Is Economic Self-Sufficiency a Myth?

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1:52You'll have everything you need to scale your go-to market efforts. Elevate your wins with Adio. Start your free trial at adio.com slash iHeart. Bloomberg Audio Studios. Podcasts, radio, news. What I would point out to people who take the view that globalization has gone too far is that you'll miss it when it's gone. We can't roll up those supply chains and cut ourselves off from other countries without dramatically changing the way we live.

2:32I'm Stephanie Flanders, Head of Government and Economics at Bloomberg, and this is Trumponomics, the podcast that looks at the economic world of Donald Trump, how he's already shaped the global economy, What on earth is going to happen next? This week, why you'd miss globalisation if it went, probably a lot more than you think. There have been a lot of books written in the last few years about globalisation, deglobalisation and the populist threats to integration, but one that's a bit different is Ben Chu's Exile Economics, What Happens If Globalisation Fails. Ben is the policy and analyst correspondent at BBC Verify and was previously economics editor of BBC Newsnight.

3:12A job I used to have a million years ago. What's distinctive in Ben's approach is he's taking the arguments against integration, you might say, both seriously and literally. He's asking not just whether it's desirable for nations to shun globalisation, to be self-sufficient, but whether it's even possible. I sat down with him in late June at an event organised by The Conduit in London to discuss his reporting, his style of storytelling, and how his own family history played a part in the development of the book. I thought it was worth sharing with you an edited version of that conversation. I started by asking Ben why he decided to write the book.

3:57On that question, I feel incredibly honoured to have had a sort of front row seat to see the impact of globalisation firsthand. And of course, what does that mean? We've all seen globalisation in our lives. But because my family came from China, my father's family came from China in 1960. He came over to the UK. I was born here. But he's still got family back in China. And I first visited, I write about this in the book, but I first visited China in 1985. When I went there, I was quite a young child. And I still remember it incredibly vividly, the lives they were living those 40-odd years ago.

4:34and it was incredibly frugal really you know family of six lived in about three rooms they would pull out mattresses from under the beds and all sleep on the floor just simply because that's the only way they could live they didn't have things like washing machines microwaves we were living in hong kong at the time so they asked us to sort of go to this special friendship store which is the only place where you could get western white goods and you had to be a foreigner to buy them, IE, from not from China. And then we sort of bought it and then gifted it to them. And it's crazy now because you think about, have you ever been to China?

5:08I'm sure a lot of you have been, just like how consumerist it all is. You can get anything there that you can get here. iPhones, laptops, certainly washing machines. So to see firsthand how their lives have changed in my lifetime. And I think it is very largely due to globalization. So I suppose the question is why did I want to write this book? Because I think that I could bring something, a bit of personal experience, if you like, to seeing how the good that globalisation has done to my own family. And to see it very vividly in a personal way really brings it home. And when we hear people like Robert Lighthizer, who was Donald Trump's first trade advisor in his first term, he wrote this book that says the title No Trade is Free, and he very explicitly states it was a mistake to trade with China or to allow China specifically into the World Trade Organization in 2001.

6:05It was a mistake. And I just found that incredibly jarring because what comes into my mind when I hear that is my own family back in Guangzhou in southern China. I was thinking, well, it really wasn't a mistake for them. And now we can talk about the ways which China does create very serious problems for the world trading system in many, many ways. But I think on a very personal on human level, I think I really wanted to tell that the other side of the story, actually, and bring that personal experience to bear, I think. And of course, I find that criticism about the entry to WTO jarring for a whole other reason, because when I was at the US Treasury, we were just negotiating the China entry to the WTO.

6:45And since then, almost everyone thinks that that was a mistake, including many of the people who were involved in negotiating it, because various assumptions were made about what was going to happened to China after that, that they would basically become more like us and sort of market driven, that being part of the global economy would push them on this same path that we've all been on. And that clearly has not happened. And you engage very directly with that in the book. We should part that briefly, but I guess we should also slightly lay out your stall in terms of, you know, what's the architecture of the book?

