OPINION: The global supply-chain mess is an opportunity for the U.S. to have a broader conversation about the economy and what it is for.
BOSTON —Global supply chains used to be the last thing policy makers worried about. The topic was largely the concern of academics, who studied the possible efficiency gains and potential risks associated with this aspect of globalization. Although Japan’s Fukushima nuclear disaster in 2011 had demonstrated how supply-chain disruptions could impact the global economy, few anticipated how central the problem could become.
This 250-page report contains many important proposals. Some are already part of the broader discussion on improving the U.S. work force’s skills and the economy’s capacity for innovation. Other ideas have been circulating for a while in international relations and security studies; for example, the document considers the national-security implications of defense and other critical industries’ reliance on imported inputs.
The review then asks whether hyper-globalized supply chains are so great for economic efficiency after all. The worst-case scenario is when a failure in one part of the chain triggers domino effects, bringing down other firms and bringing the entire sector to a standstill. Logically, this scenario is similar to what one finds in financial networks, where the failure of one bank can push others into insolvency or even bankruptcy, as happened in 2008 following the collapse of Lehman Brothers.
Squeezing the working class A second way that companies may overextend their supply chain is subtler but no less important. The problem, the White House review notes, is that “the United States has taken certain features of global markets—especially the fear that companies and capital will flee to wherever wages, taxes and regulation are lowest—as inevitable.
A fragmented supply chain may also make it more difficult for workers to organize for collective bargaining, creating yet another benefit for businesses. Companies may even reap tax advantages from globalizing their supply chain, if doing so allows them to book profits in lower-tax jurisdictions.
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