COLUMN: Russian export ban mirrors old error

A specter is haunting the world economy -- the specter of self-sufficiency.

The latest sighting is in the smoky haze hovering over Russia, where prolonged drought and spreading wildfires caused by record heat have destroyed one-fifth of the grain crop, and Russian Prime Minister Vladimir Putin has announced a ban on all exports of wheat and other grains.

Putin has explained that he must put Russians first: "We need to prevent a rise in domestic food prices, we need to preserve the number of cattle and build up reserves for next year."

In reaction to this Russian action, the price of wheat on world markets has soared to its highest level in two years, and fears of food shortages have emerged once again worldwide.

One among many countries affected by the Russian export ban is Egypt, the world's largest importer of wheat. The last time wheat prices shot up, three years ago, Egyptians died as thousands fought in lines outside public bakeries while waiting for limited loaves of bread. Half of all the wheat imported by Egypt comes from Russia.

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The Russian ban on grain exports is only the most recent sighting of the shade of self-sufficiency. There have been many others lately. Inspired by lingering economic anxieties in the wake of the Great Recession, by hunger for raw materials to fuel renewed growth, and, increasingly, as in Russia, by the consequences of climate change, countries everywhere are turning inward toward what they see as economic independence.

They are restricting exports of food. They are hoarding metals, minerals, and other natural resources of all kinds. They are yielding more and more to the lure of a retreat from the economic interdependence of globalization into the ghostly embrace of self-sufficiency.

Like Russia, Argentina has also imposed restrictions on exports of grain. Indonesia has banned the export of raw logs. India is contemplating a ban on exports of iron ore. China has cut the quotas for exports of the rare earth elements that are indispensable ingredients of numerous high-tech products.

These and many other similar measures worldwide evidence a widespread belief that national economic self-sufficiency is somehow possible for the complex economies of the twenty-first century.

Self-sufficiency is an ancient illusion. In classical Greece, early Athenians extolled the virtues of "autarky," the Greek word for self-sufficiency. They feared what they foresaw as the deleterious impact of specialization on the wholeness of human endeavor, and so they argued for the economic self-sufficiency of the Greek city-state.

In time, of course, classical Athens became anything but an economic autarky. The Athenian marketplace became a crossroads for maritime trade throughout the Mediterranean and much of the Middle East. Like Egypt now, Athens back then imported most of its grain.

All the same, the spectral appeal of "autarky" has continued to haunt humanity through all the centuries since. Insular medievalists. Bullion-hungry mercantilists. Hitler's Germany. Mussolini's Italy. Franco's Spain. Communist Albania. Cambodia under the Khmer Rouge. North Korea today. All have trumpeted the supposed virtues of economic self-sufficiency through economic isolation.

And all have failed. They failed because the illusion of self-sufficiency is not only ancient; it is dangerous.

For specialization is a source of strength, not weakness. As Adam Smith taught us, specialization through a division of labor within societies and between societies is a liberating spur to the innovation and incentive and enterprise that combine to create the most prosperity for us all. Without specialization, we cannot grow. Without specialization, we condemn ourselves to less than we would otherwise have.

A division of labor implies a division of resources to do labor's tasks most efficiently and, thus, most productively. To make the most of specialization, we must therefore make the most efficient allocation of our limited resources. Export taxes, export quotas, and export bans distort resource allocation and thus cause us to produce less overall, and to produce it less efficiently.

The world's largest trader of agricultural commodities, Cargill, made essentially the same point in a statement criticizing the Russian grain export ban: "Such trade barriers further distort wheat markets by making it harder for supplies to move from areas of surplus to areas of deficit, and by preventing price signals from reaching wheat farmers."

The more than one billion people in the world who suffer from chronic hunger -- nearly a sixth of the world's population -- surely do not need such distortions in the world's wheat markets. They need the most efficient allocation possible of the world's grain resources.

Export restrictions imposed on food, or on raw materials or other natural resources, may, in the near term, divert supply to the domestic market and thus lead to a downward pressure on domestic prices. But, due to reduced supplies, such restrictions lead also, in the near term, to higher international prices. And, in the long term, they lead to less production and thus to less prosperity overall.

Politicians confronting the near term of the next election may not be inclined to look to the long term. Calls to think and act "locally" in addressing pressing economic concerns are made more politically persuasive by the fact that only the "locals" will vote in the next election.

Yet, inescapably, ours is an interconnected, interdependent world. And we ought, in every country, to ask ourselves: Can any one country ever be entirely self-sufficient in every resource the "locals" there need? If we ask and answer that question, we will beware the specter of self-sufficiency.

James Bacchus is a former Member of Congress, from Florida, and a former Chairman of the Appellate Body of the World Trade Organization. He chairs the global practice of the international law firm Greenberg Traurig.