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Can the US/EU be Self-Sufficient?

by rdf Thu Jul 31st, 2008 at 03:20:56 AM EST

The myth of Ricardo is that each country does what it is best at and then trades with its neighbors. Each produces at the lowest cost, since it is an expert, and everyone benefits. This may have been true in some limited areas when countries were at similar levels of development so that labor cost difference were due to specialization and not to the general standard of living.

Factor in natural resource and climate benefits and it makes for a good theory. Recent developments have led to questioning the model. So the question is not should a society be self-sufficient, but can it?

Diary rescue from July 18 by afew


By this I mean that it can produce everything it needs to survive using only its own resources. If you can't grow bananas then eat pears instead. What I'm really asking is are the advanced countries maintaining their standard of living by extracting more from trading partners than they are returning in trade? If they are then they are international brigands and trade is just a cover for this.

If they could, in principle, be self-sufficient than trade is just a detail. You grow bananas and sell them to me I grow pears and sell them to you. More variety in our fruit salad, but no real advantage to one party over the other.

It is clear that the US and EU are consuming more than they are providing back to trading partners and that this is not just an artifact of current trade imbalances. In fact this has been the cornerstone of the rise of western civilization since Columbus. The current criticism includes the idea that "externalities" are not being priced into the cost. So when a country sells non-renewable resources it gets no compensation for the fact that they can never be sold again. Neither is there any accounting for the cost of the pollution or environmental damage being done. In addition the idea that it makes perfect sense for the cost of labor to differ from one place to another is never examined. Why should one person's labor be worth less than another's just because of where they live. The cheaper worker is subsiding the cost of the trade. This is never considered.

So let's play a mind game and see what would happen if we closed the borders to trade and had to go it alone. I'll assume that the transition period is instantaneous, I'm not talking about implementation (a complicated issue) but the final outcome.

The first area to be investigated is food production. It seems clear that the US and EU can be self sufficient in food, but only if we assume that the current production techniques remain. This leads us to the issue underlying everything else: energy.

Al Gore has proposed getting all US electricity from wind, solar and nuclear. I assume he has done his homework and there are ample resources, but he skipped transportation. It also isn't clear if he is proposing that fuel used for heating and cooling would be replaced by electricity as well. The majority of homes in the US are heated by gas or oil and switching to electricity would require extra generating capacity.

Someone with expertise on the EU situation will have to comment on whether a similar electric balance can work in Europe. The lack of the vast desert areas present in the US seems to make the situation a bit more difficult for Europe as well.

However, let's assume this all is feasible, then what about liquid fuel for transport and hydrocarbons for fertilizer, plastics and other secondary uses? Neither the US nor EU has fuel reserves adequate for this purpose. I don't see any substitutes being viable either. Projections using bio-fuels seem not to be based upon existing technology. Perhaps the US might be able to get by with coal to liquid and with the use of Canadian tar sands (I'll treat the US and Canada as the North American version of the EU), but once again this production would have to be fueled somehow.

So if my guess is correct and neither area can be self sufficient at the present level of consumption than what is all the talk about? Either we need to cut our levels of consumption, get much more efficient, or we need to continue unequal trade policies.

If we can't pass the thought experiment for self-sufficiency then we are lying either to ourselves or to the rest of the world. The public in the US and EU is happy deceiving itself, the greedy never see this flaw in themselves, but our ability to fool the rest of the world has worn off.

This is why the international trade talks have stalled. It is why the US continues its military build up. It is why the EU acquiesces in this and allows the US to run NATO, bases in Europe and other cooperative ventures. It is why the US continues to fight resource wars.

So how about an honest accounting and some realistic talk about a sustainable level of consumption?

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rdf,

The U.S has large reserves of phosphate, and potassium is available en-masse from Canada. So that is the "P" and "K" in the N-P-K part of fertilizer coding (where, for example, pure ammonia would be 82-0-0, since it is 82 wt% nitrogen, or Potassium Nitrate would be 14-0-39.

There are probably also lots of places where P and K can be obtained, though not in such concentrated forms, but sufficient to use.