7:20How did you decide that there are real things that people are responding to when they're nervous of globalisation. Yeah, absolutely. So the gestation of this book was really in the pandemic when the question that was arising in lots of people's minds was, hang on, has globalisation gone a bit too far? Are we a bit too interconnected? Has it made us vulnerable where we thought it was making us more prosperous? We all remember in the pandemic the shortages of things like masks, medicines, and hard on the heels of that, of course, we had Russia's invasion of Ukraine in 2022, where there was a big shock to global oil prices and food prices.

8:03And there was a real sense that we were a bit too exposed and maybe we should start to produce more at home, that those supply chains shouldn't be as extensive as they are. And that maybe, as I said, globalization had gone a bit too far. I really started the idea of writing this and it came out of a BBC radio series I did called The New Age of Autarchy with a question, actually, rather than an answer. And that question was, is it possible to actually do those things, to be more self-sufficient in terms of things like food and energy and medicine, you name it. It was a good faith exploration of whether it was possible or not.

8:40And as I started to write and explore these supply chains in more detail and go into some of the complexities of the way the global value and supply chains are constructed, it became more and more clear to me that actually the answer probably is no. At least we can't roll up those supply chains and cut ourselves off from other countries without dramatically changing the way we live. And I think on some level, we all know that, don't we? Because, you know, globalization, if you think, well, just look around you, we wake up in the morning and you brush your teeth and toothpaste is from Poland and you go and have your breakfast and the grapes from Egypt.

9:18And then you put on your clothes and it was perhaps made stitched together in Bangladesh. And then you drive your German made car to the office. That's the typical way someone describes how globalization shapes our lives. And it's all true. But what I discovered in this research in this book, and lots of other people that made this point as well, that it's not just about those consumer goods, which are the fruits of globalization, it's the components which make those consumer goods, which are unfathomably globalized as well. I was talking about semiconductors. You know, we hear about those and Trump and others and Biden all wanted to make them in America rather than import them.

9:59But if you look at the supply chain for something like semiconductors, they're so unfathomably complex coming from hundreds of different countries, these raw materials and the machines that make them, that it really is impossible to see any single country having a fully nationalized supply chain in something like semiconductors, computer chips. And it goes for many other things as well. And I talk about lots of examples of these in the book. So yes, I started out, I guess, with a question and I came increasingly to an answer, which is that, you know, don't take globalization for granted or don't assume that it's going to be simple or easy, which is obviously what a lot of the exile economic exponents, populist politicians say, it's going to be quite easy to do these things.

10:46It really won't be. It'd be very expensive. And I'm a BBC journalist. It's not my job to say what people should want or what politicians should do. What I'm trying to do in this book is say, be aware of the costs, be aware of the implications. Be aware that it's impossible. Well, if people genuinely think that it's worth it, then that's fine. But I would like them to do it with the full facts in mind. This is the Bloomberg Tech Minute brought to you by ChatGPT. Now with ChatGPT work. I'm Carol Masser. Globetrotters hunting for airfare bargains are in for a rude awakening as the days of stumbling across a cheap seat on a popular flight could soon disappear.

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13:48Built for all business. Visit PayPalOpen.com to get started. That's PayPalOpen.com. You mentioned semiconductors. I think with electronics generally, people will sort of understand that it's a pretty complicated supply chain. And in fact, that is what we're discovering, you know, with the tariffs. Donald Trump sort of outraged at the thought that even with various high tariff rates, Apple's still not going to want to make iPhones in the US. And to your point, cannot make iPhones in the US because there's so many things coming from different parts of the world. But food, how hard could it be to be self-sufficient in food?

14:29Well, that was one of the most fascinating journeys I've been on actually in the book, because that was the one where I started out, which I think was, I'm sure many of you will have this sense that, do we really need to import so much food from abroad? You know, The UK provides about or supplies about 60 % of the food that we consume in the UK. So pretty reliant on the rest of the world for food. And why not, as the farmers say, produce more at home, consume more at home? It'd be good for farmers, good for the economy, and good for food security. And I think that is quite an intuitive argument.

15:07It's a very common argument that you hear. What I discovered in the book is that it's really, for a large part of the world, it's just not feasible to rely only on the food that can be grown in that individual country. So there's a striking statistic from a study done in 2020, which said, imagine if everyone on the planet had a 100-kilometer circle drawn around them. What proportion of the world's population could feed themselves from staple foods grown within that 100-kilometer radius? And the answer is, it's only 25%. So only a quarter of the global population could feed themselves within that area.

