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What If Nations Were Less Dependent on One Another?

The Case for Autarky
Wednesday, January 15, 2014, 4:13 PM

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

Autarky vs. Self-Sufficiency

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/autarky also implies 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 autarky 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 autarky, 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 autarky 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 autarky invokes a series of trade-offs: Is the freedom of action and reduction in vulnerability gained by increasing autarky worth a national re-ordering of values, priorities, and capital, and quite possibly broad-based, long-term sacrifices?

There is an additional issue raised by autarky: Is the self-sufficiency a matter of being blessed with abundant resources, or is it the result of conscious national policy and resolve?

Autarky as Policy

Consider petroleum/fossil fuels as an example. Nations blessed with large reserves of fossil fuels are self-sufficient in terms of their own consumption, but the value of their resources on the international market generally leads to dependence on exports of oil/gas to fund the government, political elites, and general welfare. This dependence on the revenues derived from exporting oil/gas leads to what is known as the resource curse: The rest of the oil-exporting nation’s economy withers as capital and political favoritism concentrate on the revenues of exporting oil, and this distortion of the political order leads to cronyism, corruption, and misallocation of national wealth on a scale so vast that nations suffering from an abundance of marketable resources often decline into poverty and instability.

The other path to autarky is selecting and funding policies designed to directly increase self-sufficiency. One example might be Germany’s pursuit of alternative energy via state policies such as subsidies.

That policy-driven autarky requires trade-offs is apparent in Germany’s relative success in growing alternative energy production; the subsidies that have incentivized alternative energy production are now seen as costing more than the presumed gain in self-sufficiency, as fossil-fueled power generation is still needed as backup for fluctuating alt-energy production.

Though dependence on foreign energy has been lowered, Germany remains entirely dependent on its foreign energy suppliers, and as costs of that energy rise, Germany’s position as a competitive industrial powerhouse is being threatened: Industrial production is moving out of Germany to locales with lower energy costs, including the U.S. (Source)

The increase in domestic energy production was intended to reduce the vulnerability implicit in dependence on foreign energy providers, yet the increase in domestic energy production has not yet reached the critical threshold where vulnerability to price shocks has been significantly reduced.

Assessing the Trade-Offs

This highlights the critical nature of the autarchic thresholds of systemic costs and freedom of action. Above a difficult-to-define threshold, the trade-off required to increase self-sufficiency to the point of being meaningful is too high in sacrifice or cost to the economy or society; the trade-offs required aren’t worth the gain in freedom of action and self-sufficiency.

Put another way: Below a difficult-to-define threshold, an increase in self-sufficiency does not yield either lower or more reliable economic costs, nor does it decrease the nation’s vulnerability to blackmail, price shocks, etc.

In other words, though dependence always has potentially negative consequences, it can also be cheaper, more convenient, and more profitable than autarky.

The diffused benefits of autarky are often overshadowed by the presumed burdens of increasing self-sufficiency. But this trade-off can be illusory. Though the status-quo players benefiting from dependence on foreign markets, trade, and capital will shrilly claim that the nation is doomed should their foreign-derived profits be sacrificed in favor of increasing autarky, a desire for more autarky often pushes the economy and society into a highly positive and productive search for greater efficiencies and more productive uses of capital.

Is the sacrifice needed to reach self-sufficiency as steep as presumed, or is a new order of efficiency enough to meaningfully reduce dependence on foreign resources and capital?

A Thought Experiment in American Autarky

If we look at America’s consumption of fossil fuels and its dependence on oil imports to feed its consumption, autarky forces us to ask: Exactly how difficult would it be to lower consumption enough to eliminate the need for imported oil? Would the economy suffer a death-blow if vehicle, heating, and appliance-efficiency standards were raised, and business travel declined in favor of telecommuting and teleconferencing, etc.?

The answer of those profiting from the status quo is, of course, “Yes, the U.S. will be fatally harmed if energy consumption declines,” but the reality is that such creative destruction of wasteful inefficiencies and consumption is the heart of free enterprise and the rising productivity that creates widespread prosperity.

