Are provide chain disruptions the start of the top of globalization?
At the end of last week there was 584 container ships idling in front of the world’s portswaiting to be loaded or unloaded. The disturbances in the bulk goods sector seem to be even worse.
Experts believe the problems are temporary. For example Bloomberg columnist Brooke Sutherland entertains that three weeks of falling ocean freight rates tell us that “the worst could be over for the supply chain confusion that has plagued shipments of everything from Coca-Cola Co. ingredients to paint, toys and industrial fasteners.”
However, it is premature to be optimistic. The growl could last for years. Moreover, however long the serious disruptions continue, they will help end the current phase of globalization. Networking, it is now obvious, comes at a high price.
The backlog is serious. “Companies are waiting for goods that they ordered a year ago,” said Jonathan Bass, CEO of WhomHome and onshoring advocate, in a recent interview. “Predictions that we will get out of supply chain problems in the summer of 2022 are far off the mark. I think 2024 is more realistic. ”
In the meantime, expect empty shelves. Vice President Kamala HarrisKamala HarrisHarris sits down with McAuliffe in Virginia Harris to highlight drought and climate change in Nevada The Senate GOP signals they will help rescue Biden’s Fed chairmenwhile in Singapore in August, recommended Americans do their Christmas shopping early. “If you want Christmas toys for your children, now may be the time to buy them as the delay can be many, many months,” she warned. American consumers living in a land of plenty will have to get used to scarcity.
These unprecedented problems are the result of a clash of short-term factors such as labor shortages, COVID-19 control measures and a number of misguided government policies on both sides of the Pacific. Bass also pointed out a factor that was almost never mentioned: “Older ships will soon be going to the shipyards to be retrofitted with cleaner propulsion systems.”
president Joe BidenJoe BidenJan. 6 Panel Brings Criminal Contempt Trials of Bannon Overnight Energy & Environment – Presented by the American Petroleum Institute – Democrats Raise Reports That Clean Energy Program Will Be Eliminated Two House Democrats Will Retire Before Tough Midterm Elections MORE‘s solution is too Operate ports around the clock. Keeping Long Beach open is only a stopgap solution, however, because the collapse of logistics also has a fundamental cause: the existence of long supply chains that stretch halfway around the world and connect factories and consumers. These chains are extremely efficient when they work, but they are extremely fragile. It didn’t take much post-epidemic catching up to overwhelm it.
In addition, long supply chains are inevitably becoming even more fragile due to the increasing friction with China. The latest round of globalization began when countries lowered their political barriers to trade after the Cold War. In the euphoria of that time, American and other Western analysts thought that the form of government no longer mattered, so that democracies without any impact on national security could trade and thereby strengthen authoritarian, dictatorial and otherwise tough states. Because of the worrying developments in China, this view is now widely discredited.
At the moment, World trade is around 5 percent above pre-COVID levels, but long-term trends will soon tear economies apart.
“The forces driving deglobalization are likely to dominate for the foreseeable future, and will hardly be confined to the recently exposed national security threats and political uncertainties arising from China’s role as a ‘world factory’,” said Alan Tonelson, a Washington, DC-DC representative resident trade expert told me.
Tonelson, who blogs at RealityChek, cites the World Trade Organization’s inability to function effectively, the high and unstable energy prices resulting from the move away from fossil fuels, and Europe’s pursuit of technical autonomy from both China and the United States. He also notes that the continued prevalence of automation in manufacturing greatly reduces the cost advantages of low-wage countries and encourages countries like America to make products at home.
Despite the “decoupling”, there will continue to be a high volume of trade worldwide. Many therefore say that economic and trade relations will continue to serve as “ballast” to stabilize relations.
This view is questionable. “Does trade increase or decrease the likelihood of conflict?” Samuel Huntington, the late Harvard political scientist, asked in his seminal work “The Clash of Civilizations and the Remaking of World Order.” “The assumption that it reduces the likelihood of war between nations is at least unproven, and there is much evidence to the contrary.”
Many have now pointed out that high volume of trade did not prevent World War I. Huntington, building on the work of others, argued that expectation was the most important thing. “Economic interdependence promotes peace,” he wrote, “only if states expect that high levels of trade will continue in the foreseeable future.”
Of course, wars do not necessarily occur when countries decouple their economies. However, in these circumstances the threshold for the use of force inevitably falls.
Deglobalization will be largely due to trade and economic factors, but these factors will soon have geopolitical ramifications. The world is already tense, and it will become more, as societies seek economic self-sufficiency.
Gordon G. Chang is the author of “The Coming Collapse of China”. Follow him on Twitter @GordonGChang.