The real kicker in fixed nitrogen. But, when in doubt, copy what the Norwegians and Icelanders did, or what was done in Niagara Falls from the mid 1920's through WW2, or what they did in trail, British Columbia from WW2 until they discovered natural gas in a big way in Alberta. Use electricity to make H2 from water, then react that H2 with N2 to make ammonia. No need for coal or Ngas to make ammonia, whatsoever. And since those are pricey and getting pricier, and CO2 burial is also not going to be cheap, well, the electrically derived ammonia gets around that problem (CO2 garbage disposal) just fine. And there may be some ways to make NH3 directly from electricity, water and N2 in high temperature electrolytic cells, with the promise of slightly better energy efficiency.

With lots of electricity, lots of H2 can be made - about 22 to 25 kw-hr/lb of H2, or about 44 to 50 MW-hr/ton (2000 lbs, not the 2200 lbs in a metric tonne), depending on how hard the cells are run. This also eliminates the largest part of conventional (coal or Ngas based) ammonia plants, which is the purification of the H2 from the water-shift reaction. the H2 coming from electrolysis, once dried of any water, tends to be very pure, simplifies downstream operations, too.

Anyway, this NH3 made from renewable energy won't be cheap, but it will be less expensive than NH3 made from Ngas at current prices (which do not include CO2 trash disposal). And since those prices will rise, as will imported NH3 prices (due to the devaluation of the dollar and rising world prices of Ngas), the renewable approach has the added effect of stabilizing prices, potentially, of this valuable farm input. Plus, it helps take more of the hydrocarbon inputs out of the farm cost equation.

Nb41

by nb41 on Fri Jul 18th, 2008 at 05:41:46 PM EST
If we can fertilize and transport food, we can eat. If we can make a lot of electricity, we can fertilize. If we can make a lot lot lot of electricity, we can transport food -- and maybe even occasionally drive private vehicles.

So the big question seems to be, How much electricity can Al Gore make?

by Ralph on Sun Jul 20th, 2008 at 04:36:04 AM EST
[ Parent ]
There is, given the political will to establish a level playing field between unsustainable, non-renewable power and sustainable, renewable power, ample electricity.

Indeed, given the roughly 10:1 advantage of electric freight rail over diesel trucks in terms of enegry efficiency for long distance freight transport, we don't even need "lots" of electricity to transport food.

Its that political will that is the binding constraint.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Jul 20th, 2008 at 04:28:15 PM EST
[ Parent ]
Lack of political will restrains every possible change in the current pattern of doing business. Those of us who realize that significant changes are inevitable still have to choose targets for advocacy. Gore's renewable electricity plan sounds great if its promise turns out to be realistically achievable.

As for cheaper freight rail, there's no question that huge efficiency gains can be achieved by replacing trucks with rail. But we are still talking about a lot of electricity.

by Ralph on Sun Jul 20th, 2008 at 06:17:43 PM EST
[ Parent ]
... anything done on a national scale is 'a lot'. Scaling it to present electricity generation, Alan Drake's write-up of the proposal arrives at:
Transferring 100% of inter-city truck traffic (impractical) to electrified railroads, plus electrifying all (not 80%) of the existing rail traffic, would take about 100 TWh/year or 2.3% of total US electrical demand. Electrifying 80% of railroad ton-miles and transferring half of current truck freight to rail would take about 1% of US electricity. 1% is an amount that could be easily conserved, or, with less ease, provided by new renewable generation and/or new nuclear plants.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Sun Jul 20th, 2008 at 08:23:50 PM EST
[ Parent ]
This confuses me a lot, at least if inter-city truck traffic is a significant part of traffic.

I recently read, that only about 1/6th of prime energy use in Germany is for electricity generation. 2/3rds of all oil use would be traffic. Sure there is some other prime energy use for heating and industry and so on, but oil is still double digit in heating. So overall I would guess that more energy is used for traffic than for all electricity generation together, and in the US even a higher share of energy consumption is traffic. Putting a significant part of traffic on the railway making only 1% more electricity need.
Any big think mistakes? Maybe inter-city traffic is not a significant part of overall traffic? Maybe railway is incredibly more energy efficient for goods than trucks?

