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Economic Self-Reliance Is a Dangerous Delusion

Following the pandemic and globally disruptive conflicts like Russia's war against Ukraine, it is understandable that many countries would pursue policies to strengthen domestic economic resilience. But self-reliance strategies tend to lead to systemic instability and fuel international tensions – or worse.

CAMBRIDGE – Over the past three years, COVID-19 and the war in Ukraine exposed the vulnerabilities stemming from deep global economic integration. Now, governments and companies around the world have given high priority to shortening supply chains, rebuilding domestic production capacity, and diversifying suppliers. But these responses are motivated not only by pragmatic risk-management considerations but also by the goal of economic self-reliance, an aspiration that threatens to derail any stable restructuring of the global economy.

In his 2022 State of the Union address, US President Joe Biden promised to create an economy in which “everything from the deck of an aircraft carrier to the steel on highway guardrails is made in America from beginning to end. All of it.” These commitments were then crystallized in the CHIPS and Science Act and the Inflation Reduction Act, which offered sweeping subsidies and tax breaks to incentivize domestic manufacturing. The Biden administration has also seized on the concept of “friend-shoring,” which represents a kind of regional self-reliance based on national-security and normative arguments.

In response, French President Emmanuel Macron has proposed that the European Union pursue its own “Made in Europe” strategy. But inward-looking shifts in production have not been confined to advanced economies. Indian Prime Minister Narendra Modi has also vowed to create a “self-reliant India,” and even before the pandemic broke out, China’s quest for self-reliance was well underway, with President Xi Jinping reviving in 2018 Mao Zedong’s slogan of “regeneration through one’s own efforts.”