Political Cleavages and Changing Exposure to Trade

Abstract

Combining the classical theorem of Stolper and Samuelson with a model of politics derived from Becker leads to the conclusion that exogenous changes in the risks or costs of countries' external trade will stimulate domestic conflict between owners of locally scarce and locally abundant factors. A traditional three-factor model then predicts quite specific coalitions and cleavages among owners of land, labor, and capital, depending only on the given country's level of economic development and its land-labor ratio. A preliminary survey of historical periods of expanding and contracting trade, and of such specific cases as the German “marriage of iron and rye,” U.S. and Latin American populism, and Asian socialism, suggests the accuracy of this hypothesis. While the importance of such other factors as cultural divisions and political inheritance cannot be denied, the role of exogenous changes in the risks and costs of trade deserves further investigation.