By Stephen C. R. Munday (auth.)
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Relentless and ominous, the drumbeat echoes around the land: Social safety is at the verge of financial disaster. The caution has been repeated so usually that it has develop into a gloomy article of religion for the thousands of american citizens who pay Social protection taxes and count on to gather merits sometime. however it is flatly unfaithful.
Extra resources for Current Developments in Economics
Given the demand for agricultural produce, the rent received from landlords on the use of their land would certainly not decrease: if anything it would increase. This left one part of national income that would decline: profits. These would decline to the point where they were insufficient to motivate industrialists in their work (below normal profit) and the economy would grind to a halt. This provided another important argument for free trade since the international division of labour permitted through free trade would delay the evil day of the stationary state as it would lessen the immediate problem of diminishing returns.
If individuals, regions and countries produce those things in which they have a comparative advantage compared to others and then trade with each other, everyone can be better off. It does not matter if one country or individual is better at producing everything (has an absolute advantage in everything) as long as the advantage held is not the same for all products. It can be simply shown that by specialising in those things where the advantage is greatest and allowing others to specialise in producing where their disadvantage is least, total production can rise and thus all can gain through appropriate trade.
However, the value of the production from each worker may well be greater than the value of the subsistence wage. The difference between this true value of the production of the worker and the actual wage paid represents the capitalist's surplus and the level of exploitation from which the worker suffers. This system of extracting surplus will, however, begin to run into trouble. Capitalism will suffer from ever-increasing crises as profits show a long-term tendency to decline. The starting point of these crises is where the capitalist system appears to be doing well.