Editing Keynesian economics (section)

====The critique of the theory of comparative advantage====
In the post-crisis situation of 1929, Keynes judged the assumptions of the free trade model unrealistic. He criticized, for example, the neoclassical assumption of wage adjustment.<ref name="J.M. Keynes, free trade and protectionism"/><ref name="The non-neoclassical foundations of protectionism">{{Cite thesis|url=http://www.sudoc.abes.fr/cbs/xslt/DB=2.1//SRCH?IKT=12&TRM=170778401|title = Les fondements non neoclassiques du protectionnisme|year = 2013|publisher = Université Bordeaux-IV|last1 = Maurin|first1 = Max}}</ref>

As early as 1930, in a note to the Economic Advisory Council, he doubted the intensity of the gain from specialization in the case of manufactured goods. While participating in the MacMillan Committee, he admitted that he no longer "believed in a very high degree of national specialisation" and refused to "abandon any industry which is unable, for the moment, to survive". He also criticized the static dimension of the theory of comparative advantage, which, in his view, by fixing comparative advantages definitively, led in practice to a waste of national resources.<ref name="J.M. Keynes, free trade and protectionism" /><ref name="The non-neoclassical foundations of protectionism" />

In the Daily Mail of 13 March 1931, he called the assumption of perfect sectoral labour mobility "nonsense" since it states that a person made unemployed contributes to a reduction in the wage rate until he finds a job. But for Keynes, this change of job may involve costs (job search, training) and is not always possible. Generally speaking, for Keynes, the assumptions of full employment and automatic return to equilibrium discredit the theory of comparative advantage.<ref name="J.M. Keynes, free trade and protectionism" /><ref name="The non-neoclassical foundations of protectionism" />

In July 1933, he published an article in the ''New Statesman and Nation'' entitled ''National Self-Sufficiency'', in which he criticized the argument of the specialization of economies, which is the basis of free trade. He thus proposed the search for a certain degree of self-sufficiency. Instead of the specialization of economies advocated by the Ricardian theory of comparative advantage, he prefers the maintenance of a diversity of activities for nations.<ref name="The non-neoclassical foundations of protectionism" /> In it he refutes the principle of peacemaking trade. His vision of trade became that of a system where foreign capitalists compete for new markets. He defends the idea of producing on national soil when possible and reasonable and expresses sympathy for the advocates of [[protectionism]].<ref name="National Self-Sufficiency">{{Cite web|url=http://www.mtholyoke.edu/acad/intrel/interwar/keynes.htm|title=John Maynard Keynes, "National Self-Sufficiency," the Yale Review, Vol. 22, no. 4 (June 1933), pp. 755–769.|access-date=20 November 2021|archive-date=15 May 2011|archive-url=https://web.archive.org/web/20110515044928/http://www.mtholyoke.edu/acad/intrel/interwar/keynes.htm|url-status=live}}</ref> 
He notes in ''National Self-Sufficiency'':<ref name="National Self-Sufficiency" /><ref name="J.M. Keynes, free trade and protectionism" />
{{cquote|A considerable degree of international specialization is necessary in a rational world in all cases where it is dictated by wide differences of climate, natural resources, native aptitudes, level of culture and density of population. But over an increasingly wide range of industrial products, and perhaps of agricultural products also, I have become doubtful whether the economic loss of national self-sufficiency is great enough to outweigh the other advantages of gradually bringing the product and the consumer within the ambit of the same national, economic, and financial organization. Experience accumulates to prove that most modern processes of mass production can be performed in most countries and climates with almost equal efficiency.}}

He also writes in ''National Self-Sufficiency'':<ref name="J.M. Keynes, free trade and protectionism" />{{cquote|I sympathize, therefore, with those who would minimize, rather than with those who would maximize, economic entanglement among nations. Ideas, knowledge, science, hospitality, travel—these are the things which should of their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national.}}

Later, Keynes had a written correspondence with [[James Meade]] centred on the issue of import restrictions. Keynes and Meade discussed the best choice between quota and tariff. In March 1944 Keynes began a discussion with [[Marcus Fleming]] after the latter had written an article entitled ''Quotas versus depreciation''. On this occasion, we see that he has definitely taken a protectionist stance after the [[Great Depression]]. He considered that quotas could be more effective than currency depreciation in dealing with external imbalances. Thus, for Keynes, currency depreciation was no longer sufficient, and protectionist measures became necessary to avoid trade deficits. To avoid the return of crises due to a self-regulating economic system, it seemed essential to him to regulate trade and stop free trade (deregulation of foreign trade).<ref name="J.M. Keynes, free trade and protectionism" />

He points out that countries that import more than they export weaken their economies. When the trade deficit increases, unemployment rises and GDP slows down. And surplus countries exert a "negative externality" on their trading partners. They get richer at the expense of others and destroy the output of their trading partners. John Maynard Keynes believed that the products of surplus countries should be taxed to avoid trade imbalances.<ref>{{Cite web|title=Reform the euro or bin it|date=5 May 2010|author=Joseph Stiglitz|website=[[TheGuardian.com]]|url=https://www.theguardian.com/commentisfree/2010/may/05/reform-euro-or-bin-it-greece-germany|access-date=30 June 2017|archive-date=30 August 2017|archive-url=https://web.archive.org/web/20170830234718/https://www.theguardian.com/commentisfree/2010/may/05/reform-euro-or-bin-it-greece-germany|url-status=live}}</ref> Thus he no longer believes in the theory of [[comparative advantage]] (on which free trade is based) which states that the trade deficit does not matter, since trade is mutually beneficial.
This also explains his desire to replace the liberalization of international trade ([[Free Trade]]) with a regulatory system aimed at eliminating trade imbalances in his proposals for the [[Bretton Woods Agreement]].{{citation needed|date=December 2021}}