Price Ceilings and International Trade Theory

Extract

In one of his many famous speeches, Mr. Churchill predicted “the English-speaking democracies, the British Empire and the United States, will have to be somewhat mixed up together in some of their affairs for mutual and general advantage.” Mr. Churchill was thinking presumably of the fields of public finance, administration, and war strategy—of quasi-political affairs. This paper is concerned with some of the ways in which the economic affairs of nations are “mixed up together.” Now the economic structures of trading nations are intertwined both in war and peace, and whether trade is administered by public officials or planned by a multitude of private individuals. The importance of the entanglement corresponds to the importance of trading relations in the economic structure of each country. However, when trade is not administered its importance is less direct and obvious to governments and government officials. As controls are extended in the domestic realm, international trading relationships tend more and more to become subjects of administrative and even diplomatic interest. Administrators in the domestic fields are always tempted to simplify their problems by insulating the domestic economy from unexpected or unpredictable changes elsewhere, without considering the total effects of their regulations on the domestic and foreign economies as a whole. Accordingly, international administrative co-ordination in war time must increase very rapidly if it is to keep pace with the increase in domestic regulation and prevent a rapid diminution in the extent and quality of international economic co-operation.