The international economic problems of the 1930s–in the aftermath of World War I and the depression—at first sight have few resonances with the present day. The leading powers of the time protected their industries behind high tariff walls. Most of them possessed colonies or were intent on regaining those lost in the war. Restoration of the free-trade regime of the decades prior to 1913, and creation of a new financial architecture to support it, seemed a remote prospect. In all kinds of ways the post-World War II and especially the post-Cold War world is in vastly better shape. Yet some of the themes of the earlier period remain relevant. The colonies are gone and territorial expansion is virtually inadmissible, but the options for dealing with international imbalances in factor supplies and factor prices are otherwise the same: international trade, capital flows, and migration.
The insight that international trade and international movements of productive factors could be substitutes owes much to the work of the Swedish economist Bertil Ohlin. Ohlin's magnum opus. Interregional and International Trade (1933), building on earlier work of Eli Heckscher, developed what became known as the Heckscher–Ohlin model of international trade. In its simplest form it described trade in a two-region, two-factor, two-good economic system. With subsequent generalizations, the theory accommodated not just trade in goods but also movement of factors. Capital flows were principally of interest, but labor flows were formally analogous. The practical differences between the two, of course, were considerable: migration was not an acceptable mode of factor price equalization. Nor is it today, when worries about rapid population growth attach to poor countries rather than (as they did in the 1930s, if speciously) to industrialized states claiming lebensraum. Indeed, it is less so, since the population sizes of the sending countries are multiples of their 1930s levels and high migrant flows encounter resistance in the receiving countries.
The passage reproduced below comes from a project on economic reconstruction and financial stabilization organized by the Carnegie Endowment and the International Chamber of Commerce. One output of this project was a volume International Economic Reconstruction: An Economists' and Businessmen's Survey of the Main Problems of Today (Paris: International Chamber of Commerce, 1936), over half of which consisted of a study entitled Introductory Report on the Problem of International Economic Reconstruction, by Ohlin. The excerpt is part of Chapter 7 of this report: The Problem of “Overpopulation,” Colonies, Markets and Raw Materials.
Bertil Gotthard Ohlin (1899–1979) had a distinguished career as a politician as well as economist. He was a long-time member of Sweden's parliament, in which he led the Liberal Party—mostly in opposition. During 1944–45 he was Minister of Trade. In 1977 he received the Nobel prize in economics (together with James Meade) for contributions to the theory of international trade.