Boils down to emphasizing efficiency at the expense of resilience. The global system therefore became overly brittle instead of suitably flexible as interconnectivity increased.
Naked CapitalismThe Supply Chain Crisis: How We Got Here
Yves Smith
Boils down to emphasizing efficiency at the expense of resilience. The global system therefore became overly brittle instead of suitably flexible as interconnectivity increased.
Naked Capitalism
4 comments:
Another excellent article by Yves Smith, but she seems to have forgotten some of her Econ 101 on this point:
Corporations could use a maquila to import materials and produce a good more cheaply than in the US by paying Mexican laborers to lower wages and paying less money in duties. Mexicans work for approximately one-sixth of the U.S. hourly rate. —quoted from a Wikipedia article
Trade is based on comparative advantage, not absolute advantage. If it was the case that the US was three times as good as Mexico in growing corn, and twice as good at making cars, it would still be in the interest of the US to grow corn and trade it for cars, for they get more cars that way. The same is true for Mexico, in that they get more corn by trade than by growing it themselves.
Though she [i.e., Portugal] could make the cloth with the labor of 90 men, she would import it from a country where it required the labor of 100 men to produce it, because it would be advantageous to her rather to employ her capital in the production of wine, for which she would obtain more cloth from England, than she could produce by diverting a portion of her capital from the cultivation of vines to the manufacture of cloth. —David Ricardo
"Trade is based on comparative advantage, not absolute advantage"
The theory of comparative advantage has been debunked so many times it's amazing that anybody still believes it.
Specialisation of trade requires destruction of capital, relies upon the complete fungibility of individuals, and that everybody operates in a free market world where only trade matters.
In a Ricardian world no country could ever hoard vaccine for their own populations. In the real world that is exactly what they do.
It trades resilience for efficiency and has led to the brittle supply chains that are currently crippling the world.
Nature abhors monoculture. And our trade systems should take a lesson from nature.
NeilW,
It trades resilience for efficiency and has led to the brittle supply chains that are currently crippling the world.
I agree with you on this, but I would add that you don't have a choice in the matter, not unless you want to cut yourself off from trade altogether because that's what it leads to. Think North Korea here.
Last night, I eliminated part of the supply chain by extracting an abscessed tooth.
Then I got a good night's sleep.
p.s. In North Korea and SuperNova Scotia, we use VISE-GRIP pliers :D
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