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Sun Jul 20th, 2008 at 08:46:22 PM EST
[ Parent ]
As I noted, the energy ratio is about 10:1 ... rail freight is, of course, far more energy efficient than truck freight, and electric rail more efficient than diesel rail, so you get to multiply two efficiency factors together.

I guess if trucks are taken for granted as the norm, cutting energy consumption per ton mile by in excess of 90% counts as "incredibly efficient". More accurate would be that truck freight is incredibly energy inefficient, and we only rely on it to the extent that we do because of the now fading age of dirt cheap energy.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Jul 20th, 2008 at 10:07:58 PM EST
[ Parent ]
Ah. I thought it would be "a lot more" than that. Your scenario sounds good. Getting rid of a significant fraction of inter-city trucks (along with gains in efficiency) would surely be a great help to the atmosphere and to our oil tab.

What about the capital investment necessary to electrify railroads and (presumably) add extra tracks and rolling stock? Is that within reach?

Meanwhile, the airlines keep flying. The more I think about this, the more it seems to me that grounding most of those jets will turn out to be the key to calming down the atmospheric changes which are now so scarily evident.

Right after 9/11/01, when all US air traffic was banned for a few days, the skies in our area underwent a drastic change, back to the puffy clouds we used to see when I was a child, and which I had almost forgotten.

Injecting all that exhaust right into the stratosphere is, upon serious reflection, clearly Not A Good Idea. I think people would be surprised by the changes we would see without all these jets.

Still, I have to admit that our fossil-fueled civilization was fun while it lasted. I was born in 1951. When I was six, my family traveled to Europe by passenger liner and then returned on a prop plane. The experience of those forms of transportation left me with a vivid perspective on the magic of the passenger jet. Flying around the planet like some gigantic insect on five mile high stilts will never be routine for me. It is sorcery, pure and simple.

On the other side entirely, I also have to admit that I feel more and more impatient for the next phase of our planet's existence. I am sick to death of watching us wreck the place.

Aside from any ideology or purity, I just want to see that stop, and soon.

by Ralph on Sun Jul 20th, 2008 at 09:04:28 PM EST
[ Parent ]
... is the binding constraint means:
  1. that political victories will translate into successes, which is the raw material for more political clout; and
  2. that its a more straightforward case to advocate.

There are lots of potential steps ahead that need more than just the political will. But there are some ready for prime time steps that can be taken immediately:

  1. major roll out of wind turbine generation

  2. major roll out of a national electric freight rail grid

Those don't need anything except the right policy framework, to start immediately.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Mon Jul 21st, 2008 at 10:05:34 AM EST
[ Parent ]
nb41, check This out.  Yours truly is there.

Prof. Wm E. Heronemus was the first i know of to have proposed that we could get all our H2, including derivatives like ammonia substitutes.  From floating offshore wind, and ocean thermal.  1970's.

"Life shrinks or expands in proportion to one's courage." - Ana´s Nin

by Crazy Horse on Sun Jul 20th, 2008 at 01:37:43 PM EST
[ Parent ]
RT,

Thanks for the reference. I do harp on that issue a bit, and I know I'm not the first to do so, but the point keeps getting lost on a lot of normally really smart people. They just buy into the line that we need natural gas to make ammonia, and what we really need is H2, and we don't NEED CH4 to make H2. Or coal. Or, nukes...and another excuse to fill up Yucky Mountain even faster....

For example, see http://www.strandedwind.org/node/199

Anyway, tomorrow I go to make a pitch to a local investor with respect to a wind and water to ammonia project. My first business proposal....It's a bit of a long shot, but then who would have thought that ammonia would be quoted at $1200/ton for delivery in the fall of 2008, both in NY and Iowa?

Nb41

So, here's to good luck

by nb41 on Sun Jul 20th, 2008 at 04:48:49 PM EST
[ Parent ]
wonderful diary, thanks.

it cuts to the moral core of trade in the first place, and whether its additions are mutually beneficial across the board (or state line).

put clearly like you do here, it's obvious that though the coercion is much less overt than in the last centuries, (except in iraq), robber brigandry is still occurring to sustain our way of life.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sat Jul 19th, 2008 at 08:31:36 AM EST
European Tribune - Comments - Can the US/EU be Self-Sufficient?
By this I mean that it can produce everything it needs to survive using only its own resources. If you can't grow bananas then eat pears instead. What I'm really asking is are the advanced countries maintaining their standard of living by extracting more from trading partners than they are returning in trade? If they are then they are international brigands and trade is just a cover for this.

