Dan Drezner has a great piece in Reason this month called "The Post-Neoliberalism Moment." It's an unfortunate title that hides its real argument: globalization didn't hurt us during the pandemic and we abandon it at our peril.
We heard constantly during the pandemic that supply lines broke because they were so complex and global. But that's not really the case:
The more economists study the effects of the pandemic, the less evidence they find for the argument that globalization reduces resilience. Almost all of the shortages that occurred during the pandemic had little to do with globalized supply chains. Rather, they sprang from two causes—
To summarize, Dan says the two causes were (a) CEOs who screwed up by not forecasting demand shifts, and (b) CEOs who screwed up because they were obsessed with lean inventories that buckled under the slightest pressure.
I've often wondered if anyone ever seriously believed that things would have gone smoothly if only all our goods had been made in America. The notion is beyond ridiculous. COVID hit us too and kept our workers away from factories, so why would locally sourced products have been in any better shape than products sourced from China or Malaysia? They wouldn't have:
Economists Pinelopi K. Goldberg and Tristan Reed recently looked at whether the global economy suffered from shortages due to disruptions in the global supply chain. They found the exact opposite. That's because an economy with thoroughly nationalized supply chains increases its vulnerability to localized shocks. Even in instances like personal protective equipment (PPE), the evidence strongly suggests economies more reliant on imports were able to recover their stocks far more quickly than those that tried to produce more PPE indigenously.
Personally, I'd add something that Dan didn't touch on: the widespread myth that the global economy responded poorly to the pandemic in the first place. It was a pandemic! Under the circumstances, things went remarkably well. There were shortages here and there, but nothing very long-lasting or serious. And thanks to government intervention, most economies hummed along fairly nicely despite facing a deadly viral pandemic unprecedented in modern times.
There are lessons to be learned from COVID-19, just as there are lessons to be learned from the China shock of the aughts. But the lessons are fairly narrow. Our experience certainly doesn't suggest that we need a wholesale reordering of the global economy. Count your blessings, folks.
Neoliberalism has more problems than supply chain difficulties (massive and growing inequality for starters and inadequate consideration of social and environmental impacts). Your title is too big even if we accept the arguments.
As to supply chains: It boils down to a cost benefit analysis. I'd say there are a group of products that I'd like to see made domestically for cases of crisis or war: Medical supplies, basic food and hygiene items for example. For the rest it depends on the cost of shipping versus the cost of domestically made goods. And we should not forget that the US navy is crucial for this be cause it ensures the safety of transport routes worldwide. Did Drezner make a reasonable accounting for the costs of this? I bet he didn't. But there is no doubt: The US tax payer subsidizes international trade (this is not new: it used to be the British Navy that did the job and every trading power of the past had a strong fleet: Venice for example).
how is the title to big when it specifies it's about neoliberalism and "broken supply lines during the pandemic"?
"Medical supplies, basic food and hygiene items for example. "
So what do all those factories producing enough PPE for a pandemic do when there *isn't* a pandemic? Just sit around?
I dunno about you, but I intend to keep showering, pandemic or not. And I hope my surgeons do too, and use the PPE.
"...they were obsessed with lean inventories ..."
Of course, the reason why Just In Time inventories were such a disaster was because the global supply chain system failed and the inventories couldn't be replaced in a timely manner. Had supplies been more local or had transportation systems not collapsed for supplies farther away, JiT might have worked.
The fact that Just In Time inventories failed is evidence that globalization is a cause of the problems during COVID. Of course, part of the reason why JiT is a bad management process is because any disruption in supply shuts down the whole business.
Utter rubbish, it is magical assertion that domestic only responds quicker (as actual econometric data show - rather on the order of the innumerate magical thinking that leads to "eat local" being seen as environmentally positive, via essentially romanticism)
Just in Time is not a 'bad management" practice, like any tool it can be done well with attention to supply buffer risks - and reduce costs to end-consumers (be they households or entpreprises) as heavy inventories are a dead weight cost, the only reason the Left and the protectionist Populist Right is siezing on this subject is it appears to the naive to be a hook to argue their a priori beliefs.
Seems like you failed to argue against the faults of just in time inventory.
Ignoring the cost of going to a store that's missing things you need is not 'saving' those costs.
why Just In Time inventories were such a disaster was because the global supply chain system failed and the inventories couldn't be replaced in a timely manner.
Not so: the global supply chain didn't "fail." Shortages were generally modest and ephemeral, and in any event, the United States is among the nations least exposed to trade shocks of any kind.
Also, Just in Time practices may need to be modified or scaled back in some cases, but that's not a phenomenon related only to foreign inputs.
