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Globalization and Development


Security and domestic opposition may give governments political reasons for restricting trade (in addition to the danger that capital mobility can grant problematic power to economic interests, pushing the government to lower taxes or reduce regulation, as we saw from the Marxist perspective).
             The liberal model oversimplifies real world politics and presents an overly optimistic picture of the international economy. Indeed, international economic opening goes hand in hand with international economic volatility: consider the ramifications if domestic companies are put out of business because foreign products are temporarily cheaper, rather than fundamentally better, or because export prices are temporarily low. Buying products from overseas can also create vulnerabilities: consider if foreign suppliers acquired a monopoly (or form a cartel, a group of producers that, instead of competing with each other, fix prices) and then use it to inflate international prices or even refuse to sell at all. In the 1970s the oil producing countries joined together to form a cartel called OPEC (Organization of Petroleum Exporting Countries) that twice dramatically raised oil prices, with far-reaching consequences for the global economy.
             Finally, arguments about specialization are very short-term. The model of comparative advantage considers states' current best production with no consideration for companies that are currently inefficient but may be learning new skills that will eventually make them more profitable. If such companies are immediately exposed to competition, they may go bust before the necessary learning can take place. For instance, developing countries may initially be bad at industrial production and make more money from producing agricultural products and trading for manufactures but they will always remain poor unless they can learn more sophisticated and efficient forms of production.


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