Interesting post by Matt Stoller on the broader policy issues associated with the current problem in the Sues Canal.
Here is a short extract capturing the main idea …
“Industrial crashes, in other words, are happening in unpredictable ways throughout the economy, shutting down important production systems in semi-random fashion. Such collapses were relatively rare prior to the 1990s. But industrial crashes were built into the nature of our post-1990s production system, which prioritizes efficiency over resiliency. Just as ships like the Ever Given are bigger and more efficient, they are also far riskier. And this tolerance for risk is a pattern reproducing itself far beyond the shipping industry; we’ve off shored production and then consolidated that production in lots of industries, like semiconductors, pharmaceutical precursors, vitamin C, and even book printing.
What is new isn’t the vulnerability of the Suez Canal as a chokepoint, it’s that we’ve intentionally created lots of other artificial chokepoints. And since our production systems have little fat, these systems are tightly coupled, meaning a shortage in one area cascades throughout the global economy, costing us time, money, and lives.”
Irrespective of whether you agree with the solutions he proposes, I think the point he makes (i.e. the tension between efficiency and resilience and the systemic problem with systems that are “tightly coupled”) is a very real issue. We saw this play out in the financial system in 2008 and we saw it play out in global supply chains in 2020. There are differing views on whether the measures have gone far enough but the financial system has been substantially re-engineered to make it more resilient. It remains to be seen how global supply chains will evolve in response to the problems experienced.
Link to the post here
Tony – From the Outside