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Consider one or more of the following questions to reflect on at the end of Subtopic 7.2. Discuss with another student or in a small group, or record (written, audio, video) your response.
Section 7.2.1 explains that the theory of comparative advantage has been used to tell countries in the Global South to keep specialising in raw materials, while other countries move into manufacturing and higher-value production. Section 7.2.5 describes how the Washington Consensus treated a particular set of policy ideas, trade liberalisation, austerity, privatisation, as common sense rather than as choices. What do these two examples have in common? Can you think of another idea in economics that gets presented as neutral or natural, but that actually serves particular interests?
Section 7.2.4 explains that a country's balance of payments can look financially healthy for years while it depletes fish stocks, forests, or soil, because the accounts only record money flows, not what happens to nature. Looking at Kate Raworth's Doughnut model (Figure 1), how does this gap between the balance of payments and ecological reality relate to the outer ring of the Doughnut, the ecological ceiling? Can you think of a country or industry where financial accounts might be hiding this kind of depletion right now?
Figure 1. The Doughnut Economics model showing the 'safe and just space for humanity' where human needs are met within planetary boundaries
(Credit: Raworth (2025), CC-BY-SA 4.0)
Section 7.2.3 explains that deeper economic integration, such as a customs union or monetary union, gives countries benefits like lower trade costs and more bargaining power, but requires giving up policy sovereignty. Thinking about a country you know well, would you want it to pursue deeper integration with its neighbours or trading partners? What would it be giving up, and do you think that trade-off would be worth it?
Section 7.2.2 and Section 7.2.4 both show that some countries have far more room to manage economic shocks than others. A country like Sri Lanka faced a currency crisis that quickly caused shortages and inflation, while the United States can run a persistent current account deficit for decades because the dollar is the world's reserve currency. What sources of power, using the list from Section 7.2.5, help explain why some countries have this kind of buffer and others do not?
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