Ramesh Chandra has a recently released book Endogenous Growth In Historical Perspective: From Adam Smith To Paul Romer, and one of his chapters is on Nicholas Kaldor and circular and cumulative causation.

Chandra’s own views are different but I thought his description of Gunnar Myrdal and Nicholas Kaldor’s insights was amazing with the most appropriate quotes like the following (from page 201 in print/209 in pdf):

Gunnar Myrdal (1956, 1957) and Nicholas Kaldor (1978), on the other hand, argued that because of the operation of circular cumulative causation free trade led to interregional and international inequalities. Myrdal (1956) maintained that “if left to its own course, economic development is a process of circular and cumulative causation which tends to award its favours to those who are already well endowed and even to thwart the effort of those who happen to live in regions that are lagging behind” (quoted from Meier 1989, p. 385). Further, “on the international as well as national level trade does not by itself necessarily work for equality. A widening of markets strengthens often on the first hand the progressive countries whose manufacturing industries have the lead and are already fortified in surroundings of external economies, while the underdeveloped countries are in continuous danger of seeing even what they have of industry and, in particular, their small scale industry and handicrafts outcompeted by cheap imports from industrial countries, if they do not protect them” (ibid., p. 385). International trade does promote primary exports from developing countries but here they face adverse demand conditions or inelastic demand in world markets. Any technological improvements which reduce primary goods prices benefit the importing countries. Thus, “forces in the markets will in a cumulative way tend to cause even greater international inequalities between countries as to their level of economic development and average national income per capita” (ibid., p. 385).

Likewise, Kaldor (1978), in his paper “Nemesis of free trade”, thought that free trade may be good under constant costs but under increasing returns it benefitted some countries (or regions) at the cost impoverishment of others. He agreed with Myrdal that international trade perpetuated international inequalities, and developing countries would do well if they industrialized behind tariff and quantitative restrictions. Kaldor also stated that protectionism was good not only for developing countries but also for a developed country like Britain. In the initial stages of her growth, free trade suited Britain. But after Germany, France, USA, and Japan industrialized, Britain could not compete and one market after another became closed. Had Britain not been ideologically wedded to free trade, her living standards would have been much better.

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References

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Kaldor, Nicholas. 1978. Nemesis of free trade. In Further Essays on Applied Economics. London: Duckworth.

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Meier, Gerald M. 1989. Leading Issues in Economic Development. Oxford and New York: Oxford University Press.

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Myrdal, Gunnar. 1956. Development and Underdevelopment. Cairo: National Bank of Egypt Fiftieth Commemoration Lectures.

Myrdal, Gunnar. 1957. Economic Theory and Underdeveloped Regions. London: Gerald Duckworth

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