As contemporary globalization of the world economy continues, each nation enjoys the benefits of greater exploitation of scale economies and of specialization and exchange. But equally true, globalization causes greater dependence among regions, nations, and localities and this necesserily implies greater vulnerability to disruption of supply to/from each other. Alternative actions which countries might take or actually have taken to manage this vulnerability incluse (a) stockpiling of goods which might be lost due to political, economic, or natural causes, (b) protection of domestic industries which otherwise could not compete in workd markets (the classical "national" security" argument for protectionism), (c) maintenance of standby production capabilities, itself closely related to stockpiling and (d) forming special economic unions or contingency agreements to guarantee stable supply and exchange. This paper develops a unified analysis of the first two of these alternative policies.
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Paper provided by California Irvine - School of Social Sciences in its series Papers with number
99-00-16.
Find related papers by JEL classification: F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General F30 - International Economics - - International Finance - - - General F15 - International Economics - - Trade - - - Economic Integration