(3) In the case of an unclosed system, a reduction of money-wages, though it increases the favourable balance of trade, is likely to worsen the terms of trade.
Countries that free ride could find themselves in hot water with Ms Yellen: the Biden administration has promised to be stern with countries that run large, persistent trade surpluses.
It is, indeed, arguable that in the special circumstances of mid-nineteenth-century Great Britain an almost complete freedom of trade was the policy most conducive to the development of a favourable balance.