| The task of this study is to provide a comprehensive critique of the theory of comparative advantage in both its classical (Ricardian) and neoclassical form (primarily the Heckscher-Ohlin Model) and to investigate the empirical relevance of the theory of absolute versus comparative advantage for the case of the foreign trade of Greece.;The empirical investigation is based on a conceptual clarification and distinction between the theories of comparative and absolute advantage. The latter theory suggests that the basis and pattern of international trade are determined by the levels of labor productivity and the structure of the different spheres of production of the economies involved in trade. In contrast to the existing literature in the field, and after a critical evaluation of the latter, the present study focuses on the direct trading relationship between countries. After a general analysis of the international exchange and the structural change of the Greek economy during the period 1950-1975, we specifically focus on the international trade between Greece and Germany. By using descriptive statistics, scatter diagrams, and simple or multiple regression analysis, we obtain results indicating that the absolute advantage hypothesis cannot be rejected. Simultaneously, the overwhelming competitiveness of the German vis-a-vis the Greek industry becomes evident.;On the basis of the theoretical analysis and empirical investigation provided, and independent of policy implications or recommendations which are not the task of this study, it is concluded that the basis and pattern of international trade are determined by absolute advantages as they are determined in the sphere of production. Further, it is concluded that the function of international trade, as an articulating mechanism between different economies concretizing specialization and international division of labor, leads by necessity to an intensification of uneven development between countries and facilitates the concentration of capital on world scale. Thus, free trade by itself, according to this study, tends to a widening of the development gap between developed and underdeveloped capitalist countries.;In the theoretical part of the study, we consider Shaikh's critique of the Ricardian theory and extend this critique for the modern (neoclassical) theory of international trade. The relevance of this critique is further examined under different monetary systems. Methodologically, international trade is placed within the context of international exchange in general. However, a theoretically adequate integration of international trade with other forms of the increasing internationalization of capital (primarily international investment) is not provided. |
