Friday, March 22, 2013

Autarky - economic

Autarky

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Economic systems
Autarky is the quality of being self-sufficient. Usually the term is applied to political states or their economic systems. The latter are called closed economies.[1] Autarky exists whenever an entity can survive or continue its activities without external assistance or international trade. Autarky is not necessarily economic. For example, a military autarky would be a state that could defend itself without help from another country. Autarky can be said to be the policy of a state or other entity when it seeks to be self-sufficient as a whole, but also can be limited to a narrow field such as possession of a key raw material.

Contents

Etymology

The word "autarky" is from the Greek: αὐτάρκεια, which means "self-sufficiency" (derived from αὐτο-, "self," and ἀρκέω, "to suffice"). The term is sometimes confused with autocracy or autarchy (Greek: αὐτoκρατία/αὐταρχία "government by single absolute ruler") .

Modern examples

Mercantilism was a policy followed by empires, especially in the 17th and 18th centuries, forbidding or limiting trade outside the empire. In the 1930s, autarky as a policy goal was sought by Nazi Germany, which maximized trade within its economic bloc and minimized external trade, particularly with the then world powers such as Great Britain, the Soviet Union, and France, with which it expected to go to war and consequently could not rely upon. The economic bloc wherein trade was maximized comprised countries that were economically weak—namely, those in South America, the Balkans and eastern Europe (Yugoslavia, Romania and Hungary)[2]—and had raw materials vital to Germany's growth. Trade with these countries, which was negotiated by then Minister of Economics Hjalmar Schacht, was based on the exchange of German manufactured produce directly for these materials rather than currency, allowing Schacht to barter without reliance on the strength of the Reichsmark.[3] However, although food imports fell significantly between 1932 and 1937, Germany's rapid rearmament policy after 1935 proved contradictory to the Nazi Party autarkic ambitions and imports of raw materials rose by 10% over the same period.
Today, complete economic autarkies are rare. A possible example of a current attempt at autarky is North Korea, based on the government ideology of Juche (self-sufficiency), which is concerned with maintaining its domestic localized economy in the face of its isolation. However, even North Korea has extensive trade with the Russian Federation, the People's Republic of China, Syria, Iran, Vietnam, and many countries in Europe and Africa. Bhutan, seeking to preserve a manorialist economic and cultural system centered around the dzong, had until the 1960s [1] maintained an effective economic embargo against the outside world, and has been described as an autarky. With the introduction of roads and electricity, however, the kingdom has entered trade relations as its citizens seek modern, manufactured goods. North Korea has also had to import food during the 1990s due to wide-spread famine.

Historical examples

  • Afghanistan under the Taliban, from 1996 to 2001.
  • Albania became a near-autarky in 1976, when Communist Party leader Enver Hoxha instituted a policy of what he termed "self-reliance".[4] Outside trade increased after Hoxha's death in 1985, though it remained severely restricted until 1991.[5]
  • Austria-Hungary (1867–1918) was an exclusive economic and monetary union with a population of more than 50 million people. It was independent of the world market, thus autarkic.[6]
  • Burma followed a policy of autarky known as the Burmese Way to Socialism under dictator Ne Win, who ruled the country from 1962 to 1988.
  • Cambodia under the Khmer Rouge, 1975–1979.
  • Guyana under Forbes Burnham's PNC dictatorship, from 1970 to 1985
  • India had a policy of near-autarky that began after its establishment as an independent state, around 1950; it increased until 1980 and ended in 1991 due to imminent bankruptcy.[7]
  • Italy, Benito Mussolini claimed to be an autarky,[8] especially after the 1935 invasion of Abyssinia and subsequent trade embargoes. However, it still conducted trade with Germany and elsewhere.
  • Japan was partially an autarky during the era known as the "Edo period", prior to its opening to the west in the 1850s, as part of its policy of sakoku. There was a moderate amount of trade with China and Korea; trade with all other countries was confined to a single port on the island of Dejima.
  • North Korea's official state ideology, Juche, is based heavily on autarky.
  • Romania in the 1980s. Nicolae Ceaușescu proposed such goals as paying the entire foreign debt and increasing the number of items produced in the country and their quality. The aim of these policies was to reduce dependency on foreign imports, as the relationship of Ceaușescu with both Western and Communist leaders was worsening.[citation needed]
  • Spain, under dictator Francisco Franco, was an autarky from 1939 until Franco allowed outside trade again in 1959, coinciding with the beginning of the "Spanish miracle".[citation needed]
  • The United States, while still emerging from the American Revolution and wary of the economic and military might of Great Britain, came close to complete autarky in 1808 when President Jefferson declared a self-imposed embargo on international shipping. The embargo lasted from December 1807 to March 1809.[9]
  • In the Dominican Republic, the rural peasants, escaped slaves, and freed slaves that lived in the sparsely populated woodland interior of the island nation between the 1600s and early 1900s. The weak Dominican government had no control on these autonomous subsistence agriculture based communities.

