Bertil Ohlin and James Meade
Citation: For their pathbreaking contribution to the theory of international trade and international capital movements.
The key idea
Heckscher-Ohlin: countries export goods that intensively use their abundant factors. Meade: open-economy macro requires simultaneous internal and external balance.
The explanation
Ohlin completed the Heckscher-Ohlin theory: a labour-abundant country (low capital per worker) exports labour-intensive goods; a capital-abundant country exports capital-intensive goods. Meade's two-volume work on the balance of payments laid out the assignment problem — using fiscal policy for internal balance and monetary/exchange-rate policy for external balance.
Why Africa should care
Heckscher-Ohlin predicts African exports should be labour-intensive (textiles, agriculture, services) and imports should be capital-intensive — which broadly fits. But the failure of African manufacturing to capture even labour-intensive niches (Ethiopia's leather, Kenya's garments) points to non-HO frictions: poor logistics, weak institutions, energy costs. Meade's assignment problem is the standard EAC central-bank challenge: how to manage the shilling float while inflation-targeting.
How to use it
Use the HO framework to identify which sectors should export at any given factor-endowment configuration. Use Meade's assignment to think about why an exchange-rate peg combined with active fiscal stimulus often ends in a balance-of-payments crisis.
Canonical works
- Bertil Ohlin (1933) "Interregional and International Trade" Harvard University Press
- James E. Meade (1951) "The Theory of International Economic Policy, Vol. 1: The Balance of Payments" Oxford University Press
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