Economic specialization around the world, and/or self-coherent countries. Someone I talked to mentioned the Suggar factory in Groningen had to cut its production not because of a hard quota reduction (as I previously thought), but because above a certain quota the subsidies where withdrawn. I suppose in principle it isn't a good idea to subsidize production of anything that can adequately be produced in an open and free market. In a world wide economy, if true dedicated specialization occurs, that is a situation of maximum economic profit. Or maybe it isn't: not only is the cost of deep inter-dependence the spreading of a local disaster/problem to many corners of the world (for example the fruit harvest was destroyed in the fruit-dedicated nations because of exceptional weather there, assuming the fruit-dedicated nations in the deeply interdependence model are in the ideal geographic spot for fruits on the Earth, causing immediate food problems in the other nations who don't produce any fruit anymore), over time competition is lost and monopolization can occur. (I didn't come up with that obviously correct idea.) If the area of fruit productions, maybe several nations, feel that they've monopolized a global market, they can easily team up and ask higher prices because the whole world depends on them. That would work until an equilibrium is achieved just below the cost of the other nations producing their own fruits again. Thus marginalizing the benefit of global specialization. Needless to say, regulatory activities will do little or no good, and bring in the problem of the entire world becoming one nation under one Government (which is associated with loss of democracy and increased corruption - the world is just too large and too complicated to fit under one Government IMHO). Then, the benefits of world-wide specializations more or less gone or in serious doubt, the benefits of "each Nation a coherent nation" come out better. It increases quite dramatically the diversity of production, and therefore the competitiveness world wide. If each Nation tries to stimulate at least some local markets, for instance through import tarrifs or whatever else might protect the home market to some extend, then there could exist at least to some extend an industry in all of the important areas. On the one hand this will obviously cut economic efficiency. On the other hand one can not expect every nation to be a top competitor in every type of industry. If there is no protection of local markets at all, the danger is a global specialization will occur because that is the economic law assuming the public will buy lowest cost for highest quality and pay no significant heed to local production. It is a case of reducing economic efficiency in exchange for a stronger world in which each nation has all the essential industries within their borders (with the exception of the very small nations). A coherent national economy is obviously very important for political sovereignty and true independence. Is that worth the trouble and reduced risk, what is the cost of global economic problems and what is the cost of a certain level of protectionism that would achieve most/all nations becoming self-contained and coherent in principle. The cost of global economic problems would be that perhaps entire industries would have to be restarted if trade falls away. The cost of coherent nations with import tarriffs means lessened economic prosperity. The cost of global integration and interdependence is loss of sovereignty, it might be a path to a one world nation, and it could be reason for conflicts. In a modular national coherency model, international trade is still existing and could still be very important, but it would not press out of existence complete industries, except for certain products that can't be created inside a certain nation. So maybe much clothing comes from over the border, and we export a lot of suggar say, but ideally we'd still have a sizeable clothing industry of our own, while other nations maintain some suggar factories of their own. Should they fall away we can make our own clothing easily, and would. Should we fall out the other nations could produce their own suggar. If we are specialized in suggar, our suggar could become cheaper then less specialized nations. An import tarriff would reduce that benefit and stimulate local suggar production. I suppose it is at least useful to remember the size of a modern nation, which is very great. Say we want to have our own computer hardware production in Holland, or do something in that field at least. Say 1 in 10.000 persons busies itself with that. In a nation of 15.000.000 persons that is 1.500 persons. If you put 1 in a thousand there then it is 15.000 persons. Can we afford 1 in a thousand to work in such an industry: I suppose it could be done. Can we have an industry with some relevant production with that many people, I guess with 15.000 people we certainly could make some types of chip circuits. If all else fails maybe we could fabricate circuits for our own traffic lights and other infrastructure related products, which if having enough quality could be bought up nationally. This would certainly build national expertize in that industry, which can be helpfull to who knows how many other sectors in the nation. Then we aren't completely depending on