Economic and political dilemmas of an autarky

A self-sufficient economy can experience diseconomies of scale in the public and private business sectors. It is evident that several nations in the world do not have direct access to certain raw materials such as oil, coal, gas, wheat or fabrics such as wool due to geographical boundaries including climate, location, land size or population numbers.
Therefore the production of scarce resources becomes relatively expensive and a large cost to consumers and firms that need to pay a higher price for these goods and services.
Beginning after the close of World War II, and coming into full prominence in the mid-1970s, trade policy architects of the world's highly industrialized nations began to embrace a transnational system of production, exchange & capital mobility in a process that has come to be known as Globalization. Proponents of Globalization, often referred to as advocates of Free Trade, embrace the economic philosophy of Neoliberalism articulated by economists working in the Neoclassical tradition, such as Milton Friedman. Neoliberalism emphasizes the Ricardian concept of comparative advantage over theories of Import Substitution Industrialization, which had gained prominence in the first half of the 20th Century and which involved a limited use of protectionist measures. Examples of Import Substitution Industrialization regimes include the Dirigisme of France in the De Gaulle era, Stalin's advocacy of Socialism In One Country and the economic policies of Taiwan and South Korea in the 3 decades following the 2nd World War. Import Substitution Industrialization combines aspects of Infant Industry protection, promoted by Alexander Hamilton and Friedrich List, and which defined the trade policy of the United States and Britain during the 19th Century, with Keynesian stimulus policies.
Proponents of comparative advantage believe that trade without tariff restriction and regulation will benefit all participating parties, regardless of asymmetries in economies of scale, infrastructural development or commodity holdings between them. Critics, and those associated with the Anti-Globalization Movement, claim that the model has been unevenly applied to favor multinational corporations over local producers & retailers, and has led to a model of global domination along the north-south divide, characterized by a rich core and an impoverished periphery. As the political influence of those promoting Neoliberal stances and Globalization gained prominence during the 1970s, the advocates of Import Substitution Industrialization, Protectionism, Social Corporatism, Syndicalism, many models of Socialism and other forms of Autarky or semi-Autarky began to occupy an increasingly marginalized space in public policy circles, professional economics and elected office.
Due in no small part to the influence of transnational economic bodies such as the World Bank, the International Monetary Fund, the World Trade Organization, the G7, G8, G20, and trade agreements between nations with differing degrees of industrialization such as the Central American Free Trade Agreement, the North American Free Trade Agreement, the Free Trade Agreement of the Americas, the European Union, AFTA, ACTA and TPP, regions of economic exchange have become more integrated across the world than ever before and supply chains for vital commodities and products previously maintained within national borders have became distributed across international lines. Increasing financialization of commodity, industrial and commercial wealth and increasing specialization of national and regional economies and has left them vulnerable to the risk of capital flight, in the face of competitive pressure from other producing nations or localities.
The global integration of economies effected by these agreements has resulted in a gradual shift of the composition of wealth among the elites in many large industrial states, from industrial activities, whose proceeds derived mostly from domestic sales, to financial activities, whose profits are stem from substantial investments in foreign trade, including developing markets. This shift from national to transnational sources of profit among the wealthiest has, in turn, altered the focus of dominant lobbying interests across the developed world and, since the mid-1970s, greatly weakened the political bargaining power of proponents of Autarkic principles in many legislative bodies. The domestic changes brought about by a continued entrenchment of Neoliberal economic policies in multinational trade agreements and economic forums has also led to a feedback loop, wherein influence within and thus support for such bodies predicates favorable national economic outcomes for the commercial constituencies that hold most political sway across the political spectrum in many nations. As a result, political parties, such as Britain's Labour Party, France's Socialist Party (France), and Mexico's PRI, which, from the 1930s - the 1970s, fiercely championed the protection of domestic industry and promoted the nationalization of large infrastructural assets, have, since at least the 1990s, abandoned these stances in favor of an internationalist trade policy and public-private partnerships.
Cheaper labor, commodity and compliance costs for multinational corporations, access of corporations to raw materials and consumer markets located in previously autonomous regions, and the ability to establish publicly funded zero-tax export zones with minimal regulation are major motivational factors influencing the growth of international trade law and property law harmonization across the world. In this period, and in part as a result of the economic changes brought about by Globalization, geopolitical strategy, military policy and domestic economic policy has become increasingly subject to the lobbying influence of major multinational firms, marginalizing proponents of Autarky across the political spectrum in many countries. These changes have resulted in a corresponding reduction in the national economic self-sufficiency of many nations, whether highly or sparsely industrialized.

See also

Local Autarky
National Autarky
Left-Wing proponents of Autarkic Principles:
Statist:
Anti-Statist:
Left-Wing opponents of Autarkic Principles:
Right-Wing proponents of Autarkic Principles:
Right-Wing opponents of Autarkic Principles:
Autarkic principles without political affiliation:
Macroeconomic Theory of Autarky
Proponents or Partial-Proponents of Autarky:
Opponents of Autarky:
Relevant Microeconomic Theory Topics
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