Homeland economics: The price of putting country first

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  Quantumrun Foresight
• March 26, 2025

Insight summary

Global disruptions have pushed governments to prioritize economic security by promoting domestic production and reducing dependence on foreign supply chains. This shift may strengthen local industries and create jobs but could also drive up costs, limit consumer choices, and strain international trade relationships. As countries focus on self-sufficiency, businesses, workers, and policymakers may face new challenges in balancing economic resilience with global cooperation.

Homeland economics context

Homeland economics has emerged as a response to the economic instability caused by financial crises, pandemics, and geopolitical tensions. This approach prioritizes national economic security by promoting domestic production, reducing reliance on foreign supply chains, and using industrial policies to support key industries. Governments, particularly in the US and the European Union, have implemented subsidies and protective measures to shield their economies from unpredictable global shocks. While proponents argue that this strategy creates a safer and fairer economic system, critics warn that it could lead to inefficiencies, trade conflicts, and reduced global economic growth.

The shift toward homeland economics has been driven by major global events, including the Great Financial Crisis of 2008, the COVID-19 pandemic, and Russia’s invasion of Ukraine. These disruptions exposed vulnerabilities in global supply chains, particularly the "just-in-time" model that prioritized efficiency over resilience. Countries dependent on imports for essential goods, including semiconductors and raw materials, faced severe shortages, prompting governments to rethink economic strategies. However, a 2023 analysis of 17,000 US-imported commodities by The Economist suggests that supply chain failures during the pandemic were only slightly above historical averages, raising questions about whether market interventions are necessary.

Homeland economics presents several challenges, including the risk of economic fragmentation and inefficiencies in state-led industrial policies. Research from the International Monetary Fund suggests that a division of the global economy into US- and China-led blocs could lead to a 1 percent reduction in global output in the short term and a 2 percent decline in the long term. Western governments are actively working to reduce dependence on China, which controls 80 percent of the raw materials for solar cell manufacturing and holds a dominant position in several industries with over 40 percent global market share.

Disruptive impact

As governments encourage domestic production, the cost of goods may increase due to higher wages and manufacturing expenses. Consumers might face fewer choices, especially for electronics, clothing, and pharmaceuticals, as global supply chains shrink. Jobs in manufacturing and energy may grow, but service-sector workers could experience slower wage growth if businesses reduce outsourcing. Higher taxes to fund subsidies for local industries may reduce disposable income and impact long-term financial security.

Businesses that rely on international suppliers could struggle with higher costs, leading to more expensive products or reduced profit margins. Some industries, like electric vehicles and semiconductors, may benefit from government incentives, but companies outside these sectors could face new trade barriers. Smaller firms may struggle to compete with larger corporations receiving subsidies, reducing competition and slowing technological progress. Additionally, businesses expanding into foreign markets may encounter trade restrictions, forcing them to focus on domestic sales instead of global growth.

Governments may increase spending on subsidies, infrastructure, and national security to support homeland economics. Trade policies may shift toward tariffs and domestic production requirements, leading to tensions with global partners. Export-dependent countries may struggle to sustain economic growth if protectionist policies lower demand for their goods. Meanwhile, investments in research and development could increase as governments attempt to strengthen local industries, but the risk of economic inefficiencies remains. In the long run, policymakers may have to balance economic security with global trade relationships to avoid long-term economic stagnation.

Implications of homeland economics

Wider implications of homeland economics may include: 

• Governments increasing subsidies for local agriculture, leading to higher domestic food production but rising grocery prices for consumers.
• Companies shifting to automated manufacturing to offset labor costs, reducing low-skill job opportunities while increasing demand for engineers and technicians.
• National policies prioritizing local supply chains, leading to stronger economic independence but reducing trade relationships with some foreign partners.
• Research funding shifting toward energy independence, encouraging advancements in renewable energy but slowing global collaboration on climate solutions.
• Increased tariffs on imported goods raising prices for consumer electronics, pushing tech companies to redesign products with locally sourced materials.
• Businesses focusing on regional markets instead of global expansion, leading to a rise in smaller, locally tailored products and services.
• Rising investment in vocational training programs increasing the workforce for skilled trades but limiting job mobility across international borders.
• Governments tightening immigration policies to protect domestic labor markets, reducing workforce diversity and slowing population growth in some regions.
• Environmental policies promoting domestic resource extraction increasing energy security but creating tensions over land use and ecological impact.
• Public spending on national infrastructure projects boosting economic activity but increasing government debt and long-term fiscal challenges.

Questions to consider

• How could rising costs from homeland economics affect how you budget, shop, and plan for the future?
• What new career opportunities or challenges could emerge in your industry as businesses shift toward local production and supply chains?