Autarky refers to a nation that operates in a state of self-reliance, characterized by self-sufficiency and minimal engagement in international trade. Originating from the Greek words autos (meaning “self”) and arkein (meaning “to ward off” and “to suffice”), the concept denotes a closed economy that lacks external support, trade, or aid. While the notion of a fully autarkic nation remains theoretical in modern times, degree-based autarky practices persist due to the complexities of global supply chains.
Embracing Autarky: A Closer Look
Autarky represents an extreme form of economic nationalism and protectionism. Nations often pursue autarkic policies to secure essential goods and reduce dependence on foreign nations thereby mitigating external influences. Regardless of political inclinations, autarky proponents argue for domestic spending and the retention of wealth nationally. Although such ideas tend to resonate with nationalist and populist sentiments, their practical feasibility remains contentious.
Key Takeaways
- Autarky signifies self-sufficiency, typically aiming to minimize reliance on international trade.
- In the modern era, no nation achieves full autarky, with even the most isolated engaging in some level of international trade and aid.
- North Korea and Nazi Germany serve as historical instances of autarkic policies.
- Proponents of autarky often use populist rhetoric to advocate for keeping money within the national borders.
The Economic Debate Around Autarky
Despite the populist allure, autarky’s economic downsides challenge its practical application. Esteemed economists like Adam Smith and David Ricardo countered autarky with advocacy for free trade. Smith argued that nations should specialize in goods where they hold an absolute advantage, thereby expanding mutual wealth—a principal argument presented in his work The Wealth of Nations. Ricardo refined this idea, introducing comparative advantage, emphasizing the benefits of producing goods where nations fare relatively better. Such specialization fosters collective prosperity in the global trading system.
On a practical level, opting out of global trade mirrors the drawbacks of self-sufficiency at a smaller scale. For instance, a family dedicated to creating all goods in-house would struggle with productivity outside the home, earning less and contributing minimally to the broader economy. Nationally, this manifests in lesser economic output and missed trade opportunities.
Historical and Contemporary Autarky Examples
Nazi Germany and North Korea
Autarkic policies prevailed under mercantilism in Western Europe from the 16th to the 18th centuries, only to be contested by free-market advocacy from thinkers like Smith, Ricardo, and Bastiat. Nazi Germany’s economic strategy sought autarky for wartime resource security. Conversely, contemporary North Korea epitomizes self-reliance through its doctrine of juche—intentional and externally imposed owing to international sanctions—thus remaining isolated in the global arena.
Autarky Price and Economic Calculations
A related term, autarkic price, references the price of a good within an autarkic state. This price must offset production costs in a closed economy. If production costs surpass those of other nations, it implies deadweight loss for the autarkic economy. Although sometimes used to identify comparative advantages, true advantages usually emerge through market forces rather than preset economic models.
Related Terms: Economic Nationalism, Protectionism, Mercantilism, Comparative Advantage, Autarkic Price.
References
- Journal of Economic Perseptives. “On the Genius Behind David Ricardo’s 1817 Formulation of Comparative Advantage”.
