Tuesday, March 31, 2020

Autarky: Further Considerations

     In all matters of economic analysis, it’s critically important – nay, vital — to keep Henry Hazlitt’s lesson at the forefront of one’s thoughts:

     The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

     In applying this lesson, one must remain aware that economic analysis faces its severest difficulties in dealing with time. Economics is about objectives, incentives, costs, and constraints as they affect the thinking of producers, consumers, and governments. While the action of those things is predictable, the amount of time it will take for them to bear fruit is not.

     In my previous piece on this subject, I used the specter of potential enemies as the spur for my thesis. A nation that must ponder the possibility of warfare, whether of the “flying lead” variety or any other, must be braced for it. Its supply of necessities must not be in the control of any potential enemy. This much, at least, “should” be “obvious.”

     The meaning of the word necessities is, of course, subject to contention. The necessities of human life – i.e., those things absolutely required to keep people alive — are food, clothing, shelter, and energy. But very few Americans use the terms needs or necessities in that limited a fashion. This is a consequence of our prolonged enjoyment of a historically unprecedented degree of comfort and convenience.

     Comfort and convenience are sly seducers. Isaac Asimov knew that very well:

     "This is a Seldon crisis we're facing, Sutt, and Seldon crises are not solved by individuals but by historic forces. Hari Seldon, when he planned our course of future history, did not count on brilliant heroics but on the broad sweeps of economics and sociology. So the solutions to the various crises must be achieved by the forces that become available to us at the time.
     "In this case, – trade!"
     Sutt raised his eyebrows skeptically and took advantage of the pause, "I hope I am not of subnormal intelligence, but the fact is that your vague lecture isn't very illuminating."
     "It will become so," said Mallow. "Consider that until now the power of trade has been underestimated. It has been thought that it took a priesthood under our control to make it a powerful weapon. That is not so, and this is my contribution to the Galactic situation. Trade without priests! Trade alone! It is strong enough. Let us become very simple and specific. Korell is now at war with us. Consequently our trade with her has stopped. But, –notice that I am making this as simple as a problem in addition, –in the past three years she has based her economy more and more upon the nuclear techniques which we have introduced and which only we can continue to supply. Now what do you suppose will happen once the tiny nuclear generators begin failing, and one gadget after another goes out of commission?
     "The small household appliances go first. After a half a year of this stalemate that you abhor, a woman's nuclear knife won't work any more. Her stove begins failing. Her washer doesn't do a good job. The temperature-humidity control in her house dies on a hot summer day. What happens?"
     He paused for an answer, and Sutt said calmly, "Nothing. People endure a good deal in war."
     "Very true. They do. They'll send their sons out in unlimited numbers to die horribly on broken spaceships. They'll bear up under enemy bombardment, if it means they have to live on stale bread and foul water in caves half a mile deep. But it's very hard to bear up under little things when the patriotic uplift of imminent danger is not present. It's going to be a stalemate. There will be no casualties, no bombardments, no battles.
     "There will just be a knife that won't cut, and a stove that won't cook, and a house that freezes in the winter. It will be annoying, and people will grumble."
     Sutt said slowly, wonderingly, "Is that what you're setting your hopes on, man? What do you expect? A housewives' rebellion? A Jacquerie? A sudden uprising of butchers and grocers with their cleavers and bread-knives shouting 'Give us back our Automatic Super-Kleeno Nuclear Washing Machines.'"
     "No, sir," said Mallow, impatiently, "I do not. I expect, however, a general background of grumbling and dissatisfaction which will be seized on by more important figures later on."
     "And what more important figures are these?"
     "The manufacturers, the factory owners, the industrialists of Korell. When two years of the stalemate have gone, the machines in the factories will, one by one, begin to fail. Those industries which we have changed from first to last with our new nuclear gadgets will find themselves very suddenly ruined. The heavy industries will find themselves, en masse and at a stroke, the owners of nothing but scrap machinery that won't work."

     No casualties. No bombardments. No battles. War of the subtlest sort...yet the most savage. A war that turns the enemy’s habituation to comfort and convenience against it.

     Are Americans prepared for that sort of war in this Year of Our Lord 2020?

     In composing the list of necessities, one must not go too far afield...but one must not stop short, either. Food, clothing, shelter, and energy are end-user consumables. They’re made available to the consumer by a process of production and distribution that has many components. So we must look also to the supply chains that provide those components. Are they reasonably secure, or could they be badly disturbed by some hostile power?

     The item that deserves deep consideration is food. Our food supply chain involves major technological developments unknown a century ago. Agrochemicals make possible the great productivity of our farms. Massive machines do the bulk of the labor. And of course, the food must get from the farms to the supermarkets, which requires trucks and trains.

     In recent years we’ve heard several times about China’s dominance of the supply of rare earth elements. Several of those elements are important in electronics production. Do any of them figure into agrochemicals or the machines, trains, and trucks that bring the food to us? If so, what could be done about it?

     As I mentioned in the previous piece, much of the reason for the offshoring trend of recent decades has been federal over-regulation of our productive sector, particularly of an environmentalist variety. President Trump has already had some success in luring American firms back onshore. Perhaps he will succeed in reversing the flow – i.e., to make the U.S. a magnet for the productive enterprises of other nations, as it once was – but that remains to be seen.

     What also remains to be seen is whether the regulatory bureaucracy, like Tolkien’s Shadow, “takes another shape and grows again.” The bureaucracy is a favored destination for persons who like power but are ill-equipped to produce anything Americans actually want. Moreover, it offers that which the lazy and useless have favored throughout history: security. Changing the incentives involved by repealing the Pendleton Civil Service Reform Act and once again outlawing public-sector unions would prevent the resurgence of this “fourth branch of government” nowhere contemplated in the Constitution.

     Expect the Deep State to fight with the ferocity of a wounded lion.


Jess said...

Bureaucrats created a beast with self-preservation a demand. To make things worse, they introduced their politics into their job, and ignore Constitutional rights to perpetuate their existence.

I think you hit the nail on the head with the comment: "Expect the Deep State to fight with the ferocity of a wounded lion." They've proven they'll destroy the U.S. to keep their power. How far they'll go to survive is yet to be seen.

Paul Bonneau said...

There are a few past cases of reform turning things around. The New Zealand labor government a couple of decades back got things going reasonably again by ensuring everybody's ox was gored all at the same time - doing it piecemeal never works well. One could say China was a huge example of easing the regulatory state, but that was aided by American wealth and consumption. But I think, most of the time, it is war that overturns the bureaucracy in any significant way.

Now that America is producing petroleum again, I think the food supply chain is much less vulnerable than it used to be. I doubt the Chinese have such a lock on rare earths as we imagine, and you don't really need anything special to run a tractor. Whatever electronics there is in one, is probably easily hacked anyway. Finally, if I'm not mistaken, the Chinese are much more dependent on OUR food production than we are on theirs.

The ruling class needs an external enemy, and China seems to be the enemy du jour these days; but our real enemy is and always will be Washington DC. They are the only ones who have the means and motivation and the history of oppressing us. Every time you pay a federal tax you have become a victim.