Основное уравнение международной экономики: верховенство закона + иностранные инвестиции + свободная торговля = страна-бензоколонка

The Fundamental Equation of International Economy: Rule of Law + Foreign Investment + Free Trade = Primitivization of Developing Economy

Victor Spirin

MPRA Paper from University Library of Munich, Germany

Abstract: The need for the rule of law for sustainable economic development is considered an indisputable axiom of the international economy. However, another axiom imposed on developing countries by the Washington Consensus is free trade with the developed world. But free trade between developing countries and developed countries leads to a system of international division of labor in which developed countries specialize in high technology, knowledge-intensive industries and industries with high added value and increasing returns, while developing countries specialize in the extraction of raw materials and primitive production activities with low value added and diminishing returns. Under these conditions, the rule of law to a greater extent ensures the rights of developed countries and consolidates and strengthens the indicated system of the international division of labor, without any benefits to the developing countries. In this article, we will give some simple examples from the economies of Russia and Eastern Europe, in which we will demonstrate the above conclusions. We also argue that, under reasonable protectionism, the rule of law, which promotes domestic high-tech development and production, would indeed have the desired effect. However, this, again, is incompatible with free trade with more developed countries.

Keywords: Vanek-Reinert effect; free trade; standard model; macroeconomic effect of globalization; rule of law (search for similar items in EconPapers)
JEL-codes: F6 F60 F62 F63 (search for similar items in EconPapers)
Date: 2023-08-25
New Economics Papers: this item is included in nep-cis
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