Musings Report #49 12-6-13 Is Autarchy (i.e. national self-sufficiency) a Good Thing?

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Is Autarchy (i.e. national self-sufficiency) a Good Thing?

Correspondent Mark G. and I have been exchanging emails for months on the potential impacts of America's rising autarchy, i.e. self-sufficiency. It is an interesting topic because national self-sufficiency is not always a positive thing. As Mark observed, the U.S.S.R. had abundant oil when it collapsed. Other oil exporters suffer from the "resource curse," a result of dependence on oil export revenues.

This dependence on oil revenues withers the rest of the oil-exporting nation’s economy as capital and political favoritism orbit the revenues from exporting oil, and this distortion of the political order leads to cronyism, corruption and misallocation of national wealth. As a result, nations suffering from an abundance of marketable resources often decline into poverty and instability.

Developing and developed nations alike often choose to support vital domestic production with subsidies. Japan, for example, has long subsidized domestic production of rice, even though this adds cost to consumers. Germany has subsidized the production of alternative energy, a policy that carries trade-offs. Some now wonder if the gains from the policy are worth the price.

Autarchy is more than a ten-dollar word for self-sufficiency, as it implies a number of questions that “self-sufficiency” alone might not.

The ability to survive without trade or aid from other nations, for example, is not the same as the ability to reap enormous profits or grow one’s economy without trade with other nations. In other words, self-sufficiency in terms of survival does not necessarily imply prosperity, but it does imply freedom of action without dependency on foreign approval, capital, resources and expertise.

Freedom of action provided by independence/autarchy also imply a pivotal reduction in vulnerability to foreign control of the cost and/or availability of essentials such as food and energy and the resulting power of providers to blackmail or influence national priorities and policies.

Where self-sufficiency might suggest a binary state—you’re either self-sufficient or you’re not--autarchy invites an exploration of which parts of one’s economy and political order are self-sufficient and which ones are critically dependent on foreign approval, capital, resources and expertise.

In terms of military freedom of action, some nations are able to commit military forces and project power without the aid or approval of other nations. These nations have military autarchy, though they might be entirely dependent on foreign countries for critical resources, capital, expertise, etc.

In this case, though their military may be self-sufficient in terms of capabilities (power projection, control of airspace, etc.), any dependency in other critical areas introduces an element of political, financial or resource vulnerability should the key suppliers disapprove of a military action. These vulnerabilities impose often-ambiguous but nonetheless very real limits on freedom of action.

The key take-away from this brief overview is that autarchy has two distinct states: one is absolute, i.e. can a nation grow, process and distribute enough food to feed its population if trade with other nations ceased, and the other is relative: is the we-can-feed-ourselves self-sufficiency of the subsistence-survival variety that requires great sacrifice and a drastic re-ordering of national priorities and capital, or is it relatively painless in terms of national sacrifices and priorities?

Clearly, relative autarchy invokes a series of trade-offs: is the freedom of action and reduction in vulnerability gained by increasing autarchy worth a national re-ordering of values, priorities and capital, and quite possibly broad-based, long-term sacrifices?

It's a question I'll be exploring in greater depth in the coming months.

Summary of the Blog This Past Week

Obamacare is a Catastrophe That Cannot Be Fixed

What Does It Take To Be Middle Class?

Looming U.S. Retail Implosion: DeGrowth 2014

Dow 40,000, SPX 4,000: Is this Fed-Fueled Stock Rally Sustainable?

America's Excuse Book: Take Your Choice, Victim or Heartless Hypocrite

Thankfulness: Abundance, Opportunity, Openness

I usually don't get too riled by hate mail, but when I do, the result is a take-down rant: "America's Excuse Book." A reader told me it was my lowest-ranked essay ever on Zero Hedge....

Best Thing That Happened To Me This Week

My sister's one-year anniversary test of her cancer discovery and treatment was negative. This is great news for which I am grateful.

Market Musings

Two recent articles suggest "the top is in" in the stock market:
Possible Market Top in the Making?
Valuing the Markets Warren Buffett Style

This raises the question: what might investors rotate into if they start pulling money out of over-valued equities? Phrased another way: what isn't over-valued? Certainly not real estate or bonds. That leaves precious metals and perhaps commodities....

It seems Morgan Stanley has shifted its stance from bearish on gold to positive. Since no smart trader telegraphs accumulation, this suggest some major players may already have accumulated stakes in gold and perhaps also built up short positions in equities. If the top is in, there is no other way to profit from the decline except being short.

From Left Field

Most Popular How-To Guides of 2013 (Lifehacker) Mostly tech work-arounds...

The Shipping Container: A paean to the unsung hero of consumer capitalism -- still dirt-cheap to ship stuff across the Pacific....

Why are English majors studying computer science? Umm, because they actually want to be qualified for a job in the real economy?
"Today’s students recognize that “computational thinking” — problem analysis and decomposition, algorithmic thinking, algorithmic expression, abstraction, modeling, stepwise fault isolation — is central to an increasingly broad array of fields. Programming may be a valuable skill, but the hands-on, inquiry-based way in which one learns to think computationally is priceless. Those who can practice computational thinking, and who can wield the power of computer science effectively, will be in the position to make greater contributions in all fields than those who can’t. Indeed, the 2013 Nobel Prize in Chemistry was for computer models. "Biology nowadays is a branch of computer science."

Cost of College Degree in U.S. Soars 12 Fold: Chart of the Day

US Deficit Shrinks To $40.6 Billion As October Petroleum Exports Rise To New Record

Special Report: How Peugeot and France ran out of gas -- fear of change, fear of rapid adaptation...

Germany’s economy isn’t as strong as Europe believes -- rarely discussed trends...

LA's hidden ocean of swimming pools chronicled in new research -- very visible when landing at Burbank Airport....

How to Make Almost Anything: The Digital Fabrication Revolution -- what China should fear more than any other trend....

What bubble? Corporate profits reach new record as share of GDP

Handelsbanken is championing an old way of doing new UK business (recommended by Steve K.) "This is a great story. They look like some of the few 'good guy' bankers in the current system."

Keiser Report: Drilling for Fraud ( via John D.) the connection between money creation and oil....

Amsterdam Has a Deal for Alcoholics: Work Paid in Beer (via Katharine K.) I love this concept...
"The program is so popular that there is a long waiting list of chronic alcoholics eager to join the beer-fueled cleaning teams."

The Awkward Moment When The Woman You’re Trying To Rob Beats The Heck Out Of You -- The tug-of-war between the thief and owner for the handbag is exactly how we typically respond at first. Thanks to her Muay Thai training, the woman eventually responds differently, neutralizing her assailant. First she assessed the situation and then responded--classic OODA loop (observe, orient, decide, and act). The key is the training, which makes the response automatic and effective. "I fought back because I assessed the situation with my muay thai training and knew that I could take him down.”

Thanks for reading--

charles