Conclusion

Abstract

The comparative advantage theory of David Ricardo, one of the directors the East India Company—instrumental in the creation of the British Empire—says that all states should benefit from specialized trade, all other things being equal. However, all these other things are not equal and never will be under the present system. If a developing country specializes in one or two primary products, then the only way to increase its wealth is to increase production and sell the products and services at a profitable price. However, if all developing countries step up, for example, the production of coffee, as they did in the 1980s, the market will be flooded and the price of coffee will fall, resulting in trade deficits for the producers. Again, prices are determined not by the producers but by the marketing companies of the consumers.