The case for a bit more autarky
One of the few things that almost all economists agree on is that autarky – trying to be self-sufficient – is bad. Trade is good for the economy and for society. Trade lets nations access a far wider range of goods, produce the things they are comparatively good at, and it opens up societies to new ideas and cultural exchange. Autarky tends to make economies stagnate, protecting inefficient domestic firms, restricting the goods available to consumers and closing countries off to the best the rest of the world has to offer.
But what happens when you can’t trust your major trading partners any more? Trade creates interdependencies between countries, which are painful if they have to be suddenly unpicked. This seems to be in the early stages of happening to Europe, Canada, Mexico and all other countries that have been closely entwined with the United States of America.
The abruptness with which the world’s most important democratic nation has turned into an unreliable partner has been shocking, and demands a response. And while part of that response must be to lean more heavily on other partners among democratic nations, there is an element of risk in doing so. What has happened in America could easily happen – indeed, has already begun happening – in some European countries.
The response to Trumpism cannot just be about realigning alliances and economic partnerships. It is also the time to ask whether a bit more self-sufficiency is needed. And if so, how much, and self-sufficiency in what, exactly?
There are some very obvious economic links with the USA that Britain and other countries will need to try and unpick. Having nuclear warheads and fighter jets that can be shut off by a nation that might take a different side in a war to you is a very obvious problem. So too is relying on communications systems, such as GPS or satellite internet from other nations, as Ukraine is learning so painfully. This is alongside the security implications of sharing so much intelligence and access to sensitive systems with other nations, implications that have long been debated in relation to other countries.
I do not have the expertise to speculate on what the solution to these defence and security issues might be, but it seems implausible for Britain or any other European nation to go it alone on defence. A few of them might have the resources to run their own nuclear deterrent, but none can build their own individual satellite network. In a world with two superpowers, both of them with the potential to be enemies, smaller countries have to rely on each other. What they must try to do, I guess, is build systems where other nations can be cut out as far as possible if they cease to be trustworthy allies.
But defence is not the only problem. Energy is another. Europe has only recently recovered from a crisis borne of its over-reliance on Russian gas supplies. A big part of the solution to the 2022 energy crisis was to import more liquefied natural gas from countries like Qatar, and, yes, America. In a dangerous world, you cannot achieve energy security by importing oil and gas in tankers.
There is, though, a very good autarkic solution to our energy problems: clean energy. Clean energy can mostly be generated at home, whether via solar, wind, nuclear, water or geothermal. Electric vehicles and heat pumps can use that clean electricity to replace most of the other fossil fuels we import. It was already true, but it’s even more true now: clean energy is good for the economy, good for the climate, and good for national security.
Food security is another critical issue. Being able to source enough food to feed your population during a war or a crisis is critical. The term “food security” gets thrown around a lot in Britain, to argue against farmland being converted into other uses, but this is a complete misuse of the concept. If you care about food security – and I’m going to cite Dieter Helm approvingly here – you should care about things like fertilisers and farm machinery. Most European countries have enough productive land to feed their populations well, allowing for some limitations in diet. What we no longer have in Britain are any ammonia factories – a key ingredient of fertiliser, and a victim of high gas prices.
We can extend our vulnerabilities from food into water, too. I was horrified to learn during the preparations for a No Deal Brexit that there might be a risk to our drinking water supplies, as we import chemicals for water treatment. If crucial trading links get severed unexpectedly, it could create many such acute problems.
The approach we need is one that focuses on specific vulnerabilities, not broad threats. Britain has no shortage of water or agricultural land, but take away a few key chemicals and we have a problem.
Modern industries tend to have very complex supply chains, which cross borders and rely on free trade and cooperation to work. Understanding how each key supply chain works, and what the critical pinch points are, is already a vital task for industries. It needs to become a vital role of government as well, especially for those industries that are critical to national security.
As well as making statements like “we need to produce our own steel to help our defence industry” (we may well do), we also need to pinpoint and address specific vulnerabilities in a whole range of supply chains. Where those vulnerabilities are found, the answer may sometimes be to create some domestic production capacity – possibly involving state support where needed. But it may also be ensuring that we have a variety of potential overseas sources, and are not dependent on the stability or goodwill of a single trade partner. This is especially true for raw materials, such as the rare earths crucial to many green technologies, which cannot be produced at home.
Britain has the dubious benefit of being somewhat well prepared for a shift towards modern autarky. Having spent much of the last decade weakening ties with our closest trade partner, some of us know far more about the mechanics of trade than we ever dreamed. Our government, having prepared extensively for a No Deal Brexit and built our own trading systems, also has some skill in this area.
There is also the experience of the Covid-19 pandemic to draw on. Despite the appalling shock of 2020 and the long-lasting damage it caused us, it did also show how resilient our supply chains – and our society – can be. Every European country faced significant losses from Covid, but critical services and supply chains were able to adapt remarkably well after an initial shock.
That speaks to another element of the right approach to autarky: what really matters is autarky potential, or the ability to adjust quickly to changes in circumstance. It is not productive to switch to autarky preemptively, just in case there is a crisis, but it is vital to be able to switch quickly if there is one. That means having a variety of trade partners, contingency plans, stores of some critical goods and domestic production of others.
Another word for “autarky potential” is “resilience”. And of course a lot of what I’m talking about is resilience, albeit resilience to a specific kind of geopolitical problem. There are plenty of other types of resilience we need to focus on at the same time, chief among them resilience to climate change and to future pandemics. Fortunately, a lot of the actions that need to be taken to deal with climate change – clean energy, a focus on supply chains and infrastructure – are the same ones that help us deal with geopolitical risk. National security and climate security are essential complements – it is unwise to trade one off against the other.
This moment of sudden, global uncertainty does, then, call for us to think more about our own self-sufficiency. We may well need to disentangle ourselves from our closest ally, and in doing so avoid becoming similarly entangled with other countries. But this should be no old-fashioned type of autarky. It should be specific, focused on pinch points in supply chains and key goods, not broad sectors. It should be as much about diversifying our alliances and trading relationships as about making everything at home. And it should be about our ability to adjust quickly, our resilience – that thing that is talked about so much but acted on so little, until a crisis has already begun.
