<p>In principle and in theory, anything can happen.<br>
First, as always, we have to supply some more specific content for "survive and prosper". Are we assuming some <em>preferences</em> underlying the whole issue? If yes, then what kind of preferences are they? What kind of material goods and services do these preferences favor? Can these material goods and services be provided by the country's own resources, and to what degree?  </p>

<p>Looking at history though, (as we should), we notice that long-long before "global trade liberalization" policies became an officially declared goal and agenda of the powerful economies of the planet, international trade existed and expanded. For thousand of years humans are observed to trade with abroad -and no, nobody forced them to.  So it appears that international trade <em>gets chosen</em> by human societies as a way to <em>prosper</em>. And because this choice has been revealed time and again, through different eras, civilizations, cultures, productive capabilities etc, it makes it difficult to think that a country could obtain a comparable level of prosperity without international trade.  </p>

<p>Survival, though, is another matter, since it is much more easy to survive than to prosper (as an individual or as a country).</p>

CC BY-SA 3.0
2014-12-26T17:24:46.263Z
2014-12-26T17:24:46.263Z
Alecos Papadopoulos
<p>Besides allowing countries to take advantage of comparative advantage, as mentioned, an open economy can engage in intertemporal trade. </p>

<p>This possibility is useful because it allows a country to smooth consumption over time, even when domestic output fluctuates. For instance, in good times the economy can save (consume less than actual output, lending to foreign countries), allowing the economy to consume more than actual output in bad times. 
This in fact is welfare improving relative to autarky (in which consumption in any period must equal current output (to simplify assume there is no investment), when we assume that consumer's preferences are convex.</p>

<p>Therefore, I don't know if a country can survive/prosper being a closed economy, but certainly there are many advantages for an economy that engages in international trade.</p>

CC BY-SA 3.0
2014-12-27T19:33:31.900Z
2014-12-27T19:33:31.900Z
J. K
<h2>TL; DR</h2>

<p>A country can prosper without foreign investments. As for international trade, large nations set up specialization within. Small countries have to trade. Much depends on industries and the stage of development.</p>

<p>To understand why, let's look at the numbers.</p>

<h2>International trade</h2>

<p>This data covers a small fraction of the history of international trade. Back in the 19-20 centuries, the world traded less on average. The United States was basically an autarky. Britain traded a lot, but it's an exception.</p>

<p>Trade as an opportunity for specialization is critical for small countries, like Singapore or Hong Kong. They can't produce everything as the economy becomes more complex. The United States can and do.</p>

<h3>Old timers</h3>

<p>Highly developed European countries trade a lot within the European Union, which was conceived to simplify trade. But for economies as large as the United States, international trade is not an imperative:</p>

<p><img src="https://i.sstatic.net/Pd6zh.png" alt="enter image description here"></p>

<h3>Newly industrialized countries</h3>

<p>Trade played a more important role in countries that have been growing rapidly after the World War 2. This trade-oriented growth achieved two goals: larger demand (such that Japan and China run trade surplus for years) and inflow of currency to purchase novel technologies (relevant during catch-up growth, not for technological leaders):</p>

<p><img src="https://i.sstatic.net/zsWpV.png" alt="enter image description here"></p>

<hr>

<h2>Foreign direct investments</h2>

<p>FDI is a nominally small factor in all cases. Even with spillovers, FDI is a fraction of domestic savings, which are much more important for accumulation of capital and, hence, growth:</p>

<p><img src="https://i.sstatic.net/woZCu.png" alt="enter image description here"></p>

<p><a href="http://antontarasenko.com/2014/12/10/how-to-save-attention-misdirected-to-foreign-direct-investments/" rel="nofollow noreferrer">Source and additional data on FDI, savings, and growth</a></p>

CC BY-SA 3.0
2014-12-26T18:06:33.647Z
2014-12-29T18:20:32.630Z
2014-12-29T18:20:32.630Z
Anton Tarasenko
<p>It is agreed upon among economists that trade, mostly through specialization and economies of scale, is welfare improving.</p>

<p>Hence, if you want to look at self sufficient countries, you rightfully look at those which are involuntarily in that situation.</p>

<p><strong>North Korea</strong> receives supports from China. <strong>Cuba</strong> receives support from Non-US. <strong>Iran</strong> has self-sufficiency as one of the big targets of its politics, to be less dependent from international sanctions. While Iran is still trading with other countries, and getting a lot of resources through informal channels, I believe it i the country closest to self-sufficiency, disregarding undeveloped economies.</p>

CC BY-SA 3.0
2014-12-25T11:16:52.817Z
2014-12-25T11:16:52.817Z
FooBar
<p>To what extent can a country be 100% independent from the rest of the world? Is there any country like that in the world? Maybe North Korea, but North Korea receives supports from China.</p>

CC BY-SA 3.0
2014-12-25T09:35:59.953Z
Many countries can survive. But many of them will be much more poor..
XWorm
CC BY-SA 3.0
2014-12-29T02:58:12.943Z
The world is 100% independent from the (empty) rest-of-the-world, so the answer to your first question is clearly yes.
Steven Landsburg
<macroeconomics>
Can a country survive and prosper without international trade or investment from overseas?
Tom
# Can a country survive and prosper without international trade or investment from overseas?

