A sovereign economy does not need foreign trade

My (alas deceased) friend, great businessman and patriot, Mikhail Yuriev, once asked me a question: why is the ideal a zero foreign trade balance, i.e. the situation where the country sells as much as it buys (i.e. the volume of imports equals the volume of exports)? It turns out, he concluded, that the ideal would be to reduce foreign trade to zero, a very good point on which he built his curious book Fortress Russia. The main idea is: Russia should close itself off from the world and build an autonomous society based only on our traditional Russian values. If you want a perfect foreign trade balance, do it. That is a very productive way of thinking.

However, there is a question here of a lack of resources, goods and technologies that can only be received from outside. The idyll of a strictly zero foreign trade balance is only possible if the country has enough of everything. Everything is there - and everything is its own.

This self-sufficiency is called 'autarky'. The word sounds like 'blasphemy' and 'heresy' to economists brought up in the liberal paradigm, but the proponents of economic autarky were not outcasts, but the leading exponents of economic thought on a global scale, such as Friedrich List and even John Maynard Keynes.

This theory was best corroborated by Friedrich List in his doctrine called 'wide-space autarky'. List himself drew inspiration from two sources: the theory of the German philosopher Johann Gottlieb Fichte, which he outlined in his programmatic work The Closed Commercial State, and the experience of the US economy in the 19th century, which List had studied carefully.

List's logic is as follows: if we take two states, one economically, industrially and financially developed and the other - significantly lagging - and completely remove any trade barriers between them, the level of development of the economies will not be equal. On the contrary, the gap between the developed and undeveloped economies will only increase many-fold as, in effect, the more developed system will absorb the less developed one and not give it a chance to develop on its own. The growth of the weaker economy will only be apparent and will be paid for by the complete surrender of economic sovereignty. What to do in such a situation? The less developed economy must close itself off from the more developed one, but this will lead to stagnation. Yes, unless the less developed economy covers a critical area that is large geographically, demographically, resource-wise, preferably with societies that are more or less close culturally, historically, ethnically. This is the 'big space'. If it already exists, it should close itself off from a more developed competitor and focus on developing its potential (in mobilisation mode). If it does not yet exist or the space is not big enough, it should be created through the instrument of the customs union (Zollverein).

Small and medium-sized states will not make autarchy, even a large state will not, but a very large state (= Empire) will. Therefore, the creation of an Empire is an economic necessity. Listening to List, Bismarck created a 'customs union' with the German nations of Central Europe and the German Empire. And economically it worked.

As the eminent Russian economist Alexander Galushka has shown, Stalin also listened to List's follower, the economist Karlis Bolodis, author of The State of the Future, who proposed a development model for Russia similar to large-area autarky. It is not from classical Marxism, but from List and Bolodis that the economic algorithm of the Stalinist turn must be deduced, as Galushka convincingly demonstrates in his book The Crystal of Growth. Again, as in Germany, the model worked. Before the adoption of the Bolodis List model and after Stalin's death, the Soviet economy, while remaining ideologically the same, showed very different, much less convincing results. So the secret is not in Marxism, but in Bolodis, because both before and after Stalin the Soviet economy was ideologically the same, but the effect was completely different. The increase has nothing to do with socialist dogma: on its own it is neutral in terms of effect. If it is combined with the autarky of large areas and a fine balance between economic initiative from below (artelli) and sensible state planning from above - that is one thing, if you cling to dogma and disregard reality - another. Galushka shows that it was precisely this model of Lista that played a decisive role in the meteoric rise of Hitler's Germany, where economist Jalmar Schacht followed the logic of autarky of the great spaces against the superior economies of England and the United States, and once again it worked.

In Keynes' theory we find a term that receives little attention: 'economic isolation'. It is about creating a self-sufficient island (insula) in economic space, combining private initiative and public management (up to and including labour armies) to achieve complete independence from external markets. This theory suited the conditions of the Second World War, in which economic relations with foreign countries were severely disrupted. It was basically in line with the isolationist economic policy of the United States in its confrontation with the British metropolis, and protectionism had always been a favourite tool of the US economy.

Listening to Keynes, Roosevelt launched the New Deal and it worked.

It turns out that it is not a matter of ideology. Autarky of large areas works in the case of the Republican US, the German Reich (second and third) and Stalin's USSR, and vice versa, when this model is abandoned, then, regardless of ideology, economic successes prove to be much more modest or non-existent.

In essence, autarky of large spaces is equivalent to Empire.

Thus, a great extension of Empire is also an economic necessity. Autarchy is the only possible version of full economic sovereignty.

The logic is as follows: first, a large enclosed space is created and strengthened through a customs union, regional integration, the unification of peoples and societies on the basis of narrow cultural, historical and civilisation patterns with a more or less equal level of economic development. And here, as Mikhail Yuriev suggested, an ideal zero foreign economic balance by virtue of zero foreign trade. No monetarism. Fully sovereign, preferably two-circuit issuance with a special state account for projects of strategic importance. Currency exchange then becomes insignificant, the state has all the money it needs. Only then can the Empire begin to open up little by little - and this with the preservation of a strict monopoly on foreign trade.

Foreign trade will have a positive effect as an addition to autarchy, not as a replacement for it. By the way, the Anglo-Saxons know this well, having built two trade empires in the last centuries: the British and the American. Both started with autarky in large spaces (Liszt himself borrowed from the American experience in the 19th century) and only later, after passing through eras of mercantilism and making intelligent use of protectionism when necessary, did they arrive at the open market. Only an economically consolidated Empire can afford to be open. If one opens up without becoming an empire, backwardness, degradation, dependency and loss of sovereignty are guaranteed. Based on this observation, List began to build his theory of large-area autarchy, i.e. the construction of the German Empire. Until the Empire becomes powerful and independent enough, it is best to remain closed. Only then can it open up little by little, incorporating other economies into its structure. This is exactly what China is doing today: 'One Belt, One Road', what is it if not the construction of the Great Chinese Empire?

Our economists read the wrong authors. Coincidence? I don't think so. Rather sabotage. Let them now read the right ones.

Translation by Lorenzo Maria Pacini