It was economist David Riccardo (1772-1823) who laid the theoretical ground work for free trade among countries. He was able to show that, although Portugal had an absolute advantage over England in producing both wheat and wine, it would be mutually advantageous for both countries to trade with each other. In the production of wheat, England had a relative advantage over Portugal. If both countries specialized in what they did best, production of both wine and wheat would both increase, and both countries would be better off. Riccardo termed this the principle of comparative advantage.

    If two countries are identical, there is no incentive to trade. Thus, the greater the differences are between two countries, the greater the potential for prosperity through trade.

    If tariffs, or barriers to trade, are erected, it will have the opposite effect - total possible income will decrease. Tariffs only benefit special interest groups at the expense of the nation as a whole. If these measures were effective in promoting income and wealth for everyone, we would have tariffs between Minnesota and Iowa, and between North and South Dakota or any other 2 bordering states. We don't, because everyone would see the folly of doing so. Subsidies benefit only special interest groups as well. The rest of the nation is worse off for it through lower purchasing power than without the subsidy.

    The greater the trade, the less chance there is for war and conflict. In a speech at the World Trade Center in Tacoma, WA, George Russell¹ noted that free trade and globalization was the key to world peace. He also pointed out that since China opened up for free trade in 1979, hundreds of millions of people have benefited from the largest reduction in poverty the world has ever seen. He quoted the World Bank as stating that poor countries that opened their markets over the last two decades grew five times as fast as those who kept their markets closed. He also noted that since the small country of Jordan joined the World Trade Organization in 1998 it has created 40,000 new jobs in four years.

    In 1923 the brilliant Swedish economist Knut Wicksell argued the case for free trade in probably the best argument ever put forth by a free trade advocate². A minority report, written by his rival, Gustav Cassell, includes probably the best argument against free trade ever written. History has shown that Knut Wicksell was correct.

    The argument against free trade is invariably made to protect certain interest groups. Concern is expressed that the low cost country does not pay fair wages and benefits. Little is made of the fact that the alternative may be even worse jobs or no jobs at all. Another argument is made against immigration - that it somehow takes away American jobs.

    Well, the United States of America is a country of immigrants! We tend to forget that whomever God gives two hands, he also gives a mouth, and consumption benefits everyone. If it were good to block movement by people across borders we would close the borders between our states. The European Economic Community is trying to be like the U.S., with free flow of capital and labor across all its borders. If they succeed, they will become more prosperous and worthy competition for the U.S.

    Hector Garcia, a noted authority on immigration, has written about "cultural complementarity", a concept that describes the benefits that different cultures bestow upon each other as they co-exist, or assimilate, in a country. This is trade of a different kind - language, art, cuisine, music, skills, etc. The comparative advantages available to a population that can select the best from a hundred different cultures are truly extraordinary, and are a key reason for the diversity and economic vitality of the U.S. economy.

    When I was a young graduate student, I worked for Professor John Chipman at the University of Minnesota. He was doing a review article for Econometrica on International Trade Theory, and I was doing research for him in foreign language journals, in particular the Swedish “Ekonomisk Tidskrift”.

    One of my contributions to this work was to show that the Factor Price Equalization Theorem, then credited to Bertil Ohlin, was actually jointly developed with his teacher, Eli Heckscher (the theorem is now called the Heckscher-Ohlin Theorem). This theorem³ states that, under constant technology, what is being paid for labor, capital, and other production factors will eventually be equalized if there is free trade.

    This is a very powerful, and perhaps unexpected, insight. Economics is a wonderful armchair science and many of its findings are counterintuitive. The statement that free trade between, say, Mexico and the U.S. would eventually lead to people being paid the same in both countries seems hard to believe.

    But think about it. We have free trade between the 50 states. Each state is endowed with rich natural resources, none of which more important than its people. We expect the same return from investing in a power plant in Alabama as we receive from a power plant in Montana. If we didn’t, there would be no power plants in Alabama OR Montana. To attract people to Montana, they would have to be paid about the same as people in Alabama, and vice versa, or the plant would not be able to get the workers it would need.

    But the factor price equalization theorem has one crucial and overwhelmingly important assumption: constant technology.

    Since capital moves at great speed to reap its greatest return, it will be indifferent as to how that return is provided. A low wage country will use more labor-intensive technology than a high wage country. But the engineer in Shanghai knows how much his colleagues in India and the U.S. are paid. If he is paid less, and there is free flow of people across borders, he will move elsewhere. So, his wages will rise. And so, then, will his consumption. And now the upward spiral starts to work.

    The textile worker in India that is paid a fraction of that of a textile worker in North Carolina will still watch Hollywood movies, travel on Boeing airplanes, and use computers with Windows and Intel inside. And the Boeing engineer in Seattle will wear sandals from Indonesia, drive a car from Japan, drink wine from France and wear, perhaps, an Italian suit.

    Competitive advantages and factor price equalizations are the two guarantors of a more cohesive, prosperous, and safe world. It also works its magic at the corporate level. Produce something no one else can produce, or use technology to improve your business, and you may do very well indeed.

    And it works for individuals. Find your own voice. Or, as Joseph Campbell said, “Follow Your Bliss!”⁴ Isn’t it a joy to realize, that what you do best, and most love to do, is what you should do? And that doing so, is what will be most highly rewarding?

    In the city of Bangalore, India, a long time friend of mine is developing software that will revolutionize his field. He and I share the same dreams, the same needs, the same thoughts. We are just seconds away from online communications with each other via email.

    My father would have been astounded at this. And I feel very privileged that my Indian friend and I are tied to each other by signals sent around the earth, and by a very long string from my heart to his.

What was your most memorable reward?

"I was driving back from a harried week in Pennsylvania. A few friends and I had pulled together a group of about 30 people for a week of vigorous exercise in a beautiful game preserve. Half of the participants were blind, the other half sighted. We had created a series of five exercise routines where the participants who could see guided, cajoled and encouraged the paricipants who could not see through the courses. They hiked, biked, swam, ran the fitness course and played soccer. The idea came from Norway. It had never been done before in America. The people who could see had gained a whole new zest for life from the people who could not see. The blind participants had grown as well. At the end of the event everyone said their goodbyes promising to reunite and to stay active.

We called it Sports for Health. We had no budget. We had no model. Everyone volunteered to come and paid their own way. And it worked very well. Everyone had a blast. I was thrilled and over joyed that this "experiment" had worked.

So on the trip home, I stopped and called my folks. I filled them in on the week. My father, who well knew how much work had gone into this event, listened and then said, "We are very proud of you". Those 6 words sunk in as an affirmation that, hey this "kid" had finally arrived, done something to make his folks proud. That was almost 30 years ago, and it still rings through in my heart today."

• Stevan Eikevik, Sr. Associate, Tor Dahl & Associates

Part of the TDA process involves engaging people's innermost thoughts on rewards, lessons and great moments in their lives. It allows them to engage these thoughts as they move towards achieving peak performance.

Please tell us what your most memorable reward was… Send your response to amy@tordahl.com. We'll report a summary of our research in future newsletters.

“If the world is to be brought to order

my nation must first be changed.

If my nation is to be changed,

my home town must be made over.

If my home town is to be reordered,

my family must first be set right.

If my family is to be regenerated,

I, myself, must first be.”

-Sun Tzu

“Right actions for the future are the best apologies for wrong ones in the past” -Tyron Edwards