When surplus situations come to an end

Ian Welsh has long provided some of the most useful and insightful economic analysis to be found anywhere on the internet. At Firedoglake, he concludes this post about recent Arentinian Government decision with these observations:

Food and oil are created in specific countries. Those countries, as food and oil become scarce, will tend to take care of their own needs first. This is especially true in states that are democratic, where the rulers can't just say "let them eat cake". Specific long term contracts will matter. The world market will become less and less of a fact as more and more oil and food is sold based on bilateral arrangements.

Likewise, in democracies, there will be a real temptation to take commodity resources that are necessary for manufacturing and use them at home. Why sell the raw stuff when you can do the value add yourself? Sure, it may cost a bit more than if it was done in some cheaper or more productive country, but when there's an absolute scarcity of key resources, that doesn't matter. You have pricing power and you can extract the extra money. It gives your population more and better jobs, which gives you a better tax base. And it gets you reelected.

Global markets are based on surplus situations without strong incentives for nations to horde or make bilateral deals. Those circumstances are ending and we are coming to an end of this era of "free" trade.