If the U.S. had listened to the 1970s-era defenders-of-the-status-quo doomsdayers, who claimed that environmental codes and higher energy-efficiency standards would doom the nation, the U.S. economy would in fact be doomed by the absurdly inefficient energy consumption of that era. The U.S. economy has remained vibrant and productive precisely because the defenders-of-the-status-quo doomsdayers lost the political conflict between the forces of improved efficiency and productivity and the defenders of the inefficient, wasteful, and diminishing-returns status quo.

There is one other element in the calculus of dependence, vulnerability, and freedom of action implicit in any discussion of autarky. Despite the rapid increase in production of oil and gas in the U.S., America remains dependent on imports of oil. But not all foreign sources of oil, capital, expertise, etc. are equal; some suppliers may be stable, close allies, and share borders and standards of trade (for example: Canada, Mexico, and the U.S.), while others may be distant, unstable, and unreliable.

In other words, autarky may not be worth the cost if a nation is dependent on stable, close neighbors, but the value of autarky rises very quickly when a nation’s survival is dependent on distant, unstable nations with few ties other than the profitable export of resources.

Though a survey of America’s relative dependence and self-sufficiency would require a book, let’s look at a few charts to get a taste of America’s declining dependence on foreign-supplied oil.

Declines in consumption have the same effect in terms of reducing dependency as do increases in domestic production. Has the U.S. economy imploded as miles driven have declined? Or has the increased efficiency this implies boosted productivity?

U.S. imports of petroleum have declined:

U.S. domestic crude oil production has increased:

U.S. natural gas production has risen:

The U.S. oil/gas rig count is still far lower than the peak in the 1980s:

There are many issues raised by these charts, including the sustainability of increased production, the possibility of further declines in consumption, policies that affect production and consumption, and so on, but similar charts of grain, capital, expertise, goods, etc. would help to fill out the complex set of issues raised by declining consumption and increasing domestic production and productivity.

In finance, dependence can mean dependence on other nations for capital and/or profits. What is the consequence of rising autarky for an economy such as America’s that is heavily dependent on foreign markets and trade for the stupendous profitability of its corporations?

In Part II: The Consequences of American Autarky, we discuss this and other ramifications of America’s rising autarky.

America’s ability to project power and maintain its freedom of action both presume a network of diplomatic, military, and economic alliances and trading relationships which have (not coincidentally) fueled American corporation’s unprecedented profits. 

The recent past has created an assumption that the U.S. can only prosper if it imports oil, goods, and services on a vast scale. Could the U.S. shift production from overseas to domestic suppliers, and reduce its consumption of oil and other resources imported from other nations? 

Click here to access Part II of this report (free executive summary; enrollment required for full access).

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12 Comments

BSV's picture
BSV
Status: Silver Member (Offline)
Joined: Jan 26 2009
Posts: 170
Fuel rationing

It would be nice to know about how much auto fuel would be allocated to each U.S. family should we be forced one day to rely solely on domestic oil production. Should the dollar (I should say when) lose its reserve currency status, that question will take on increased importance.

The federal government will allocate whatever it needs to itself, of course, with a generous margin of error. Then, state and local authorities will be next in line and their allocations will be pretty generous as well. But for those of us who have no political connections (the 99%), what could we expect? Thanks to the current (but temporary) tight oil revolution, it might not be as bad as it would have been a few years ago. But I suspect that penciling in the numbers would be a pretty grim task.

I wonder how people would react should families be rationed to perhaps one or even a couple of gallons a day. Even with the recent increase in production from tight oil, there is a huge gap between domestic production and consumption. I've not even touched on what the price of rationed gasoline (or diesel) might be. A black market would surely emerge and the black market price would be astronomical. The authorities might rage about the black market but they could not stop it.

