1)      Adam Smith; “The Wealth of Nations” (ed. Robert Heilbroner); W.W. Norton, New York; 1986; p. 258.


2)      Karl Marx; “The Communist Manifesto”; Bantam Classic, New York; 2004; p.p. 14-15.


3)      Jonathan Spence; “The Search for Modern China”; W.W. Norton, New York; 1990; p.p. 122-123.


4)      Yasheng Huang; “Capitalism with Chinese Characteristics”; Cambridge University Press, Cambridge; 2008; p. 89.


5)      Ibid.; p.p. 57-58.


6)      Ibid.; p. 111.


7)      Ibid.; p. 113.


8)      Kellee Tsai; “Capitalism Without Democracy”; Cornell University Press; Ithica; 2007; p.p. 153-166.


9)      N.Y. Times, 6/25/11.


10)  The American Scene, “A Post-American World”, 5/7/08.


11)  Several years ago, before the advent of market fundamentalism, a national magazine noted that if all of society were organized according to neoclassical principles, it wouldn’t work. We think the main problem with economic theory is that it lives in a static mathematical universe, whereas people and societies live in real time. Spence (2011) writes, “Investors have a renewed or heightened sense that risk is dynamic and far from (Gaussian, static) stationary as the conventional framework held…”


12)  The Washington Post, 8/21/11.


13)  Foreign trade experts are beginning to reconsider the present laissez-faire World Trade Organization system, asking whether the present system of international trade (like neoclassical economics) that favors efficiency and low costs, enables nations to meet their social goals. An example of this is Harvard Professor Dani Rodrik’s book, “The Globalization Paradox (2011)” that calls for a rethinking of the system. He writes, “…we should accept that countries can uphold national standards…and can do so by raising barriers at the border when trade demonstrably threatens domestic practices enjoying broad popular support (p. 241).” This seems to us unworkable because trade policy is negotiated and highly technical; but Professor Rodrik’s analysis of present and past trade systems is very informative.


Where is the foreign exchange rate in this discussion? In theory, flexible exchange rates are supposed to balance trade and to actualize the theory of comparative advantage. But first, nations manage their foreign exchange rates to keep their exports competitive. Second, the labor cost differential between the U.S. and the developing countries is very large. Third, in the real world you can’t create something out of nothing; regional industrial clusters develop where companies reinforce each other’s development. Economic development is therefore path-dependent. The foreign exchange rate is only a major factor determining local economic growth.


14)  Bloomberg Business Week, 7/1/10.