Tag Archive for: globalisation

Does globalisation have a future?

As wildfires raged through Los Angeles in January, the infamous American conspiracy theorist Alex Jones posted on X (formerly Twitter) that they were ‘part of a larger globalist plot to wage economic warfare & deindustrialize the [United] States’.

While Jones’s suggestion of causality was absurd, he was right that the fires had something to do with globalisation. Last year was Earth’s hottest since recordkeeping began—and likely the hottest in at least 125,000 years—eclipsing the record set in 2023. For the first time, global average temperatures exceeded the Paris climate agreement’s target of 1.5 degrees C above preindustrial levels. For this, scientists overwhelmingly blame human-caused climate change.

Globalisation refers simply to interdependence at intercontinental distances. Trade among European countries reflects regional interdependence, whereas European trade with the US or China reflects globalisation. By threatening China with tariffs, US President Donald Trump is trying to reduce the economic aspect of our global interdependence, which he blames for the loss of domestic industries and jobs.

Economists debate how much of that loss was caused by global trade. Some studies have found that millions of jobs were lost to foreign competition, but that is not the only cause. Many economists argue that the more important factor was automation. Such change can boost overall productivity, but it also causes economic pain, and populist leaders find it easier to blame foreigners than machines.

They also blame immigrants, who may be good for the economy in the long term, but are easy to portray as the cause of disruptive change in the near term. The migration of humans out of Africa is arguably the first example of globalisation, and the US and many other countries are the result of the same basic phenomenon. But as these countries were being built, earlier immigrants often complained about the economic burden and cultural incompatibility of newcomers. That pattern continues today.

When immigration (or media coverage of it) increases quickly, political reactions are to be expected. In nearly all democracies in recent years, immigration has become the go-to issue for populists seeking to challenge incumbent governments. It was a key factor in Trump’s election in 2016, and again in 2024. Social media and artificial intelligence may be more important sources of disruption and anxiety, but they are less tangible (and thus less attractive) targets.

This is why some people blame the populist backlash in nearly all democracies on the increased spread and speed of globalisation, and why populists themselves blame trade and immigrants for most of their countries’ problems. Trade and migration did indeed accelerate after the end of the Cold War, as political change and improved communications technology led to greater economic openness and lowered the cost of cross-border flows of capital, goods and people. Now, with populists’ influence growing, tariffs and border controls may curtail these flows.

But can economic globalisation be reversed? It has happened before. The nineteenth century was marked by a rapid increase in both trade and migration, but it came to a screeching halt with the outbreak of World War I. Trade as a share of total world product did not recover to its 1914 levels until nearly 1970.

Now that some US politicians are advocating a full decoupling from China, could it happen again? While security concerns may reduce bilateral trade, the sheer cost of abandoning a relationship worth more than a half-trillion dollars per year makes decoupling unlikely. But unlikely is not the same as impossible. A war over Taiwan, for example, could bring US-China trade to a screeching halt.

In any case, trying to understand the future of globalisation requires us to look beyond economics. There are many other types of global interdependence—military, ecological, social, health and so forth. While war is always devastating for those directly involved, it is worth remembering that the COVID-19 pandemic killed more Americans than have died in all of the US’s wars.

Similarly, scientists predict that climate change will have enormous costs as global ice caps melt and coastal cities are submerged later in the century. Even in the near term, climate change is increasing the frequency and intensity of hurricanes and wildfires. The perverse irony is that we may be in the process of limiting a type of globalisation that has benefits, while failing to cope with types that have only costs. Among the second Trump administration’s first moves was to withdraw the US from the Paris agreement and the World Health Organization.

So, what is globalisation’s future? Long-distance interdependencies will remain a fact of life as long as humans are mobile and equipped with communication and transportation technologies. After all, economic globalisation spans centuries, with roots extending back to ancient trade routes such as the Silk Road (which China has adopted as the slogan for its globe-spanning Belt and Road infrastructure-investment program today).

In the fifteenth century, innovations in ocean-going transportation brought the Age of Exploration, which was followed by the era of European colonisation that shaped today’s national boundaries. In the nineteenth and twentieth centuries, steamships and telegraphs accelerated the process as industrialisation transformed agrarian economies. Now the information revolution is transforming our service-oriented economies.

The widespread use of the internet began at the start of this century, and now billions of people around the world carry a computer in their pockets that would have filled a large building half a century ago. As AI progresses, the scope, speed and volume of global communication will grow exponentially.

