A narrative far from finished

Bill Sims Contributing columnist

Bill Sims Contributing columnist

The idea of “just-in-time” sourcing of materials, parts and services seemed like such a great idea. 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 enamored with 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 could be called for “just-in-time.”

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

The international pandemic has had catastrophic consequences on the global supply chain and those consequences have come in waves. China, one of America’s biggest suppliers, is once again shut down over COVID-related infections. These infectious effects have also spread to other countries in Southeast Asia, South America and South Asia.

Then there’s the shocking reality of Putin’s War. There was an assumption associated with globalization that wars of territorial expansion were over, that these kinds of hostilities were a thing of the past. Multinational corporate chieftains assumed that it was a brave and enlightened new world. It now made sense they thought to spread assets, production, supply lines and goods and services liberally around the world because the threats of disruption from international conflicts were essentially over (except perhaps for tribal conflicts in parts of the developing world).

Putin’s War on Ukraine has upset energy markets around the world, food availability, resources to deal with a mutating coronavirus, global inflation, and it’s transforming alliances which inevitably will influence capital flows, foreign-direct investments, international finance, banking protocols and the application of sanctions.

The psychological effects of all these global phenomena has caused decisionmakers to throw in the so-called “clutch,” waiting to see what might further 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 into 2023 or 2024? Will Russian-European natural gas issues continue to roil energy prices? Will opportunistic energy producers continue to callously keep prices high and make hay while the sun shines? Will this virus continue to mutate and cause additional waves of infections? Will the war in Ukraine expand into a global conflict?

It comes as no surprise that some companies and countries are rethinking their globalization premises. Is it better, for example, for the U.S. to start increasing its manufacturing of computer chips instead of relying on foreign suppliers? Is it better for U.S. car manufacturers and appliance manufacturers to source and build domestically? Will nations begin to trend more towards self-reliance?

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

Nations do seem to be retrenching and searching for ways to be more self-reliant. That being the case, it may not mean that globalization is failing; instead, it may mean that countries don’t want to be so dependent on others for their economic well-being.

Justin Lahart, an economics reporter for the Wall Street Journal, said recently, that there might well be changes afoot to globalization’s dynamics. “The shortages the pandemic has induced and the Russian invasion bring home how becoming over reliant on a single country’s production, be it microprocessors or natural gas, can be dangerous,” he said.

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 ensure our economic and geopolitical interests in this shrinking competitive sphere is a compelling narrative that is far from finished.

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, executive and foundation president.

Bill Sims Contributing columnist
https://www.timesgazette.com/wp-content/uploads/sites/33/2022/05/web1_Sims-Bill-mug-2.jpgBill Sims Contributing columnist