> xeno syndicated wrote:
> > Little Paul wrote:
> @xeno:
Much of what I want to say about that you find in this link:
http://en.wikipedia.org/wiki/Mercantilism
Could you be more specific?
Actually, it's pretty much what Flint said before you decided to ignore it.
If Japan, for example, were to try to be self-sufficient, it would have serious problems. Agriculture wouldn't exactly be friendly to them. The country has little, if any, oil resources of note. In addition, the natural resources necessary to even produce technology (various rare earth metals, for example... ask Little Paul about this one) would be unavailable to the country. Long story short, they'd be back to a pre-industrial era.
Historically, drives toward self-sufficiency have had drastic consequences for the world. European nations in the 1500's subscribed to the theory of mercantilism (self sufficiency, the drive toward being a net exporter). As a result, European nations were driven to search for territory in Africa, Asia, and the Americas to expand their own production base and gain an advantage in the trade field by forcing their colonies to only trade through their overlord. The result: 400 years of European imperialism, the colonization and subjugation of millions of people, and plenty of colonial wars, ranging from the Seven Year's War, American Revolution, War of 1812, the Napoleonic Wars, the Franco-Prussian War... there's quite an extensive list! You see, when people are dead set on the idea that they need to produce everything themselves, and they are unable to efficiently produce everything themselves... their only alternative is to find another nation which can more efficiently produce the resource themselves and conquer that region in order to make it part of "themselves."
Another example is WW2. Japan had an initial drive toward regional imperialism, but nothing expanding to global levels early in the war. Then, in retaliation against Japan's expansion, the US placed an embargo on exports of oil to Japan. Japan had no oil resources of its own, so unless it obtained resources, it was doomed. The result? Japan was forced to switch tactics and directly attack the United States with the hope of securing some access to American oil reserves. Self sufficiency drives lead to resource wars.
Trade fixes this issue. In the current economic climate, Japan still has very little natural resources of its own. However, it's probably become stronger in the global political arena than it ever was during WW2. Japan is able to import its supply of rice, wheat, meats, steel, rare earth metals, and other materials. Japan can then use its skills to do what it does best (manufacturing) to produce resources for global export. By manufacturing for the world, Japan is able to take advantage of economies of scale (the fact that the more goods any particular factory makes, the less the expenses will be for that particular good at that particular plant, up to its maximum capacity) to maximize its production. In contrast, if other nations were to try and be self-sufficient in this area, they would each need to build their own smaller, less efficient factory to produce those goods.
Japan has been able to become a global economic center, despite having hardly any natural resources, because Japan can focus on cultivating the resources which are most productive in Japan (its manufacturing base and a well-educated population), rather than attempting to obtain production facilities in resources which Japan does not possess. I would say this has allowed Japan to be more powerful today than it ever was during WW2, even considering that Japan has only a skeleton of a military.
From a perspective of pure economics, let's look at a theoretical example to demonstrate this issue:
Assume two countries exist, Oiltopia and Carland. Carland has a factory in place which would be able to supply cars for 100 people. Oiltopia has easily accessible oil reserves able to supply oil for 100 people. That is, Carland has a comparative advantage in producing cars, while Oiltopia has a comparative advantage in producing oil. If these nations were interconnected through trade, Carland could exchange cars for oil to supply both populations.
Alternatively, let's assume Oiltopia wanted to produce its own cars, stop trading with Carland, and become self-sufficient. Oiltopia would need to invest cash into building a factory in Oiltopia to build 50 cars. The development costs money. Then Oiltopia would need to train people in car manufacturing who previously had no experience in the industry. That costs money. The final factory won't be able to take advantage of the economies of scale of the Carland factory, having larger fixed costs... that will make Oiltopia's cars more expensive.
Once Oiltopia actually gets that going, we now have a system where, combined, Oiltopia and Carland could produce 150 cars, but only have the demand for producing 100 cars. The result, then, is that Carland's factory will only produce at half the rate it normally would, driving up the cost of its cars as well.
Meanwhile, Carland will need to start supplying its own oil. Even if Carland has oil resources that are as easily accessible as Oiltopia's resources, Carland would need to invest the cash to find oil and extract it (that costs money), and they would need to train people into the new positions. Just like with the car factory, Oiltopia would have to leave half its oil production idle due to a lack of demand, and both countries would see a rise in prices of oil due to decreasing economies of scale on both parts.
Both of these assume ideal scenarios for self-sufficiency, however. In reality, Carland will most likely have oil resources that, if available, aren't as easily accessible as Oiltopia's resources, driving up its own costs of oil production. Both Oiltopia and Carland would have problems establishing new training systems for industries with which they aren't familiar. In effect, both countries will need to reinvent the wheel. Meanwhile, their counterpart would have a fully matured industry that could have provided those resources, but now just sits idle with half its production going to waste.
This scenario explanation didn't even get into the issue of natural resources (such as rare earth metals), which distribute comparative advantages to nations that can't easily be duplicated (although it demonstrates my point, manufacturing is probably a terrible example because it's much easier to build a new factory than it is to find a new energy source).
Little Paul, does that sufficiently summarize your argument?
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