I think that there is a general rule that the more optimal a system is the less robust it is. So, it seems that we have to choose a balance between the two. And the current market incentives are to choose the minimum costs.
Is It Time to Rethink Globalized Supply Chains?
221–230 of 322 posts
Re: Is It Time to Rethink Globalized Supply Chains?
#222Fron 2012: Trade Off: Financial system supply-chain cross contagion – a study in global systemic collapse. By David Korowicz
...in order to understand systemic risk in the globalised economy, account must be taken of how growing complexity (interconnectedness, interdependence and the speed of processes), the de-localisation of production and concentration within key pillars of the globalised economy have magnified global vulnerability and opened up the possibility of a rapid and large-scale collapse. ‘Collapse’ in this sense means the irreversible loss of socio-economic complexity which fundamentally transforms the nature of the economy. These crucial issues have not been recognised by policy-makers nor are they reflected in economic thinking or modelling....
https://www.feasta.org/2012/06/17/trade-off-financial-system...
Re: Is It Time to Rethink Globalized Supply Chains?
#223Earlier quoted context omitted.
Wow, published in 1909. Amazing how old (and wrong) this "economic mutually assured destruction" argument is. I think it's popular today as a distraction from the fact that the American Empire is really held together by military occupations in Europe, Asia, the Middle East, Latin America etc. and not economic ties. Obviously "we just want to make you rich" is much nicer sounding than "we will bomb you if you resist U…
There are a lot of unsettling parallels between the era before WW I and today: A major rising power that feels it is being denied its "rightful place" in the world order by the existing power brokers (Germany vs the UK/ China vs the USA) lead by a hardline leader that isn't interested in compromise (Kaiser Wilhelm II/Xi Jinping) A series of interlocking mutual defensive pacts that will automatically draw nations into…
Many interesting points, but the "mutual defensive pacts that will automatically draw nations into war" part seems to not apply today.
For NATO, the key part is Article 5 that specifies "armed attack against one or more of them in Europe or North America shall be considered an attack against them all", and is intentionally drafted so as to not apply to "Cold war turning hot" in Asia (e.g. the Korean war or Vietnam war or Afghanistan or Iraq) and to any "non-core territories" e.g. French or British overseas territories or pacific islands like Guam. Heck, a literal repeat of Pearl Harbor and invasion of Hawaii would not trigger Article 5 (though NATO could and would likely take action despite not being required to do so) - the NATO treaty is explicitly designed to not draw nations automatically into war unless USSR or someone else starts WW3 in Europe or attacks mainland USA. It's hard to imagine any Chinese actions regarding their ambitions (e.g. South China Sea, Taiwan, Hong Kong) that could trigger the NATO Article 5 which would automatically draw nations into war, anything in Asia would give each nation a choice whether to get involved and if so, how much.
I'm not informed about the Russia-China treaties much, but IMHO they also don't have any strong mutual defence pacts, they have some limited military cooperation and sharing but that's it; they had a mutual defence pact in 1950s but that's long gone now. For example, there's the https://en.wikipedia.org/wiki/2001_Sino-Russian_Treaty_of_Fr... where the strongest relevant obligation in Article 9 would require each party, if it's attacked, to.... immediately contact the other and consult about the situation; it does not include any agreement or obligation to actually do anything about it.
Re: Is It Time to Rethink Globalized Supply Chains?
#224The problem is that almost no one buys products based on the stability of the supply chain, so irresponsibly-global supply chains will beat out responsibly-global ones on price. The problem is our tools to addressing this are either (a) some sort of tariff arrangement, which will almost certainly be political footballs far more than they will address any real problem, or (b) some regulatory/compliance arrangement, wh…
Hm, what about some kind of "chaos monkey" where a random number generator decides which countries will be embargoed and for how long? (Half-joking.)
We used to have this; it was called piracy.
Re: Is It Time to Rethink Globalized Supply Chains?
#225Earlier quoted context omitted.
that's also where i've landed on the tariffs issue. theoretically a bad idea, but has practical uses beyond purely economic considerations. good tariff policy is hard to achieve in divisive political environments however. for instance, in many cases, you'd want them to go away dynamically as conditions improve, but lawmakers hate giving away their levers of power.
I am convinced a low tariff of ~3% on all goods and services to every country is a good idea. But that’s never what happens, you get a huge mix of zero to insanity based on which industries have political power. As such a blanket ban on tariffs became a rallying cry. Food is often used as the counter example, but IMO domestic production is less valuable than a multi year stockpile.
Such a tariff could be made more economically neutral if the tariff proceeds were distributed to citizens as a dividend too.
Re: Is It Time to Rethink Globalized Supply Chains?
#226If those in power dealt with emergent threats like epidemics, climate change, AI safety, nuclear war, maybe we could trust them with globalized supply chains. But since they hoard profits and refuse to pay taxes, while failing to prioritize the populace survival, seems we may do well to localize into our own communities. Why should we accept global threats and barely reap the rewards of global commerce?
Re: Is It Time to Rethink Globalized Supply Chains?
#227The problem is that almost no one buys products based on the stability of the supply chain, so irresponsibly-global supply chains will beat out responsibly-global ones on price. The problem is our tools to addressing this are either (a) some sort of tariff arrangement, which will almost certainly be political footballs far more than they will address any real problem, or (b) some regulatory/compliance arrangement, wh…
There is a third option. Apply the same regulations to the manufacture of all products sold in your country. You want to manufacture in China and sell in the US, that's fine -- but you have to do it in accordance with US environmental rules. That does two things. One, no more cost advantage to global manufacturing in whatever place has the least respect for the environment, which lets others compete better and remove…
This is already partially done with Automobiles, for example. Comply with local pollution and safety standards or a lucrative market is closed to your exports.
Re: Is It Time to Rethink Globalized Supply Chains?
#228The price advantages of globalised supply chains vs. the relative rarity of an event like this means that, during normal periods, firms using them will enjoy a significant advantage over those doing the "right" thing and market forces will weed out the latter. So I don't expect management to be taking a lead on this.
Can you quantify the human suffering avoided by lower prices borne out of supply chains?
Re: Is It Time to Rethink Globalized Supply Chains?
#229Earlier quoted context omitted.
Hm, what about some kind of "chaos monkey" where a random number generator decides which countries will be embargoed and for how long? (Half-joking.)
We used to have this; it was called piracy.
lol, very true! Put in that perspective, maybe it's a better idea to contain have international cooperation -- like we did for piracy -- to compat the problems that cause a country to be shut down, rather than assume international trade will always be a crapshoot.
Re: Is It Time to Rethink Globalized Supply Chains?
#230No company will trade efficiency for resiliency. If you prepare for black swan events your company is eaten by the efficient ones that don't. Even if the black swans come every 10 years.