The researchers behind a study from the International Institute for Applied Systems Analysis have made some interesting points about global trade and its resilience to economic shocks, and they did so by taking inspiration from ecosystems.
While the study itself is rather complex, it can be crudely broken down into the basic idea that efficiency is good for growth, but redundancy makes trade more resilient.
Preferential trade agreements between different countries and vertical integration by companies both help to make trade more efficient, which allows markets to grow during stable economic times. But when shocks hit, like the economic shock of 2009, they can seriously harm less redundant markets. Redundancy results in slower overall growth, but a greater resilience to shocks and greater ability to return to normalcy following such shocks.
The researchers suggest then, that it is in the best interest of concerned actors, such as governments, trade organizations, and large firms, to implement systems that promote both efficiency and redundancy, but never to stray too far into one or the other camp. Redundancy is important to stay resilient, but efficiency is needed to grow markets. Finding ways to promote both of these behaviors sustainably is an issue that will require more research, but the IIASA study is a great place to start.
And when one considers previous economic shocks, like the 2009 shock or the Great Depression, the integrated ecosystem model for understanding global trade makes a lot of sense. After all, those situations, particularly the Great Depression, spread rapidly as markets collapsed and influenced other markets in other countries. Since the early 20th Century, the world has become increasingly interconnected, and that means that market failures in one place can have a strong effect in other places as well.
The researchers concluded their paper by saying they hoped their work would encourage further research in examining other critical networks relevant to sustainable development—such as the water, food, and energy nexus—and that the ecological information-based approach they used will make their information more accessible to policymakers.
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