I do not even want to think about what happens to commuter cities such as Los Angeles or Houston, to mention just two. They lack mass transportation.

charleshughsmith's picture
charleshughsmith
Status: Platinum Member (Offline)
Joined: Aug 15 2010
Posts: 718
fuel rationing

Hi BSV:

I've thought about rationing for many years, and written some (what looks like crazy to conventional thought) projections on what could happen if fuel becomes very costly or rationed.  I believe (based on human response to real sustained shortages), people would get very creative. I recall the story of the isolated town (apocryphal, perhaps) that lost its generator. Residents quickly cut their electrical usage in half without any regulations. I know I appear like a bicycle fanatic to most because I bike almost as many miles as I drive, but given that most car trips are less than 5 miles, bikes are a potential alternative in non-extreme weather. Ditto car pools, min-vans, etc.  A HUGE percentage of fuel is wasted in the US (on business travel, sitting in traffic, 1-passenger vehicles, low-mileage vehicles, etc.)  Rationing would provide significant incentives to eliminate waste, and people tend to respond in ways that serve their self-interests. It might be a positive thing after the initial shock that we have to change wears off.

George Fleming's picture
George Fleming
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Posts: 2
fuel rationing

We should never have abandoned fuel rationing after WW2.  But that was not politically possible, even though some were farsighted enough to know that rationing would be necessary soon enough.  Even decades before, Edison realized that we would exhaust our fossil fuels and should begin to develop solar power.  M. King Hubbert's warning was a little later, but soon enough to have had good effect if enough of us had listened.  Instead, among other outrages we got the wholesale destruction of the trolleys and railroads. See a short history of that at http://www.verdant.net/natlcity.htm

There is some rationing by price now, but it is grossly unfair.  If the stockbroker had to bargain with the homeless man for fuel coupons so he could fill up his Beemer, that would be a first step toward fixing things.

But there would still be a very long way to go, and I don't see how we are going to get there.  In the last place I worked, some employees drove more than 100 miles one way every day.  One drove more than 150 miles.  Often it was because the wife didn't want to move to where the work was.  When fuel shortages put an end to these long commutes, modern industrial civilization will disappear, because it will not be possible to rearrange things fast enough.  If we had listened to Edison, Hubbert and others, we could have avoided this looming disaster.

 

locksmithuk's picture
locksmithuk
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Posts: 125
Fuel by the teacup

BSV, Charles:

 

Who'd have thought that Zimbabwe could teach us so much? For those of us who lived there it showed what life could be like under hyperinflationary conditions, and under fuel rationing conditions. I'm sure Arthur could probably also regale you with stories of using restrictive fuel rationing coupons from circa 1978.

I suspect that people are unaware of the true impact which consumer fuel rationing could have on their everyday lives. Blinkers begin to attach themselves to one's daily routine. "At what time should I leave my car parked in the 3-day fuel queue?", "Whose turn is it to take the 6 neighbours to work in their car this month?", "At what time do I have to return to my parked car in 3 days' time so that I can progress up the queue to the fuel pump, fill up, and still get to the supermarket afterwards before they shut, so that I can do my fortnightly grocery shopping and feed the kids?", "Which is the best & shortest route to drive so that I can travel along as many roads as possible on a downhill gradient?", "Which larger refrigerator should I buy so that I can store 2 weeks' worth of groceries at a time, now that I can't drive to the shops more regularly?"

 

In Zimbabwe the above typical daily preoccupations applied equally to fuel, ATM queues and to food. Try coordinating all of these scenarios simultaneously around your life and your job! Main Street will be forced into this kind of pattern should fuel become severely and suddenly rationed. It makes experts of us as logisticians, but it potentially narrows intellectual scope, and leaves little room for social pursuits and relaxation. On the face of it it seems subtle, but its ancillary effects on our time and our lives is huge.

Dwig's picture
Dwig
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Posts: 141
Thoughts on some bumps in the road to autarky

Charles, a very interesting speculation!