Ah, but it is a win-win situation for those countries whose minerals are extracted and whose rivers are polluted, because they get some of the shiny stuff they want in return (well, their corrupt leaders, anyway).

To answer this questions, there are statistics. For instance, eurostat tells me that the EU imports about 1.8 trillion kilos, and exports about 0.5 trillion.

In money terms, on the other hand, imports total € 1.4 trillion, exports €1.2 trillion.

But: why would the EU and US be the appropriate geographical units to organise self-sufficiency for, instead of Luxembourg and Rhode Island?

by nanne (zwaerdenmaecker@gmail.com) on Sat Jul 19th, 2008 at 09:55:40 AM EST
But: why would the EU and US be the appropriate geographical units to organise self-sufficiency for, instead of Luxembourg and Rhode Island?

An excellent question. The only reason I picked the US and the EU (and had to cheat with Canada anyway), is because these areas have defined themselves as coherent regions.

What this implies is that if these regions can't be self-sufficient than they probably should not be unified political entities either.

This is one of the reasons the EU is having so much trouble defining its membership.

If Mexico was part of a "North American Union" the economic picture would look a lot different. Think of the problems when East Germany was reunited with West Germany. Immigration issues would be replaced by poverty issues.

It just shows how much of what we take for granted is based upon lies or false assumptions.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Sat Jul 19th, 2008 at 10:56:58 AM EST
[ Parent ]
You're going to need to incorporate a factor related to standard of living. For example, a big fraction of our electronic equipment is imported, including stuff like TVs that might be considered optional, but also including much of our computer and communication infrastructure. Bringing that back to our shores would be expensive. Cars and clothing are also largely imported. We COULD make this stuff ourselves--and did up until maybe 20 years ago--but it would be quite a change if we closed the borders...

From a subsistence level, the U.S. still has tremendous resources and could easily be self-sustaining. I'm not so sure about Europe, but then it depends on where the eastern edge of "Europe" is defined.

by asdf on Sat Jul 19th, 2008 at 10:20:54 AM EST
  1. It doesn't matter how much it "costs" to make things for internal consumption in a self-sufficient system. It is just cost shifting from one sector to another.

  2. "Subsistence level" is the crux of my argument. Even the Inuit in northern Canada were self sufficient (before the white man), but most people wouldn't want to live the way they did. So how much would we have to give up to be self sufficient?

  3. The edge of Europe seems to be the stumbling block with the EU. I wondered the other day whether the EU was trying to become a modern version of the Austro-Hungarian Empire to counter a modern version of the Ottoman Empire. The situation with Turkey and several of the former Soviet Republics highlights this problem. Does the EU still think of itself as "Christian"?


Policies not Politics
---- Daily Landscape
by rdf (robert.feinman@gmail.com) on Sat Jul 19th, 2008 at 11:02:50 AM EST
[ Parent ]
Your perspective of the EU needs to be disaggregated. What the EU is and how it should develop is a subject that is politically contented within the EU. The conservatives are more agreed on keeping Turkey out than they used to be, but membership negotiations for Turkey are still ongoing.
by nanne (zwaerdenmaecker@gmail.com) on Sat Jul 19th, 2008 at 04:48:04 PM EST
[ Parent ]
Since the first "oil shock" in the early 70s I have believed that the eventual solution to hydrocarbon requirements, such as for plastics, would be by providing "photo-synthetic front ends" to refineries, now referred to as bio-mass. Nitrogen fixation could eventually be provided by bacteria similar to those that fix nitrogen inside the roots of legumes. The balance of output products should change given the present awareness of the problems of global warming.

We at least could have the demonstrated technology to provide all of our ground transportation technology via electric vehicles with batteries and ultracapacitors, with a means for either quick recharge or "on the go" recharge from inductive pick-ups or alternative means. A political hurdle would be agreeing to standards to which manufacturers could build compliant vehicles. If you have ever been involved with a "standards committee" you will be familiar with the problem.

