In My Naiivety About these Things

The way I understand Ricardo's Law of Comparative Advantage, it goes something like this:

Consider two countries, England and Portugal. England produces wool and wine. Annually, England can make 400 bales of wool and 200 barrels of wine. Portugal is also in the wool and wine business, but the Portuguese are less efficient. They can only produce 100 bales of wool and 100 barrels of wine per annum. Nevertheless, England should concentrate on producing wool and Portugal on making wine.  Even though England is more efficient at everything, it should concentrate on what it is most efficient at, while Portugal should devote itself to its area of greatest relative efficiency (i.e. the thing it is least inefficient at compared to England).

We know this because some maths shows that such a strategy will lead to the greatest total combined output of both products. The two countries can then trade and, assuming the price system works well, they will both be better off than before*.

This is supposedly the closest that economics gets to a physical law, what economists cite when they're asked to name something in their discipline that's definitely true. It's what smart people explain, speaking slowly and occasionally rolling their eyes, when naiive interlocutors wonder about the benefits of free trade.

But let's look at how freer trade and increased specialisation could play out. Imagine that wool production in Portugal is undertaken by smallholders while wine is grown on estates owned by a landed oligarchy. After the Portuguese government enthustiastically embraces its new FTA with England, the sheep farming land is put into wine production and the former wool producers work on the estates.  However, despite the overall gains from trade, the estate owners see no reason to pay more to either the new or the existing workers. In fact, maybe they can pay them less, since now there's little chance they'll run off and become a small-scale wool producer.

Later, some technological advances in wine production allows the Portuguese estate owners to increase production while laying off some of their workers. Fearful for their jobs, the remaining workers daren't ask for any pay increases.

This looks like it could lead to things getting worse for the majority of Portuguese who aren't wine estate owners. But never fear, an elightened Portuguese government ensures that the benefits of a growing economy are widely distributed. Having "grown the cake", the government receives increased tax revenues, which it uses to provide generous welfare payments to unemployed workers and increase funding for education.

However, this government is voted out, as the opposition rails against the the "irresponsible bribes" to "unproductive parasites".  Why should the wealth producers give up their hard-earned income to support those who aren't contributing to the economy? Both the weathy wine estate owners and many of the embattled workers buy in to this argument.

This scenario is obviously simplified but may also sound rather familiar. You'd think that smart economists would factor in such changes to the political economy and would have done some serious thinking about how they could be addressed in the real world. You'd also think that in a democracy such changes would have to be thoroughly considered and negotiated before being accepted. But then, maybe I'm being naiive.

*If I'm working it out right, England could potentially end up with 450 bales of wool and 200 barrels of wine, while Portugal would have 150 bales of wool and 100 barrels of wine.