Self-sufficiency
Self-sufficiency is on the rise.
The preceding decades of globalization made self-sufficiency a bad word, saved for things like North Korean political philosophy (juche) or Iran’s weapons development (Research and Self-Sufficiency Jihad Organization). However, self-sufficiency is surging in the democratic world.
In the last two years alone, there’s been self-sufficiency for semiconductors, vaccines, energy, currency, and even champagne.
Self-sufficiency is the capture and alignment of people, information, capital, and goods. These are the same factors that, when moving freely, accelerate globalization.
Capture and alignment are key. Capture means having all the ingredients, and alignment means having the recipe to combine the ingredients for something that tastes better.
In principle this sounds good: who wouldn’t want full control over these factors?
But self-sufficiency comes with real costs:
- Creativity and innovation suffer. Nothing kills a creative mind quicker than having everything you need at your fingertips.
- Competition is weakened and costs rise. Without influence from outsiders with competitive advantages, rent-seeking runs rampant.
- Supply chains become more brittle. Paradoxically, damage to one component of a self-sufficient system is harder to repair, because there are fewer substitutes remaining in the market.
- Technical advances are linear and centrally planned. Because self-sufficient systems are tightly coupled, advancement in one modular subsystem can’t slot in easily for step-change improvements.
We like to make self-sufficiency sound both benign and lasting, using terms like energy independence or semiconductor supply chain resilience, but the reality is that self-sufficiency is a short term remedy that neglects the impact of innovation on large systems.
Instead of self-sufficiency, we should build resilient systems that are modular by design, distribute innovation activity broadly, and can absorb outside shocks.
(Let’s see if the DC rebranding of “friend shoring” delivers.)
