A story far from over

The idea of ​​a “just in time” supply of materials, parts and services seemed like such a great idea. The parts could be made cheaper elsewhere. Global suppliers of goods and services were eager to engage. Boeing, Apple, Ford, General Motors, GE, and Hewlett-Packard, among many others, were enticed by the idea of ​​not having to inventory all those essential parts and materials, especially if they could be made cheaper elsewhere. . And, in a shrinking world, they might be called “just in time.”

But then things started to go downhill. Global supply chains have proven vulnerable and not as reliable as President Bill Clinton once insinuated: “Globalization,” he said, “is not something you can delay or turn off… It’s the economic equivalent of a force of nature, like wind or water.” I guess the retort to that could be, “Sometimes the wind doesn’t blow and sometimes you have to dance to make it rain.

The international pandemic has had catastrophic consequences on the global supply chain and these consequences have come in waves. China, one of the largest suppliers to the United States, is shut down again due to COVID-related infections. These infectious effects have also spread to other countries in Southeast Asia, South America and South Asia.

Then there is the shocking reality of Putin’s war. There was an assumption associated with globalization that territorial expansion wars were over, that these types of hostilities were a thing of the past. Multinational business leaders assumed this was a brave and enlightened new world. It now made sense that they thought they would generously distribute assets, production, supply lines, and goods and services around the world, as threats of disruption from international conflicts had essentially passed (except perhaps for conflicts tribes in some parts of the developing world).

Putin’s war on Ukraine has upended energy markets around the world, food availability, resources to deal with a changing coronavirus, global inflation, and it is transforming the alliances that will influence inevitably capital flows, foreign direct investment, international finance, banking protocols and the application of sanctions.

The psychological effects of all these global phenomena have prompted policymakers to throw in the so-called “clutch,” waiting to see what else might affect global economic circumstances. Will China see the Russian invasion as an opportune time to launch its own invasion of Taiwan? Will the war in Ukraine drag on in 2023 or 2024? Will the Russian-European gas problems continue to drive up energy prices? Will opportunistic energy producers continue to ruthlessly keep prices high and make hay while the sun shines? Will this virus continue to mutate and cause new waves of infections? Will the war in Ukraine turn into a global conflict?

It’s no surprise that some companies and countries are rethinking their premise of globalization. Is it better, for example, for the United States to start increasing its manufacturing of computer chips instead of relying on foreign suppliers? Is it better for US automakers and appliance makers to source and manufacture domestically? Will nations begin to move more towards self-reliance?

China’s Xi Jinping seems to be more focused on state ownership and a less dependent consumer-driven economy. The European Union appears to be ready and willing to wean itself off dependence on Russian energy and ready to develop alternative EU energy sources. Ohio will soon become one of America’s largest producers of computer chips, reducing our dependence on the rest of the world for these semiconductors, thanks, of course, to Intel’s decision to increase the domestic production of these vital components for almost everything we make today.

Nations seem to be turning in on themselves and looking for ways to be more self-sufficient. However, this may not mean that globalization is a failure; instead, it may mean that countries do not want to depend so much on others for their economic well-being.

Justin Lahart, economics reporter for the Wall Street Journal, said recently that there may well be changes in the dynamics of globalization. “The pandemic-induced shortages and the Russian invasion show how dangerous becoming overly dependent on one country’s production, whether of microprocessors or natural gas, can be,” he said. he declares.

The world is getting smaller. We are no longer the simple analog world of yesteryear but a complex digital world of competing economic and hegemonic forces. How to secure our economic and geopolitical interests in this declining competitive sphere is a compelling story that is far from complete.

Bill Sims is a Hillsboro resident, retired president of the Denver Council on Foreign Relations, an author, and runs a small farm in Berrysville with his wife. He is a former educator, director and foundation president.