other nations, and would have our hands tied behind our back if the other nations start to make demands on these specialized products that we can't do without (anymore). I guess it is a difficult trade-off between apparent and certainly short term economic efficiency, and less obvious long term national strength and independence. In the very long run the model with greater national independence and meaningful competitive representation of all industries could be most profitable, as the diversity and greater spread of knowledge and abilities around the world could push forward economic development at a greater speed (diversity also means a greater change of scientific discoveries). Hence my idea would be: trying to have most/all important industries represented in each nation (of adequate size, a nation of 2.000.000 people probably can not have an space satalite industry of its own **)), allow free international free trade but not to the extend it whipes out apparently competitive national industries. To an extend national industries could be made to suffer from foreign competition, so they also try to stay competitive (not including the slave-labor problem, slave labor is obviously not good and nobody can price compete with that or should be expected to win or compete.) I suppose in practice something like this can mean: - we allow a certain amount of foreign apples, up to 80% of national consumption - the remaining 20% should be locally grown Or: every important apple is 5 cents import tarrif, because that happens to yield us a local 15% apple production Or: free trade in all apples because people buy the local apples at a rate of 65% already, which is probably enough to have a meaningful apple industry here. It certainly would give Government something to do. Needless to say import tarriffs will restart the smuggling business, the more smuggling the higher the import taxes. If targets can be achieved without import taxes it would be better I guess. posted on Thursday, April 09, 2009 9:08 PM Comments # re: Economic specialization around the world, and/or self-coherent countries. jos boersema Assuming transport costs are insignificant. I suppose, by the way, that one of our big problems these days is the ridicilously low cost labor in certain areas in the world. Those people should fight for a fair share, in the absence of that we have a big problem in that we need to be principled enough to put high tarriffs on these slave-labor products to protect our own industries and not reward the slave bosses. In the short term that will cost us all these very cheap products, but in the long run we maintain our industries. Note also that if we allow production to go to the wage-slave-labor side, in the end we are just hollow shells of nations with nothing to trade in exchange for the slave products. In theory we then collapse and have to rebuild. I guess that means we need to put realistic import tarriffs on slave-labor products, and try to get these people in these nations to start earning fair wages and getting fair benefits. The way things are I don't think you can say the people in these other nations are just working a lot harder and happier with less, because they often can't even buy their own products, or can they. It isn't exactly a stable social situation. Hence it makes some sense that we need special policies to deal with this flood of ultra-cheap production, so that we won't also import the social/economic instability. Meaning: far eastern electronics will get a lot more expensive because of import tarriffs, maybe even American build goods also if that is also ultra-cheap labor produced. We will own less, simpler cheaper cars and electronics and everything. But there would be more industry in our own (western European) nations, more home-build cars and electronics and so on. But economic prosperity would be reduced in the short term, in exchange for long term economic and social stability. I don't see how in the long run the slave-labor production can be really stable, it seems it will have to change some day. We might as well pre-empt that change as if it already occured. Question is: will poeple be willing to pay the economic price. Posted @ 4/9/2009 9:29 PM Post Comment **) Then in that case, that 2.000.000 nation may want to use satellite technology the least possible, not for essential needs, to increase independence. To be ready any second to do without it, and enjoy it. Could also reduce potential for conflict. Maybe the current aggressive stance of the NATO toward energy, that they would potentially attack militarily if other nations exercise their sovereign rights over their very own resources from their very own soil, is an interesting example of the tension that deep economic inter-dependency can lead to. If we really need XYZ, and if another nation for whatever reason decides to do whatever on their own soil with their own resources, suddenly we can have a big war. A war unlikely to have emerged if we didn't really need XYZ, but had other options ready. Needless to say: independent production is infinitely more important for the essentials (water, food, shelter), then for the luxuries. I suppose that the psychological feeling from being a coherent independent nation is also worth something (peace of mind?), a "product" deep global economic integration probably doesn't produce.