Miracles in Wakanda
We need to talk about the economics problem in the new Marvel movie Black Panther. The movie is about a super hero known as the ‘Black Panther’, who also happens to be the king of Wakanda, which is a fictional country in Africa. Wakanda is also the location of a Vibranium meteorite strike. Vibranium is a metal with extraordinary properties. It is stronger than any other metal in the world, it can grant super human strength, it can heal human injuries and it is useful for engineering, war and advanced telecommunications. But this article is neither about the action of the film nor Vibranium itself. It’s about Wakanda’s trade policy.
The government of Wakanda embraces a policy of autarky: Wakanda does not trade or interact with the outside world in any way. Because of its Vibranium, it also becomes the wealthiest and most technologically advanced country in the world. This however, is the most absurd premise in the entirety of the Marvel universe.
No autarkist nation has ever prospered relative to more trade-friendly nations. In the 1950s and 60s, India embraced a government-planned economy while imposing high tariffs on imports that competed with its labour-intensive textile and cloth industries.[1] The result was dismal. In 1960, India’s real per capita income was approximately three fifths of South Korea’s. Three decades later, ‘India’s income had only slightly more than doubled, while income in South Korea’s export-oriented economy had risen to 6.5 times its starting level’.[2]
Under Hitler’s rule, the German economy established trade controls, import quotas and attempted ‘self-sufficiency’. The consequences were disastrous. The economy devolved into rampant inflation, which led to price controls, resulting in severe shortages and a proliferation of black markets. Hitler eventually declared the country unable to feed itself and blamed overpopulation.[3]
The other few examples tell similar tales. Albania, Tanzania and a number of other African nations grew very slowly relative to their neighbours after attempting, amongst other policies, autarky.[4] The only nation today that pursues Wakanda style isolation is North Korea and even they still trade with China.
On the other extreme, nations that embraced international trade prospered after WWII. Singapore, Japan, South Korea and Hong Kong are some of the wealthiest nations in the world. Singapore and Hong Kong have essentially no natural resources to benefit from, yet they are some of the most technologically advanced cities in the world. Estonia went from being one of the poorest nations behind the Iron Curtain to one of the wealthiest per capita nations in the world after embracing, amongst other things, free trade.[5]
So why is free trade so good? Christis Tombazos is an Associate Professor at Monash University, and has been researching international trade since 1992. When it comes to free trade, his opinion is certain:
‘It’s not like a moral argument where someone might be in favour of a particular institution or not. It’s not a normative question or question of opinion. It is a positive question. If you ask me “do you accept the optimality of free trade?” then the answer is unambiguous: I do’.
Christis is not alone. Almost every economist in the world advocates for unilateral free trade regardless of their political persuasion. At its simplest, free trade always works because it generates infinitely multiplying ‘win-win’ situations. As Ricardo proved in the early 19th century, it doesn’t matter who is the best resourced or the cleverest; it comes down to opportunity cost. This means that a nation will benefit from unimpeded trade, no matter what its neighbours do and no matter what its circumstances! Just to emphasise the point, wealth in natural resources never justifies autarky, nor does it guarantee the optimal use of that resource.
Finally, if the premise of Black Panther is correct, then we are actually staring at the face of a greater tragedy. Imagine that there are two identical countries. Then suppose the first chooses isolationism and autarky, while the second chooses free trade and international engagement. Economic science tells us that the second country will be wealthier than the first. Moreover, the second country makes the rest of the world better off as the world gets the benefits of the second country’s produce, ideas and technology. Had Wakanda chosen trade instead of isolationism, we could be looking at a world without poverty, hunger or cancer.
But it’s just a movie!
You may feel compelled to reject the absurdity of critiquing the economics of a fictional movie. However, fictional stories can have powerful influences on attitudes to public policy. Charles Dickens’ stories reversed social attitudes towards the poor.[6] Whether the writers realise it or not, they have suggested that isolationist policies can succeed. On that score, I will leave the last word to Christis:
‘The forces of isolationism and protectionism are the forces of ignorance.’
References
[1] Lawrence White, The Clash of Economic Ideas, Chapter 10, 2012, Cambridge University Press
[2] Ibid, p 261.
[3] “Hitler’s Memorandum on the Four-Year Plan,” in Robert Stackleberg and Sally A. Winkle, eds., The Nazi Germany Sourcebook: An Anthology of Texts (London: Routledge, 2002), pp.197-8.
[4] Isolation and Autarky, US Library of Congress < http://countrystudies.us/albania/70.htm>; George Ayittey, ‘Betrayal: Why Socialism Failed in Africa’, 24/12/2008, < https://fee.org/resources/betrayal-why-socialism-failed-in-africa/>
[5] Mart Laar, ‘The Estonian Economic Miracle’, The Heritage Foundation, 7/08/2007, < https://www.heritage.org/report/the-estonian-economic-miracle> ; Mart Laanemae, ‘Did free trade make Estonia prosper?’, < http://vm.ee/sites/default/files/content-editors/web-static/151/Mart_Laanemae.pdf>
[6] Sylvia Nasar, The Grand Pursuit: The Story of Economic Genius, 2011, Simon & Schuster, p 9.
Image: https://commons.wikimedia.org/wiki/File:San_Diego_Comic-Con_2014_-_Black_Panther_(14768387231).jpg