The Long Hard Road to Decoupling from China
“The era of globalization” may finally be coming to an end. The Wuhan Virus and the attendant misery that the Chinese communist state has unleashed upon the world (very much including its own people) has laid bare a core structural flaw in the assumptions underpinning globalization. It turns out that the radical interweaving of markets—which was supposed to lead to the “complex interdependence” that IR theorists have been predicting for the better part of the century would lead to an increase in global stability as countries’ fates are proven to be dependent on each other’s fortunes—has instead created an inherently fragile and teetering structure that is exacerbating uncertainty in a time of crisis.
That this has turned out to be so should not be surprising. The logic that has driven globalized supply chains has all but eliminated redundancies across the world in the pursuit of efficiency. That efficiency has been found by locating links of the supply chain in places where labor costs have been low. In theory, anyway, this should not have been problematic: as one country grew its economy and ascended out of poverty, its low-wage sector would get outcompeted by other poor countries, by which it could be replaced in the supply chain. Similarly, by this logic, if robots become permanently competitive with low-skilled workers, so be it. A more efficient way of producing something is always favorable in this way of thinking.
Such thinking largely ignores geopolitics. By striving to “flatten” the world (in Thomas Friedman’s memorable phrase) into a single, borderless entity in pursuit of nothing but profit and prosperity, this worldview has created huge blind spots. For example, it was powerless to predict that China would build on its early advantage in sheer numbers of low-skilled workers to lock in a dominant and increasingly powerful position for itself in global supply chains. Economies of scale played their part, as did the complementarity of the various manufacturing sectors the country strategically developed, not to mention China’s bullying and corrupting practices. The end result was that the costs of shifting to poorer countries would be unappetizing to corporate supply chain managers. Worse still, such thinking could not account for the fact that behind the scores of successful companies lay a monolithic, totalitarian, nationalist entity with a vision for restoring China’s role in the world: the Chinese Communist Party (CCP).”
Excerpt from The American Interest, April 8, 2020.
This article reflects the views of the author and are not necessarily the official policy of the United States, Germany, or any other governments.