Yeah, I was also going to say - Just In Time inventory and globalization are inherently linked.
Note that I am not saying that there is a causal relationship here. Both are/were done in pursuit of the same goal: efficiency and ever higher profits for capitalists.
"an economy with thoroughly nationalized supply chains increases its vulnerability to localized shocks"
This is one reason that globalization is thought to be good, since if domestic supply fails some other place can be tapped. But the pandemic was not a "localized shock" - it was a global shock and nobody was making enough for the entire world. The lesson here is that globalization is not a solution to pandemics. What is needed for pandemics is foresight - preparation for increased production or stockpiling in case of emergency. Localization does not provide that either - if things are run on the principles of maximum profits. It's not profitable to prepare for a world-wide emergency, or even a national or local one.
It's governments that have to prepare for emergencies, and this has to be done on a national level. There is no world government yet. Globalization was another step in making all decisions dependent on corporate profits. This just doesn't work in emergencies. Traditionally governments have taken over in wars, but now there is a world-wide emergency in the form of global warming. Trans-national corporations aren't going to solve that.
Pandemics by nature are unpredictable. Because of that there are very distinct limits to how much advance preparation can be done for a once in a century, more or less, event. Consider disease vectors alone. Covid is spread through the air, and so masks are helpful in limiting its spread. If a disease comes along that, for instance, is spread by mosquitoes but not limited to any particular species of mosquito, much different measures would be needed to limit its spread.
Symptoms are another matter. Covid affects the lungs, so we had a respirator panic. Perhaps the next pandemic will affect the kidneys, and patients will need to be on dialysis for some weeks. Then there will be dialysis machine panic.
In short, without knowing what the next pandemic will be ,we really can't do much to prepare for it, and economic systems make no difference.
Actually COVID-19 attacks a lot more than the lungs. One of the first effects noted in early 2020 was that it attacked the endothelial cells that make up the inner lining of blood vessels. I read an article in the Seattle Times in the spring of 2020 about the "Styrofoam" look of X-rays of the lungs of early patients - the alveoli and fine blood veins in the lungs were being destroyed. But the lungs were just the first line of attack for an airborne virus. Some other articles more recently note variances in blood cells in people who have had COVID-19 as well as evidence that it can do damage to veins throughout the body.
Researchers are still trying to get a better handle on "long COVID".
Our Lord God Mammon cannot fail, He can only be failed.
Well said.
This is kind of like the game of telephone we played with GMOs a while back. Experts said there may be problems with GMOs disrupting local ecologies and pernicious economic effects if hegemonic companies use them to exploit local labor and small farmers.
The popular opinion freakout turned into: GMOs are unhealthy! ...when that wasn't really one of the experts' concerns.
Likewise with supply chains, we heard expert warnings that lean just in time delivery was just waiting for a catastrophic failure and that's what we got with the pandemic. But the popular opinion freakout blamed it on China and practically everything but.
From what I saw in the US, supply chain failures were not such a serious problem that there was widespread suffering. Complaining about some empty shelves? Plenty of that. But when it came time to refrigerate the large number of dead bodies outside of hospitals in bit cities, capitalism and globalization came to the rescue! Dead bodies did not fester in our streets in large numbers, if at all.
Isn't it globalization that leads to pandemics in the first place, though? People and goods move so freely and so quickly that viruses must do so, too. If I were going to pin blame for the virus spreading so rapidly that the responses came tardily, I would point the finger at our lack of controls over those rapid movements over vast distances.
The difference between an epidemic and a pandemic is transportation!
Supply chains were a complete disaster. We had limitations on how much chicken we could buy at one time at the supermarket or Costco, and had to switch to other proteins more available. The horror of not having your favorite bread available, or needing to wait at the curb for the liquor store to put my required beverages in the trunk of my car. It was tragic when I had to wait until my new refrigerator or dishwasher was in stock at the appliance store, or had to endure the sorrow of choosing another brand, or getting a floor model (with a little ding) to get it sooner.
Not to mention being unable to buy those 500 rolls of TP and 800 single-serving bottles of water. Wonder how much of those overstocks are still left? I hear states are throwing away extra left-over N95s, gowns and gloves because they've "expired."
I may have a lifetime supply of Lysol spray in my basement.
We did get a lesson on what toilet paper brands nobody would buy even in a shortage...
And when the car companies cancelled their chip orders since they didn't think they'd sell any cars, but then changed their minds, those mean chip fabs didn't let them jump to the front of the line!
I'm still waiting to buy flour!
