Probably The Most Important Chart In The World

Tyler Durden's picture

Having discussed the links between economic growth and energy resource constraints, and with the current geo-political fireworks as much about energy (costs, supply, and demand) as they are human rights, it would appear the following chart may well become the most-important indicator of future tensions...

 

Source: Goldman Sachs

This is not the first time we have discussed "self-sufficiency" - As none other than Bridgewater's Ray Dalio noted in a slightly different context:

"self-sufficiency encourages productivity by tying the ability to spend to the need to produce,"

 

"Societies in which individuals are more responsible for themselves grow more than those in which they are less responsible for themselves." The nine-factor gauge of self-sufficiency provides some interesting insights into those nations most likely to experience above-average growth going-forward and those that are not; as European countries, notably Italy, France, Spain, and Belgium, all ranking at the very bottom on self-sufficiency.

And here we discussed, What If Nations Were Less Dependent On One Another?

The ability to survive without trade or aid from other nations, for example, is not the same as the ability to reap enormous profits or grow one’s economy without trade with other nations. In other words, 'self-sufficiency' in terms of survival does not necessarily imply prosperity, but it does imply freedom of action without dependency on foreign approval, capital, resources, and expertise.

 

Freedom of action provided by independence/autarky also implies a pivotal reduction in vulnerability to foreign control of the cost and/or availability of essentials such as food and energy, and the resulting power of providers to blackmail or influence national priorities and policies.

 

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Consider petroleum/fossil fuels as an example. Nations blessed with large reserves of fossil fuels are self-sufficient in terms of their own consumption, but the value of their resources on the international market generally leads to dependence on exports of oil/gas to fund the government, political elites, and general welfare. This dependence on the revenues derived from exporting oil/gas leads to what is known as the resource curse: The rest of the oil-exporting nation’s economy withers as capital and political favoritism concentrate on the revenues of exporting oil, and this distortion of the political order leads to cronyism, corruption, and misallocation of national wealth on a scale so vast that nations suffering from an abundance of marketable resources often decline into poverty and instability.

 

The other path to autarky is selecting and funding policies designed to directly increase self-sufficiency. One example might be Germany’s pursuit of alternative energy via state policies such as subsidies.

 

That policy-driven autarky requires trade-offs is apparent in Germany’s relative success in growing alternative energy production; the subsidies that have incentivized alternative energy production are now seen as costing more than the presumed gain in self-sufficiency, as fossil-fueled power generation is still needed as backup for fluctuating alt-energy production.

 

Though dependence on foreign energy has been lowered, Germany remains entirely dependent on its foreign energy suppliers, and as costs of that energy rise, Germany’s position as a competitive industrial powerhouse is being threatened: Industrial production is moving out of Germany to locales with lower energy costs, including the U.S.

 

The increase in domestic energy production was intended to reduce the vulnerability implicit in dependence on foreign energy providers, yet the increase in domestic energy production has not yet reached the critical threshold where vulnerability to price shocks has been significantly reduced.

 

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America’s ability to project power and maintain its freedom of action both presume a network of diplomatic, military, and economic alliances and trading relationships which have (not coincidentally) fueled American corporation’s unprecedented profits.

 

The recent past has created an assumption that the U.S. can only prosper if it imports oil, goods, and services on a vast scale.