World wars have reversed economic globalisation, protectionist policies can slow it down, and international institutions have not kept pace with many of the changes now underway. But so long as we have the technologies, globalisation will continue. It just may not be the beneficial kind.

Towards a functional global order

World leaders attending the International Monetary Fund and World Bank annual meetings in Marrakesh this week have some difficult decisions to make.

For starters, numerous developing economies—including Egypt, Ethiopia, Ghana, Kenya, Pakistan, Sri Lanka, Tunisia, Ukraine and Zambia—are teetering on the edge of default or have already defaulted. Meanwhile, the United Nations’ recent ‘global stocktake’ climate report shows that we are far from staying under the 1.5°C ceiling for global warming.

While robust economic growth could provide the necessary resources to tackle these challenges, the IMF foresees global sluggishness and a prolonged fight against inflation. Without international cooperation, countries may become ensnared in a slow, messy and expensive effort to manage their debts, combat climate change and stimulate growth.

This isn’t the first time the world has faced such a crisis. As economic historian Martin Daunton notes in his forthcoming book, The economic government of the world: 1933–2023, policymakers from 66 countries convened at the 1933 London Economic Conference to address challenges eerily similar to the ones we face today: debt, protectionism, financial instability and polarisation. With the world economy in freefall and commodity prices crashing, demand for industrial goods evaporated. As unemployment surged, so too did the tensions between domestic political agendas and international economic concerns.

The London conference seemed doomed from the start, as political and economic turmoil elevated extremist leaders. In Italy, the post–World War I economic downturn facilitated Benito Mussolini’s rise to power. In Germany, Adolf Hitler had recently been appointed chancellor. Joseph Stalin ruled the Soviet Union with an iron fist, and China was embroiled in a civil war, having been invaded by Imperial Japan just two years earlier.

There were deep disagreements in both the United States and the United Kingdom over the appropriate response to the crisis. As tensions escalated between the US, the UK and France over wartime debt, an American journalist labelled the conference a ‘plot to cancel debts owed to America’.

The London conference oscillated between calls for international cooperation and their dismissal by those who, in the words of US Secretary of State Cordell Hull, were ‘futilely and foolishly striving to live a hermit’s life’. Despite more than a month of wrangling, participants left without any resolutions. Daunton attributes this to disagreements between politicians, central bankers and the ‘motley collection’ of experts in attendance over the problems facing the world economy and how to address them.

In Marrakesh, representatives of 190 countries, each grappling with its own internal disputes, will attempt to strike a balance between international cooperation and domestic politics. Daunton’s book offers several cautionary tales for them to consider.

While the first part of Daunton’s book, which focuses on the response to the Great Depression, offers little encouragement, the second, which covers the Bretton Woods era, features more successful examples of effective international cooperation. The creation of multilateral institutions like the IMF and the World Bank facilitated a greater understanding of global economic problems and potential solutions, as experts could aggregate and analyse data from all member countries.

In contrast to many other works, Daunton’s book highlights those relegated to the periphery of the emerging order by delving into the politics of Ghana, India and the developing world during the Cold War. In the 1960s, the Kennedy Round of the General Agreement on Tariffs and Trade (which was succeeded by the World Trade Organization) reduced industrial tariffs. With their concerns and interests sidelined, developing countries turned to alternative international forums such as the UN Conference on Trade and Development and the New International Economic Order.

The third part of Daunton’s book charts the rise of the ‘hyperglobal’ and ‘neoliberal’ Washington consensus. As the IMF and World Bank became agents of globalisation, the WTO was established, and rentier capitalism spread across economies, reaching deep into the European Union.

The final part of the narrative begins with the 2008 financial crisis and explores the threats to today’s global order. Daunton then proposes a range of potential paths to a ‘fairer, more inclusive capitalism’, including tougher competition enforcement, progressive taxation, job initiatives, levelling up, de-financialisation and implementation of a ‘green new deal’.

A theme that runs throughout the book is the contentious nature of international cooperation. Early on, we learn that in the 1930s, US President Franklin Roosevelt’s ‘brain trust’ presented him with a plethora of conflicting views on foreign economic policy. It wasn’t until he sided with his more internationalist officials that the protectionism and currency instability of the Great Depression began to subside.