(Asked by: username_0 on 2014-12-25)

To what extent can a country be 100% independent from the rest of the world? Is there any country like that in the world? Maybe North Korea, but North Korea receives supports from China.

**Tags:** macroeconomics

> **Comments:**
> **username_1**: Many countries can survive. But many of them will be much more poor..  
> **username_2**: The world is 100% independent from the (empty) rest-of-the-world, so the answer to your first question is clearly yes.  

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## 4 answers

### Answer by username_3 on 2014-12-26. Score: 1 | Accepted answer

In principle and in theory, anything can happen.  
First, as always, we have to supply some more specific content for "survive and prosper". Are we assuming some *preferences* underlying the whole issue? If yes, then what kind of preferences are they? What kind of material goods and services do these preferences favor? Can these material goods and services be provided by the country's own resources, and to what degree?

Looking at history though, (as we should), we notice that long-long before "global trade liberalization" policies became an officially declared goal and agenda of the powerful economies of the planet, international trade existed and expanded. For thousand of years humans are observed to trade with abroad -and no, nobody forced them to. So it appears that international trade *gets chosen* by human societies as a way to *prosper*. And because this choice has been revealed time and again, through different eras, civilizations, cultures, productive capabilities etc, it makes it difficult to think that a country could obtain a comparable level of prosperity without international trade.

Survival, though, is another matter, since it is much more easy to survive than to prosper (as an individual or as a country).


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### Answer by username_4 on 2014-12-27. Score: 5

Besides allowing countries to take advantage of comparative advantage, as mentioned, an open economy can engage in intertemporal trade.

This possibility is useful because it allows a country to smooth consumption over time, even when domestic output fluctuates. For instance, in good times the economy can save (consume less than actual output, lending to foreign countries), allowing the economy to consume more than actual output in bad times.
This in fact is welfare improving relative to autarky (in which consumption in any period must equal current output (to simplify assume there is no investment), when we assume that consumer's preferences are convex.

Therefore, I don't know if a country can survive/prosper being a closed economy, but certainly there are many advantages for an economy that engages in international trade.


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### Answer by username_5 on 2014-12-26. Score: 2

## TL; DR

A country can prosper without foreign investments. As for international trade, large nations set up specialization within. Small countries have to trade. Much depends on industries and the stage of development.

To understand why, let's look at the numbers.

## International trade

This data covers a small fraction of the history of international trade. Back in the 19-20 centuries, the world traded less on average. The United States was basically an autarky. Britain traded a lot, but it's an exception.

Trade as an opportunity for specialization is critical for small countries, like Singapore or Hong Kong. They can't produce everything as the economy becomes more complex. The United States can and do.

### Old timers

Highly developed European countries trade a lot within the European Union, which was conceived to simplify trade. But for economies as large as the United States, international trade is not an imperative:

![enter image description here](https://i.sstatic.net/Pd6zh.png)

### Newly industrialized countries

Trade played a more important role in countries that have been growing rapidly after the World War 2. This trade-oriented growth achieved two goals: larger demand (such that Japan and China run trade surplus for years) and inflow of currency to purchase novel technologies (relevant during catch-up growth, not for technological leaders):

![enter image description here](https://i.sstatic.net/zsWpV.png)

---

## Foreign direct investments

FDI is a nominally small factor in all cases. Even with spillovers, FDI is a fraction of domestic savings, which are much more important for accumulation of capital and, hence, growth:

![enter image description here](https://i.sstatic.net/woZCu.png)

[Source and additional data on FDI, savings, and growth](http://antontarasenko.com/2014/12/10/how-to-save-attention-misdirected-to-foreign-direct-investments/)


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### Answer by username_6 on 2014-12-25. Score: 1

It is agreed upon among economists that trade, mostly through specialization and economies of scale, is welfare improving.

Hence, if you want to look at self sufficient countries, you rightfully look at those which are involuntarily in that situation.

**North Korea** receives supports from China. **Cuba** receives support from Non-US. **Iran** has self-sufficiency as one of the big targets of its politics, to be less dependent from international sanctions. While Iran is still trading with other countries, and getting a lot of resources through informal channels, I believe it i the country closest to self-sufficiency, disregarding undeveloped economies.


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