Those who have read my book will know I am no fan of globalization, or the false narratives which are used to promote it. Such narratives resemble religious doctrine which are only challenged by heretics. By promoting ever higher levels of dependency, globalization threatens both national and individual sovereignty. It also creates huge systemic vulnerabilities. Yet, such trends seem unstoppable and irreversible. I have argued for a return to more local and national production – as close to self-sufficiency as possible. That might seem like an idealistic dream.
Yet, I am reading an increasing number of reports that the coronavirus is causing a re-think of globalization because of the interruption of complex international supply chains and the devastation this is causing to the global economy. It was reported today in The Times of London, March 6, 2020:
The most efficient, which is to say the cheapest, way companies have found of manufacturing products is to use supply chains that straddle the globe in search of cheap labour. If something could be made for less on the other side of the world, so be it.
Yet coronavirus, which threatens to constrain the free movement of people and goods, will deny companies this cheapest avenue. Companies will have to think long and hard about whether intercontinental supply chains make sense. Already some companies are shifting production back home and opting for home-built components.
And this from Bloomberg: “Fed Did Right Thing, But It’s a Whole New Ballgame: Jim Bianco”:
“I would argue that markets are signaling that the coronavirus is causing a secular shift in thinking [by declining after the Fed rate cut announcement] … the global supply chain, especially if more shortages develop in the coming weeks, will get a rethink similar to the worst-case scenario from the trade wars. This means de-globalization and returning manufacturing processes closer to home…
This trend reversal would mean relief from grossly over-valued asset prices (urban real estate and the share values of multi-nationals). That won’t be such a bad thing if people at home can afford to buy a house. There will be a return of inflation (excluding real estate) but that won’t be such a bad thing since wages will rise also, as will employment in more meaningful and better quality jobs.
Penicillin is no longer manufactured in the U.S.; it comes from China, as do the components of many manufactured goods. Assembly lines at home are crippled if trade is interrupted.
I am reminded of the 2005 movie War of The Worlds, based on the novel by H.G. Wells. The “tripods” seemed unstoppable. Missiles, planes and tanks were useless; but in the end, the aliens were defeated by a tiny microbe invisible to the naked eye.
(c) Adrian Charles Smith 2020