A few things come to mind:

  • You don't mention that the recent rise in US oil production is largely due to the fracking "boomlet".  From what I've been reading, this will likely peak before 2020, and due to the nature of the geology, will deplete rapidly after that.  A sane policy would treat this as the temporary windfall it is, rather than indulging dreams of "Saudi America".  (Charles, I'm not accusing you of this, but the "petrol dreaming" is so deeply entrenched in US domestic and foreigh policy, that it'd be difficult to impossible to make a relatively smooth transition to an energy policy based on declining availability.  This is especially so since it would imply a financial and economic policy to match, and we simply don't have such a model "ready for prime time".)
  • The image of the US as the sole remaining superpower is also still strong.  For instance, the feeling is that we need our hugely expensive and expansive military to "keep the global peace".  (Or, as David Graeber points out, to ensure that the US dollar remains globally accepted as the reserve currency.)  A move toward autarky would threaten a variety of global interests, with multiple consequences, and would surely be resisted by the global network of finance and industrial powers.
    (By the way, you've written about China before, on the basis of a more than casual acquaintance; what might the Chinese reaction be to a unilateral US move away from global involvement?)
  • On the other hand, there's also a growing awareness, in the US and elsewhere, of the need to move to a lifestyle roughly like autarky; this is being manifested more by local thought and action than in national policy.  Could autarky happen bottom-up, as the national fantasy cracks and crumbles?

(Update: looks like I should have read Part II before commenting!  I'll leave this here anyway, for what it may be worth.)

sofistek's picture
sofistek
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Posts: 818
Charts Accuracy?

I was looking at those charts and they didn't seem to ring true. If net imports are about 6.5 mbpd and domestic production is about 7.5 mbpd, that means the US uses about 14 mbpd. I'd heard that it was over 18 mbpd. Which is right?

The dry gas production graph looks very different from the EIA graph, but I see that the latter is zero based, so the slope up to 2012 looks very gentle, compared with the one here, otherwise they seem to show similar numbers. The EIA graph is also showing more recent data and shows a plateau for the last 12 months or more (presumably because fracking is not very profitable - if profitable at all - right now).

I couldn't quite work out the vehicle miles graph. It seems to be a graph of the percent increase over January 1971 of per-capita vehicle miles per period (not sure about the period but I guess that's not too important on this graph). So it doesn't quite give the full picture of how total vehicle miles driven has varied, since the total is, presumably, more important than the per-capita?

Humble_Investor's picture
Humble_Investor
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Lucky the Earth has more than one land mass

Thankfully our globe has a series of different land masses, and the advantage of this is we can borrow $$ from folks in the other land masses.

Imagine how terrible it would be if there was only ONE landmass on the globe, and only ONE country.

I can tell you right now, that their economy would be down the tubes, there would be mass poverty, very little infrastructure, etc.

Why you ask? Simply because as there is only one country, it means that they cannot lend money off other countries in order to improve their own circumstances, and without this ability to lend $$ from other countries, yep, sorry to say, but their economy will be right down the tubes. 

charleshughsmith's picture
charleshughsmith
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Posts: 718
good comments

Sofistek, the energy charts were prepared by PP.com contributor Davefairtex from raw data from govt agencies (EIA, I believe). Since the miles-driven were population adjusted, they are roughly comparable to per capita measures.  I think we're driving fewer miles per capita, and using less fuel to do so, hence a significant decline in consumption from 2008 peaks.

Although I didn't discuss this in this first series (which was already long enough), autarky strikes me as scale-invariant, meaning some communities will become more self-sufficient and rely less on other parts of North America. Perhaps the same will be true of regions and states. Any shift in relative dependency has the potential to upset the status quo, which is why it's such an interesting topic.

China would be impacted if manufacturing shifted to the Americas again, and if a global depression cut imports from Asia. The mideast is already being impacted by the relative reduction in OPEC's share of the global oil market. But the US also has an interest in maintaining energy for its allies, so I doubt the US would lose interest in oil exporters even if it were to (briefly) become oil independent.

