advantage should be viewed as being dynamic rather than static. Many of
today’s industries depend more on human capital than on fixed physical
capital or natural resources. The skills of a computer designer or a video
game programmer are acquired by education and on-the-job training.
Natural endowments of energy and raw materials cannot account for
Silicon Valley’s leadership in computer technology, for Canada’s
prominence in auto-parts manufacturing, for Taiwan’s excellence in
electronics, or for Switzerland’s prominence in private banking.
If comparative advantage can be acquired, it can also be lost. If firms
within one country fail to innovate and adopt the latest technologies
available in their industry, but competing firms in other countries are
aggressively innovating and reducing their production costs, the first
country will eventually lose whatever comparative advantage it once had
in that industry. In recent years, for example, pulp and paper mills in -
Canada have been closing, driven out of the industry by Scandinavian
firms that more aggressively pursue improvements in productivity.
With today’s growing international competition and rapidly changing technologies, no
country’s comparative advantages are secure unless its firms innovate and keep up with their
foreign competitors and its education system produces workers, managers, and innovators
with the requisite skills.Contrasting Views?
The view that a country’s comparative advantages change over time and
can be influenced by education, innovation, and government policy is a
relatively modern one. It contrasts sharply with the traditional view that a