Autarky

Definition

Autarky is a state of economic self-sufficiency and independence, where a country or region produces all the goods and services it needs without relying on trade with other economies. It involves the ability to meet all of one's own needs from its own resources, without external assistance or international trade.

5 Must Know Facts For Your Next Test

1. Autarky is often associated with isolationist economic policies, where a country aims to be self-sufficient and minimize its reliance on international trade.
2. Achieving autarky may involve measures such as import restrictions, tariffs, and subsidies to support domestic industries and production.
3. Autarky can lead to a lack of access to a wider range of goods and services, potentially resulting in higher prices and reduced consumer choice.
4. Autarkic policies can limit a country's ability to benefit from the gains of trade and specialization, as outlined in the theory of comparative advantage.
5. Historical examples of autarkic policies include the economic policies of Nazi Germany, Maoist China, and North Korea, which aimed to achieve self-sufficiency at the expense of international trade.

Review Questions

• Explain how the concept of autarky relates to the principle of absolute advantage.
  • Autarky is in direct contrast with the principle of absolute advantage, which states that countries should specialize in the production of goods and services where they have the highest productivity, and engage in trade to obtain goods and services that they cannot produce as efficiently. Autarky, on the other hand, emphasizes self-sufficiency and the avoidance of trade, even if a country does not have the absolute advantage in the production of all goods and services. This can lead to inefficiencies and a lower overall standard of living compared to a situation where countries specialize and trade based on their comparative advantages.
• Analyze the potential benefits and drawbacks of an autarkic economic policy.
  • The potential benefits of an autarkic economic policy include increased self-reliance, reduced vulnerability to external economic shocks, and the ability to protect domestic industries and jobs. However, the drawbacks can be significant, such as higher consumer prices, reduced access to a wider range of goods and services, and the loss of potential gains from trade and specialization based on comparative advantage. Autarky can also lead to inefficiencies in production, as countries may be forced to produce goods and services that they are not well-suited for, rather than focusing on their areas of comparative advantage. Additionally, autarkic policies can limit a country's exposure to new technologies, ideas, and innovation that can come from international trade and collaboration.
• Evaluate the long-term economic and political implications of a country pursuing an autarkic economic strategy.
  • Pursuing an autarkic economic strategy can have significant long-term implications for a country, both economically and politically. Economically, autarky can lead to a lower standard of living, reduced economic growth, and a lack of access to the benefits of international trade and specialization. This can result in higher prices, limited consumer choice, and a less efficient allocation of resources. Politically, autarkic policies can foster isolationism, protectionism, and a lack of engagement with the global economy. This can limit a country's influence and bargaining power on the international stage, as well as its ability to participate in and shape the global economic and political order. In the long run, an autarkic strategy can make a country more vulnerable to external shocks and limit its ability to adapt to changing global conditions, potentially leading to economic stagnation and political instability.

Related terms

Self-Sufficiency: The ability of a country or region to meet its own needs from its own resources, without external assistance or international trade.

Protectionism:

An economic policy that restricts or regulates trade between nations to protect domestic industries and jobs.

Comparative Advantage:

The ability of a country or region to produce a good or service more efficiently than another country or region, allowing for specialization and trade.