But if the global economy contracts in a new financial crisis, as many of us expect, the desire to protect home markets and production could spur trends to autarky that would severely disrupt economies that are heavily dependent on exports--China, Germany, oil exporters, etc.

Yes, any increase in energy production domestically has a short shelf life. But as noted above, I see the potential cut energy consumption in half without major sacrifice.  As others noted, price imposes its own rationing at some point. Right now, that looks distant.

Most interesting comments on the impact of rationing--either by central planning or price. the web could enable a much more efficient use of resources, I think, as the logistics could be largely automated.

sofistek's picture
sofistek
Status: Platinum Member (Offline)
Joined: Oct 2 2008
Posts: 818
Scale

Thanks for the response, Charles. I'm still not sure about that vehicle miles driven chart as we have to just assume that the total vehicle miles driven (not per capita) shows a similar drop, but without the data.

You didn't mention my point about the charts of net oil imports and domestic production. The combined net imports and domestic production show a much lower total than I'd thought the US was using but the discrepancy may be because the total consumption includes stuff other than crude oil (e.g. natural gas plant liquids, biofuels, refinery gains).

I'm not sure that autarky is scale independent. That might be true up to a point if a country is large and have plentiful usable land but, for example, could the UK be self-sufficient with 64 million people?

No doubt large decreases in energy use could be made without much sacrifice, provided it is done through efficiency measures. However, it would affect energy producers, who would sell only half (in your example) the energy they do now (until economic growth or the rebound effect, spurs greater use), so that would definitely affect those employed by energy companies, directly or indirectly. Consequently, I don't think it's possible to significantly reduce energy consumption painlessly, though it must be done.

Tony

charleshughsmith's picture
charleshughsmith
Status: Platinum Member (Offline)
Joined: Aug 15 2010
Posts: 718
scale invariance and data

I am not sure about the data discrepancy and can think of a few possibilities but will have to look deeper at the standard sources.

You make an interesting point about scale invariance, and I would say that with a diet much lower on the food chain than it is currently accustomed to, the UK could probably feed its people.  If the rule of thumb is correct, 5-10 lbs of grain = 1 lb. of meat, then a significant reduction in meat consumption would greatly increase the calories available for humans. 

Land that could be productive but not at a corporate profit (for example, home gardens, urban gardens) could boost food production by as much as 30%, if other nations are any guide.

None of this makes sense as long as oil is cheap and grain surpluses are plentiful.

I think another topic of interest is regional autarky. Some areas in the US have plenty of water, soil etc., others do not. Will that eventually matter?  I don't know, but relative abundance of necessities may act as attractors to people who can choose where to live.

The jobs in energy might rise as it takes more capital/labor to extract the same quantity of net energy. For example, there is a lot of oil in old wells in the US but it takes a lot of capital and labor to install technologies to extract it. If oil stays at $150+ a barrel, a lot of old wells become good prospects for new investment, even though they typically yield trickles of oil (50-60 barrels a day, for example).

mannfm11's picture
mannfm11
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Joined: Nov 5 2011
Posts: 4
Miles driven

Interesting chart.  I recall when I was a kid, gas was 25 cents a gallon or less.  2000, it was CPI adjusted, about the same price.  As a high school kid, I would drive around in circles all night, as would my friends, usually on $1 worth of fuel.  A kid can't do that today, unless his mama and daddy give him plenty of money.  Long trips in small cars also isn't a joy ride, so I suspect those have gone away for many families.  the price mechanism has had its effect.  You might also recall that big SUV's and other large auto's were in vogue 10 years ago.  $100 fill ups changed that.

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
And Here it Comes.

The size of an empire is dependent on it's speed of communication.

Asimov.

Max Keyser discusses TTIP, a Super-National trade organization that can sue your elected Government  if they make laws that interfere with Big Business.

This is an attempt to impose order on a chaotic system. A top down centralist government, if you will. Destructive harmonies will shatter all illusionary mental constructs that they create.

Now watch Kali Dance.

 

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