Keynes on economic nationalism - the facts have changed

Marginal Revolution points us to Keynes discussing economic nationalism and the idea that actually, you know, it might not be that bad an idea:

But I am not persuaded that the economic advantages of the international division of labor to-day are at all comparable with what they were. I must not be understood to carry my argument beyond a certain point. A considerable degree of international specialization is necessary in a rational world in all cases where it is dictated by wide differences of climate, natural resources, native aptitudes, level of culture and density of population. But over an increasingly wide range of industrial products, and perhaps of agricultural products also, I have become doubtful whether the economic loss of national self-sufficiency is great enough to outweigh the other advantages of gradually bringing the product and the consumer within the ambit of the same national, economic, and financial organization. Experience accumulates to prove that most modem processes of mass production can be performed in most countries and climates with almost equal efficiency. Moreover, with greater wealth, both primary and manufactured products play a smaller relative part in the national economy compared with houses, personal services, and local amenities, which are not equally available for international exchange; with the result that a moderate increase in the real cost of primary and manufactured products consequent on greater national self-sufficiency may cease to be of serious consequence when weighed in the balance against advantages of a different kind. National self-sufficiency, in short, though it costs something, may be becoming a luxury which we can afford, if we happen to want it.

The problem with this being that the facts have changed. We are now at a level of technology where the globe itself is the efficient market size. One of us here was, for a time, the global monopolist in a very minor market indeed. That monopoly being the result of the market being so small that it wouldn’t support two people attempting to operate in it.

But it is possible to be more serious about this. The problems various countries are having with Huawei are well known. Who really wants a foreign government - allegedly - with access to the domestic telecoms system? And yet The Pentagon itself points out the problem here. Even the US market isn’t of sufficient size to be an efficient market. The costs of developing 5G are such that if standards there diverge from the rest of the world - likely, given spectrum issues - then the US is always going to be some years behind in that technology.

No single country supports an entire computer ecosystem. There are many more such examples. The efficient production size is now supranational meaning that the costs of economic nationalism are far greater than they were near 80 years ago. And, as Keynes the economist would be the first to point out, we should do less of things that are more expensive.