In depth analysis about article - Essay Example

The article, ‘On the system of Political Economy and Taxation’ by David Ricardo was first published on 1817 but its tenets of economic principles still hold true. The article is quite vociferous on issue of foreign trade and emphatically states that ‘increase in the mass of commodities’ becomes the most visible factor that reflects ‘people’s enjoyment’. It also asserts that foreign trade is important element of the development process across states because it helps to exchange goods profitably and meet the demands of the people.

Most importantly, the author asserts that abstraction of employability and capital from one commodity to another is the major factor for increase in profits as it increases the price of the commodity. The article contends that foreign trade does not necessarily increases the amount of value of commodity unless it is accompanied by increase in demand. This is important facet of economic principle that heavily relies on demand and supply of goods and services for optimal profit. The influx of capital and employability within the production process results in profits either due to new technology and methods that increase efficiency or there is decrease in wages that help to increase the percentage of profit.

Thus, increase in revenue or decrease in consumption will result in accumulation of capital which can be gainfully employed for production of other commodities. They are indeed, vital inputs for trade and apply equally for domestic and foreign trade. Interestingly, the article also highlights that countries tend to favor import of those goods which have relatively higher cost of production. Ricardo gives example of corn which he says would be imported by England even if it has fertile land. Main reason is that it gains relatively higher profits on export of wine for which it has developed improved skill and technology which lower the cost of production.

This holds true for all economic transactions amongst nations and promote equitable distribution of wealth and produce. Ricardo correctly surmises when he says that ‘disadvantage of distance would probably be more than compensated by the advantage of having an exportable commodity of great value’. The article is highly relevant in the contemporary times because it serves as the basic guideline for trade and commerce. The increasing globalization and advancing technology has significantly influenced international trade.

In the current environment of market driven commercial activities, mutual dependency has necessitated new international trade policies. Ricardo’s assertion that value of the commodity greatly enhances the profitability also becomes a contributing factor ‘which regulate the comparative value of money in the different countries of the world’. The various elements of foreign trade therefore, constitute vital ingredients of a nation’s wealth which are invested to improve socio-economic parameters for the wider welfare of society at large.

One can thus conclude that the article draws attention to the essential paradigms of political economy that governs international trade practices. They are also important constituents for exchange rate of currency which motivate inter dependency of states for economic cooperation. (words: 497) Reference Ricardo, David. (1817). ‘On the system of Political Economy and Taxation’.