15:50So how big would that circle need to be around every single person on the planet so that they could feed themselves on staple foods like wheat and corn and potatoes and what have you? It would have to be 2 ,000 kilometers. And what that tells you is, given the size of countries, given the size of the planet, is that if we're going to feed ourselves as a world, as a planet, we're going to be incredibly reliant on trade in food. This idea of food self-sufficiency is a non-starter for probably most people on the planet. And that's really sobering thought, isn't it? Because we often hear this line, as I said, we just do it at home, just do it at home.

16:28Well, it's not going to happen. At least we're not going to have the kind of diets that we're used to, increasing reliance on meat in large parts of the world, the variety of food. But simply, we can't feed ourselves as a planet with just national production. Although that fact does cast some light on why Donald Trump would want Canada, because I think the Americans would probably do quite well if they could just take all of the Canadian planes. Well, that was another interesting thing about it, because America, on the face of it, is very abundant in food. It produces more than it consumes. It's a big agricultural exporter to the rest of the world in net terms.

17:03But even America relies on fertilizer imports, quite a lot of them from Canada. So even if you say America doesn't need the rest of the world when it comes to food, well, it actually needs chemicals from the rest of the world to make its agriculture so productive. In your chapter about food, you also have a distinction, which I think is useful in other areas as well, because you think of self-sufficiency, we often paint it politically as being the same as security. If you're making it your own, then you're not at the behest of foreign powers and dictators. But you make the point, especially with food, that food security is very different from that and is often just related to poverty.

17:44Yeah, I had a look at countries ranked by food self-sufficiency, so how much of their own consumption they're producing at home, and also about their levels of food security, the proportion of the populations who are struggling to feed themselves. so just to take two examples which i plucked out in the book which i think are really illustrative so the zambia in africa which is only seven percent uh reliant on imports according to the measures of the which i was looking at so it basically produces more or less all that it consumes when it comes to agriculture but it has food insecurity levels which are extremely high so more than 50%.

18:26And if you look at a country like Mauritius in the Indian Ocean, which has a food self-sufficiency ratio, which is incredibly low, so almost the inverse of Zambia, but its food security was incredibly high. And what's the difference between those two countries? Mauritius is a much richer country than Zambia is. So precisely as you said, I think the lesson is What leads to food insecurity is not reliance on imports, it's poverty. And you need to solve that if you want people to be well fed, rather than obsessing about local production. And actually, and you make the very obvious point, which I hadn't thought about, that you could be completely self-sufficient, but if you have a crop failure, if you've also closed yourself off from the world, then you are instantly less secure just through that fact alone.

19:19Yeah. I mean, we all know this in a way because we all saw the example of Ukraine. Ukraine has this reputation of the breadbasket of Europe going back for decades. And it is. It is on paper. It's incredibly food secure. It produces more than it consumes. It's a big exporter to the rest of the world. But when it got invaded by Russia in 2022, it had to rely on the World Food Programme to feed 3 million of its population. That just shows you how just having a large amount of agricultural production doesn't necessarily make you secure. So it's fair to say we've not overplanned this conversation, but you have taken me perfectly to the subject of Ukraine and Russia.

19:59because energy is the other example where I think it's the most intuitive to people that we just can't depend on other nations for our energy, or at least it would be much better if we weren't. And the celebrated example which you go through, but I think a lot of people will have in their heads, is the way Europe, especially Germany, but Europe allowed itself to become very dependent on Russian gas. Despite that, the risk of over-reliance on Russia being identified by Americans and the American intelligence community and others. So what about energy? Surely it's better for us to be independent in our energy supply, especially now we can get all of this nice wind and so forth.

20:38Yeah, well, I mean, it takes me back again to 2022 when this was what the politicians were saying. This, as you said, Stephanie, shows the folly of relying on energy imports. A country like Russia can hold you hostage, cut off the supply, and then you having to have power cuts or rationing. I found it very compelling, that argument in 2022. But when you start... As you were paying your gas bill. Yeah, absolutely. I'm sure we all felt this, didn't we? And it dovetails so perfectly, doesn't it, with the argument that we should decarbonise and rely on renewables. And it's all true to some extent.