We could also greatly increase the speed and efficiency while decreasing the cost and polution of long distance transportation for both people and freight, possibly combining rights of way for both energy transmission and freight and personal transportation into a rebuilt  infrastructure.  In relative terms this should be less expensive and less technically challenging than the moon shot in the 60s.  The biggest obstacles are political.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Jul 19th, 2008 at 08:09:46 PM EST
... but it does not directly imply a conclusion with respect to:
What I'm really asking is are the advanced countries maintaining their standard of living by extracting more from trading partners than they are returning in trade? If they are then they are international brigands and trade is just a cover for this.

It is quite possible for trading partners to each extract more in trade than they are returning trade, when evaluated from a baseline of their self-sufficiency. So a trading partner extracting more in trade than they are returning in trade evaluated from the baseline of self-sufficiency is not in and of itself proof of international brigandage.

I would argue, in other words, that a different baseline is required to detect the international brigandage.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Jul 20th, 2008 at 01:19:03 PM EST
Otherwise, trade would be a zero sum game at best, and almost certainly a negative sum game, it would seem.  You would also have to have a way to calculate investment and other capital flows and the returns thereupon.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jul 20th, 2008 at 01:38:15 PM EST
[ Parent ]
... measure "financial investment" flows between countries, when considering the question raised here?

The direct question is whether there are net real benefits of economic relations to both parties, and international financial investment is not established as a plausible means for providing net real benefits to both countries.

Indeed, if there was balanced trade, which is a pre-requisite of Ricardo's model, there is no substantial opportunity for net flows of financial capital, and no need to pay a tribute in blood and treasure in return for prior receipts of financial capital.

So the main job of measuring flows of "investment" in financial terms is to indicate how far the international relations between the countries are from conditions in which mutually beneficial trade is one plausible outcome.

Obviously we have to be on guard against the semantic confusion that people and organizations holding wealth constantly rely on, the confusion between "financial investment" and "economic investment". "Investment" in economic terms ... acquisition of newly produced goods and services used to expand productive capacity ... is not in the capital account ... it is in the trade account.

And the point of financial "investment" is not to increase the amount of economic investment that takes place, but rather to place a financial claim on the product of the economic investment that takes place.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Jul 20th, 2008 at 01:49:18 PM EST
[ Parent ]
Thanks for the pointer on terminology.  So if Bridgeport makes milling machines and a US citizen purchases them and ships them to a factory in Mexico in which he has a 49% share and co-owns with a Mexican national who is the managing partner, how would that be described in these terms?  Today it would be Intel or Motorola setting up chip plants, etc. "off-shore" and the capital could come from third parties in third nations.  Not being trained in you discipline, I am always stepping in it.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jul 20th, 2008 at 02:11:02 PM EST
[ Parent ]
If someone buys something from a producer in one country and ships it to another country, that is a trade transaction.

If trade is balanced, as in Ricardo's model, then the international finance for that import of an investment good would come from equivalent export earnings of that country.

But trade is not balanced, so assuming a foreign-controlled subsidiary is importing that investment good, it does so by borrowing money from banks in the low-income country, at a preferential rate because it is a quite desirable customer for a bank or financial intermediary in that country.

Given the normal tendency for net capital flows go to high income countries from low income countries(NB), the international finance comes from either elbowing aside other imports, forcing down the terms of trade to make exports more competitive and reduce incomes earned on resources used in the low-income country, or as a result of other wealthy corporations offering to either take over a larger share of the low-income nation or else help put the low-income nation deeper in debt to overseas interests.

(NB. This is not how it would work if the world was like the traditional marginalist theory, where there is no international hierarchy of core, semi-peripheral, and peripheral nations, but out here in the real world, high income core economies have the hard currencies, and there is therefore a strong incentive for those accumulating wealth in low-income countries to exchange that for wealth in a hard currency and hold their wealth in account balances in a core economy somewhere.)


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Jul 20th, 2008 at 04:25:03 PM EST
[ Parent ]


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