desperation.
In this research, we focus on: “application of theory of comparative advantage in Vietnam’s export and import and the gain and loss of the economy in trade”. The research intended for people who want to comprehend more about the recently situation of import and export in Vietnam. Besides, we bring to users basic knowledge and implication of comparative advantage in those situation of Vietnam through example of exporting coffee after the collapse of ICA.
Adam smith and the wealth of nations was a book that Adam Smith had wrote. Adam smith was the man to append mercantilism. As I stated in my last essay I explained that mercantilism is economic theory that trade generates wealth. Adam smith was one of the people that believed in this system. Adam smith even wrote a book to upend mercantilism. Basically, nations would sell their gold and goods without buying anything in return. Not many nations liked this and disagreed with the mercantilism system. At this point the nations fell into circling of retaliatory tariffs that suffocated international trade all around.
The theory of comparative advantage explains the benefit of free trade. According to this theory by David Ricardo in the early 19th century, “Both countries will be better off if each specializes in the industry where it has a comparative advantage, and if the two trade with one another.” (Citation) International trade opens up markets to foreign supplier, and domestic companies need to improve their efficiency, boost productivity, and lower cost to increase competitiveness instead of enjoying monopolies or oligopolies that enabled them to keep prices well above marginal costs. On the other hand, international trade also offers domestic companies bigger demands and broader markets; therefore more jobs relevant to export have been created. Furthermore, jobs in the US supported by goods exports pay 13-18 percent more than the US national average (ustr.gov).
Adam Smith, author of The Wealth of Nations, shows support for free trade and emphasises it as a trade policy which ought to be adopted. Krugman and Obstfeld back Smith's support by stating that the efficiency of trade is increased by free trade and accumulates the national income of countries. Free trade is a theory which suggests that each nation benefits in specialising in an economic activity from which it gains absolute advantage, enjoying absolute superiority over other nations in a specif economical activity (Peng). With free trade follows opportunity, replacing regulation and growth of economic activity. (Rugmann and Collinson).