Are supply chain disruptions the beginning of the end of globalization?
At the end of last week, there were 584 container ships idling off the world’s ports, waiting to be loaded or unloaded. Disruptions in the bulk cargo sector look to be even worse.
Experts suggest the problems are temporary. For instance, Bloomberg columnist Brooke Sutherland maintains that three weeks of declines in ocean freight rates tells us “the worst may be over for the supply-chain snarls that have plagued shipments of everything from Coca-Cola Co. ingredients to paint, toys, and industrial fasteners.”
The optimism, however, is premature. The snarls could last years. Moreover, the severe disruptions, however long they persist, will help end the current period of globalization. Interconnectedness, it is now evident, has a steep price.
The backlog is serious. “Companies are waiting for goods they ordered a year ago,” Jonathan Bass, CEO of WhomHome and an onshoring advocate, told me during a recent conversation. “Predictions that we will come out of supply-chain issues in the summer of 2022 are way off base. I think 2024 is more realistic.”
In the meantime, expect empty shelves. Vice President Kamala Harris, while in Singapore in August, suggested Americans do their holiday shopping early. “If you want to have Christmas toys for your children it might now — it might be the time to start buying them because the delay may 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 confluence of short-term factors, such as worker shortages, COVID-19 control measures, and an array of misguided government policies on both sides of the Pacific. Bass also pointed out a factor almost never mentioned: “Older ships will soon be heading to the yards to be refitted with cleaner propulsion systems.”
President Joe Biden’s solution is to operate ports 24/7. Yet keeping Long Beach open is only a stopgap measure because the breakdown in logistics also has a fundamental cause: The existence of long supply chains stretching halfway around the world, connecting factories and consumers. These chains are extremely efficient when they work, but they are exceedingly fragile. It did not take much post-epidemic pent-up demand to overwhelm them.
Furthermore, long supply chains are, due to increasing friction with China,
Header featured image (edited) credit: Supply chain backup/Getty images
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