Call it naïve. I once wrote that economic independence is mostly an expensive hobby (see this column). Why make everything yourself if you can get it cheaper elsewhere? Implicitly, I assumed a stable world that operated mainly on rules and without major military conflicts. In hindsight, that was a blind spot.
As long as the world runs like a well-oiled machine, globalization is a marvel. Every country—or extend that to every company or individual—does what it’s relatively best at. Leveraging these comparative advantages creates the greatest collective prosperity. In theory, policymakers can use the winners’ gains to compensate the losers so everyone benefits. And mutual dependence makes war economically unattractive. A nice story, of course.
But compensation turns out to be tricky in practice. A bigger problem: we no longer seem to live in a world of rules and peace. Mutual dependence doesn’t prevent military conflict (see Ukraine). In fact, dependence can be used as a weapon against you. War isn’t fought only on the front lines. Anything that can undermine the war effort or morale becomes part of it. As an ex once told me: “All is fair in love and war.” So Russia turned off the gas tap, China waved its rare earth metals, and America wielded the dollar.
Economically, none of that is rational—geopolitically, it is. Efficiency through specialization is great, but you don’t want to be vulnerable to geopolitical blackmail. Too much specialization leads to monopolies. They may start with the best intentions, but (market) power corrupts. Eventually, monopolists have an incentive to squeeze their customers. Geopolitical monopolists are even worse. They can simply refuse to deliver—think Chinese rare earths. Or the American security umbrella: will it still be provided, and at what price? In hindsight, Europe placed too much trust in automatic American support. A hard lesson.
So what now? Should the EU become an autarky? Even if full self-sufficiency were feasible, it would still be unaffordable (and for the Netherlands, it’s pure fantasy). We lack raw materials and energy and don’t produce things like coffee or bananas. We could probably live without the latter, but not without the loss of prosperity that would come from pulling out of the global economy.
So what’s the alternative? A pragmatic approach: keep trading with the world, but reduce our vulnerabilities. Don’t rely too much on a single supplier, build in redundancy, and stockpile reserves. Some things—think critical medicines, but also your own weapons—you want to produce in Europe. And the ability to strike back—militarily or economically—can help keep others in check.
All this requires more political involvement in the market and may slow economic growth. But it would make the economy more resilient to geopolitical shocks. In that sense, it’s like insurance: it’s not free, but when disaster strikes, you’re glad you have it.
How far we want to go in reducing vulnerabilities is a political question. Everything has a price. Autarky is an illusion and unaffordable. Unlimited free trade boosts prosperity but exposes us to geopolitical bullies. When it comes to international trade, we shouldn’t throw the baby out with the bathwater—but we shouldn’t be naïve either. We’d do ourselves a favor by reducing the riskiest dependencies. Because you never know. My religion teacher used to say most people are usually decent, but temptation lurks. His conclusion: “Trust in God, but lock your bike.”
Charles Kalshoven is Expert Strategist at APG.