Britannia says, "Neoliberalism - ideology and policy model that emphasizes the value of free market competition. Although there is considerable debate as to the defining features of neoliberal thought and practice, it is most commonly associated with laissez-faire economics. In particular, neoliberalism is often characterized in terms of its belief in sustained economic growth as the means to achieve human progress, its confidence in free markets as the most-efficient allocation of resources, its emphasis on minimal state intervention in economic and social affairs, and its commitment to the freedom of trade and capital." This =/= globalism. Ergo, that globalism didn't cause our problems is not a defense of neoliberalism..
I recall reading anecdotes that amounted to GM saying, "Taiwan, we don't have any stinking chips!' and Taiwan replying, "You didn't order any stinking chips." The issue in the COVID recession was logistics, not globalism. I see little evidence economists understand logistics, I recall my Econ 101 text (I'm so old to was Samuelson) saying supply and demand meet by adjusting prices. It didn't say anything about six month lead times.
You're lucky you still had Samuelson instead of Milton Friedman.
Funny story: my one Econ 101 class was taught by Wendy Gramm, the other half of the notorious DC power/corruption couple headed by Senator Phil Gramm. Back then, they were still both starving professors and Democrats.
I took courses using Samuelson's economics textbook too! I recall a lot of stuff about beans. 😁
It wasn't until a few years after I graduated that I read a very interesting article in Fortune magazine about areas where "the free market" had a lot of trouble with stability. There are certain goods/services that have high barriers to entry and inherently unstable price structures.
Fortune cited airlines as a major example. The cost of entering the business is huge, the cost of securing landing and takeoff rights and gates is both expensive and complex, and scheduling and logistics of operations is a real can of worms.
Setting ticket prices introduces another oddity. As soon as you sell enough tickets to break even on the cost of the flight, each additional ticket is profit. This creates an incentive to heavily discount subsequent tickets - and leads to ruinous price wars. Imbalances in how many people are going outbound versus coming back can lead to experiences like me flying on 747 from Chicago to Honolulu where the flight crew outnumbered the passengers by quite a bit. Got to have SOME plane at the other airport to fly passengers back!
There were a few other examples, but it turned out to be quite a bit more interesting than Econ 101.
Isn't the efficient allocation of resources and a commitment to free trade what makes globalism useful as an economic practice?
And isn't "just in time delivery" an obvious business choice within the context of neolibralism functioning in today's marketplace?
It's hard to imagine someone who is devoted to neoliberal economics advocating the opposite: "what we really need, boys, is to shrink our supply chain to a few dozen miles, no matter the higher cost, and warehouse as much product as we possibly can, just in case!"
My thoughts exactly: Globalism is a corollary of Neoliberalism. Of course, neoliberalism is, well, a theory in search of an observation while globalism had less to do with comparative andvantige and much, much more to do with absolute advantage.
Actually I read a good article in Kos a while back. Japan created JIT - not because they wanted to but because they wanted to become an industrial/military power but didn't have the resources in their archipelago to do so. So they developed JIT as a way to make the best use of the scarce materials they were able to scrounge from anywhere they could find them.
I think pushing JIT a little too hard probably contributed to early supply chain failures, but there were a whole lot of other problems with lots of people coming down with COVID-19, work from home, spikes in unemployment, stunning incompetence in the TFG administration, etc.
Yeah, GM planning on selling fewer cars during the pandemic seemed... dumb. Yet they did it anyhow.
This is very similar to the current panic about schoolchildren. "Oh my god, they're not learning!"
Well, yes, there was a pandemic.
Blame neoliberalism for allowing CEO's to screw up supply chains, quality initiatives, and finding reliable pundits to accept their blaming of neoliberalism for their screw ups.
Drum: "COVID hit us too and kept our workers away from factories"
No, dumb Fauci and a lot of clueless governors did that.
Uhh, no, he did not.
Unless you think workers who were sick should have been in factories.
Roboto is a troll that always writes these stupid things.
You're a fool.
Woo, there it is, I spotted a "Fauci" hater in the wild!
"Pinelopi"
Pandemics aren't the only thing that could happen. If China decides to take over Taiwan, we will look smart for bringing at least some chip production back to the US.
A side note to the topic is how much energy is used to make stuff half way round the world and then ship it over here. Using energy for now still means a lot of greenhouse gas emissions. While that may be cheaper on paper somehow (oh, right, underpaying foreign workers is cheaper than paying for fuel for cargo ships I guess), the damage done still comes dear.
And I also haven't gotten into invasive species.
Ackshually, pound-for-pound, shipping goods in huge container ships across the ocean is greener than trucking it across the state.
"CEOs who screwed up because they were obsessed with lean inventories that buckled under the slightest pressure."
That IS neo liberalism.