Sovereign Economy

EU vs Sovereign Economic Model

The Sovereign Economic Model is a stalwart for sovereign economics of a state.

EU is a centralizing black hole: EU has such a bureaucracy in place to remove sovereignty from countries in order to create a political "union".
This overflows to economics, where the EU:

1) regulates what and which countries can do,which cannot
2) has quotas for food production (e.e. milk)
3) forbids some local foods
4) distributes economic "tasks" to EU "favourite" countries, while forbidding other countries to implement them
5) limits state capitalism (while the Sovereign Economic Model encourages it)
6) de-industrializes poorer countries by shutting down local companies
7) favours large companies with huge lobbying budgets
8) removes competition as 6)7)
9) direct support to designated companies only

Sometimes I feel pity for European countries being handicapped by EU bureaucracy, and the instalment of EU nominated companies with related loss of competitiveness, will cause the complete defeat of many industries by more eager less bureaucratic Asian countries.

Sovereign Economic Model and Japanese-style economy

One of the ways Japan build its post-war economy was a peculiar method on how they organized both internal competition and exports.

1) In the internal market, Japan applied strong protectionism to impede imports from foreign firms.
2) They selected a number of national champions (usually between 5 and 8) with a similar structure of suppliers
3) National champions competed furiously for market share, without one ever grabbing a too big share
4) As result of this fierce competition, the Japanese companies became competitive in the international market
5) The companies began to export, not individually, but as a syndicate -in a collaborative way- to gain critical mass

Japan had huge success with this stratagem. Also Keiretsu - which is a Japanese term, for a strong relationship, even mutual equity stakes between a group of companies - is a strong bond when working and trading internationally. This system is still in place in the Japanese economy.

I believe a sovereign economy should consider the Japanese method of building up entire industries, it has worked before successfully and can work now.

FDI Foreign Direct Investments are bad for a sovereign economy

Let's imagine you have a house, which needs some improvements. Since you don't have the finances or skills to do it yourself, you ask others to chip in. Somebody will do the hydraulic pipelines of water and heating, some will put in new wooden floors, somebody else will custom design a new kitchen, somebody the landscaping of the garden.
Now, who owns the house?
With works completed, the heating system is very expensive because of foreign technologies, to walk on parquet floors you need to wear special footwear, kids and dogs cannot use garden so to not damage the grass lawn, because the "investors" want to safeguard their "investments".

In a sovereign economy, foreign investments have many disadvantages, in some cases they are a trap. An economy can only be sovereign if the state is very strong, to direct the economy down the right path to become advantageous for the country and its people. Even with a strong government, large investors have incredible power to influence an economic and political system.

The advantages of receiving FDI Foreign Direct Investment is clear: investment, jobs and knowledge transfer.

The list of disadvantages of receiving FDI Foreign Direct Investment is very long:
-Hindrance to Domestic Investment
-Modern-Day Economic Colonialism/predatory exploitation
-Disappearance of local cottage and small scale industries
-Replacement of local technologies with expensive proprietary foreign ones
-Takeover/elimination of unique or critical local companies
-Cultural erosion
-Profit repatriation

How does a sovereign economy need to manage FDI Foreign Direct Investment?

1) Excellent governance, i.e. resistance to pressures
2) Allow only FDI in real economy (i.e. manufacturing)
3) Give local investors same (tax) benefits as FDI investors
4) Disallow takeover/elimination of unique or critical companies/technologies

Summing up, FDI Foreign Direct Investment is mostly a bad deal for receiving sovereign economies, and only advantageous if the sovereign economy is able to apply a very strong governance in order to reap its (limited) benefits.

Sovereign Economics in the Sovereign Economic Model (Summary)

A summary of concepts of a sovereign economy. If you follow the links below, please enable a translator in browser, most posts are written in Russian.

State Capitalism for strategic sectors
Value creation from natural resources
Import substitution
Technology acquisition
Strong support for Mittelstand producers - SMEs(De-taxation)
Market regulation(market share limitations)
Sovereign Agriculture
Sovereign Internet and E-Commerce

In case you have missed it in previous posts, the pdf of the “Sovereign Economic Model” is at

Sovereign Economy, Industry 4.0 and the economy of "simple things"

Very interesting articles (in Russian)

I completely agree on on the policy of restoration of the economy of "simple things" .
The economy of "simple things" is basically FMCG, plus agriculture. In many countries this “simple” economy is a bit underdeveloped as many products are, yes, produced in locally, but by foreign companies, and not local companies. It just takes a stroll in a supermarket and most of cleaning and personal care products are of foreign companies.
I believe both de-taxation and market regulation are in favour of local companies which could take over this market.

Суверенная экономика, Индустрия 4.0 и экономика "простых вещей"

Очень интересные статьи

Я полностью согласен с политикой восстановления экономики "простых вещей" в России.
Экономика "простых вещей" - это в основном FMCG плюс сельское хозяйство. В России эта экономика немного неразвита, так как многие продукты, да, производятся в России, но иностранными компаниями, а не российскими. Он просто прогуливается по супермаркету, и большинство чистящих средств и средств личной гигиены принадлежат иностранным компаниям.
Я считаю, что и отмена налогообложения, и регулирование рынка идут в пользу местных компаний, которые могли бы захватить этот рынок.