21:12But if you, again, if you go into the weeds, go into the supply chains of all these renewable technologies, you just see how distributed they are right around the world. Just for example, the battery that goes into an electric vehicle, the amount of critical minerals that it relies on is vastly greater than a petrol car. And those critical minerals are spread right across many, many different countries. There's no single country who can realistically source all those critical minerals at home and have a national supply chain. It goes for China, it goes for America, it certainly goes for the UK.

21:47And so you just go through all these renewable technologies and you realise that actually we are going to be reliant on imports if we're going to have a renewable energy generating sector. So that's not to say that it shouldn't be done. It's to say that actually be wary of the rhetoric of self-sufficiency, autarky when it comes to energy, just as you should be wary of it when it comes to food or semiconductors or medicines. If you read the book, we can sort of take it as read, but he goes through quite a few things, medicine, steel, semiconductors. It's really hard, all of them, to be self-sufficient.

22:25If Donald Trump was sitting here, he would say, yeah, too right. It's really hard because we've had 30 years on the wrong path. We took the cheaper option, the easier option. We took advantage of falling transportation costs, companies becoming more global. The fact there was a sort of broadly peaceful global environment, countries all seem to be moving in the right direction. So businesses created these enormously complicated supply chains that they never should have done. And yes, it's going to be really painful to unpick it all. But if we don't, we're going to wake up tomorrow and everything we want is being made by China.

23:02Yeah. Well, Donald Trump has changed his tune on this, hasn't he? Because I'm sure you remember, Stephanie, in the campaign trail, he wasn't talking about the long, difficult journey to a more resilient American economy. Now, you're right. He has started to talk about how this will be hard and there will be sacrifices along the way. But I think, how would I try and persuade Donald Trump that he's wrong about that? wrong about it. It's not just him, right? The Biden administration, in some ways, institutionalized his kind of gut instinct slash tweets. And they did sort of focus more on resilience, focus more on industrial policy.

23:41But it was based on that same negation of the original idea of globalization, or what had driven the previous version of globalization, which is, we have to think about the long-term costs, our strategic position with regard, particularly with regard to China, not just the short-term cost-benefit. Yeah, I think Richard Baldwin, I think you've interviewed recently, had a great phrase that Trump was not, how did he put it? He said he wasn't a new turn, he was a culmination of something that had been going on for a very long time in politics. This gradual sense of, you know, globalization is not working the way we thought it, we hoped it would, and we need to think more about pulling inwards and turning inwards and doing things differently.

24:26Because you're absolutely right. Joe Biden had a lot of those same instincts as well. His administration had a lot of the same instincts. And they were quite protectionist when it comes to things like Chinese electric vehicles, Chinese batteries, and really took on what Trump had done in his first term and took it to a whole new level. And when it came to making it harder for China to source the most advanced microchips, they were much more proactive than Donald Trump had been. So I think that's really important to recognize that this isn't something that just started when Trump came to the White House.

25:05What I would point out to people who were not Trumpian, but sort of take the view that globalization has gone too far, is that you'll miss it when it's gone, I think, is probably the right way to frame it. Because we have taken it for granted, some of the huge benefits, not just in terms of like my family in China, but all our lives have been enhanced and we've been made much more productive and wealthier as a result of globalization over these past 50 years. In a sense, trade is being used as a scapegoat for the failures of domestic politics to redistribute those gains and to compensate the losers from it.

25:48So I would say, I suppose if Trump was here saying, you know there are undoubtedly problems in america economic problems communities which are suffering but don't make the story all about trade make it about how you can use the immense resources of america to improve their lives it's quite interesting i was listening to jd vance who's slightly more sophisticated figure than trump when it comes to making these arguments and he was he gave a speech in March to the American Dynamism Conference. And he said, the problem of the American and global economies that has been too addicted to cheap labor, both at home, and talking about immigration, and abroad, meaning outsourcing, American multinationals sending their supply chains abroad, cheap labor.