During the first half of the 20th century, the UK considered three competing global economic visions. The first emphasised full employment, which required countercyclical policies, international buffer stocks to maintain stable demand and prices, and public works financed by the International Bank for Reconstruction and Development (the World Bank’s lending arm) to offset labour-market fluctuations.

The second vision focused on the sterling area, imagining a world divided between the US dollar and the pound in which the UK would maintain imperial preferences and look to Africa as an expanding market. At the heart of the third perspective was the Anglo-American relationship, suggesting that Britain should align neither with its own empire nor with Europe, but instead collaborate with the US in a dollar-based economy. Contemporary British politics echoes these discussions, as officials debate whether to strengthen relations with Europe, the Commonwealth (as part of its Indo-Pacific strategy) or the US.

In every era explored, Daunton presents readers with a rich tapestry of competing ideas, underscoring the challenge of forging multilateral agreements between dozens of countries, each with its own internal disputes. As he observes, we again find ourselves in an era of uncertainty and debate over the structure of the global political economy.

Over the past 30 years, international cooperation has often been conflated with globalisation, market liberalisation, deregulation, privatisation and capital flows. But domestic and international debates are now characterised by other issues, including job quality and social welfare, climate change, the geostrategic implications of global supply chains, technological competition driven by national security considerations, and the growing normalisation of sanctions and economic warfare.

While these priorities are at odds with the globalisation-facilitating cooperation that Daunton describes, the agreements and institutions forged over the past century enable us to achieve a new and different form of cooperation. Policymakers and the representatives of international organisations attending the Marrakesh meetings have studied both domestic and international challenges, allowing them to explore collaborative solutions and highlight the concerns of member countries during negotiations.

Though this process may appear inefficient and laborious, it remains indispensable to a world that values state sovereignty and fosters international cooperation. While Daunton’s book underscores the numerous obstacles facing such efforts, it also illuminates the myriad ways a functional international order can emerge.

Globalisation isn’t over

Late last year, Morris Chang, the legendary founder of Taiwan’s (and the world’s) leading semiconductor producer, proclaimed: ‘Globalisation is almost dead.’ In a world where supply chains have been disrupted by Covid-19 and the deepening Sino-American rivalry, other commentators have echoed this view, and many companies have begun ‘onshoring’ and ‘near-shoring’ their procurement of goods. But it is a mistake to conclude that globalisation is over. A lot of human history reveals why.

Globalisation is simply the growth of interdependence at intercontinental, rather than national or regional, distances. Neither good nor bad in itself, it has many dimensions, and it certainly isn’t new. Climate change and migration have been driving humanity’s spread across the planet ever since our ancestors began to leave Africa over a million years ago, and many other species have done the same.

These processes have always given rise to biological interactions and interdependencies. The plague originated in Asia but killed a third of the European population between 1346 and 1352. When Europeans journeyed to the western hemisphere in the 15th and 16th centuries, they carried pathogens that decimated the indigenous populations. Military globalisation goes back at least to the days of Xerxes and then Alexander the Great, whose empire stretched across three continents. And, of course, the sun never set on the 19th-century British Empire. Through it all, great religions also spread across multiple continents—a form of sociocultural globalisation.

More recently, the focus has been on economic globalisation: the intercontinental flows of goods, services, capital, technology and information. Again, the process isn’t new, but technological changes greatly reduced the costs associated with distance, rendering today’s economic globalisation thicker and quicker. The Silk Road connected Asia and Europe in the Middle Ages, but it was nothing like the vast flows of modern container ships, let alone internet communications that connect continents instantaneously.

While globalisation came to be seen primarily as an economic phenomenon in the 20th century, it then became a political buzzword (for proponents and critics alike) in the 2000s. When rioters in Davos broke the windows of a McDonald’s to protest labour conditions in Asia, that was political globalisation.

The current globalisation clearly differs from that of the 19th century, when European imperialism provided much of its institutional structure, and when higher costs meant that fewer people were involved directly. Western firms began spreading around the world in the 1600s, and by the end of the 19th century, the global stock of foreign direct investment was equivalent to about 10% of global output. By 2010, the worldwide stock of FDI included non-Western companies and was equivalent to about 30% of world GDP.

On the eve of World War I in 1914, there was a high degree of global interdependence, including movements of peoples, goods and services. There was also inequality, because the benefits of economic globalisation were unevenly shared. But economic interdependence didn’t prevent the major trading partners from fighting each other (which is why people at the time called it the Great War). After those four years of devastating violence and destruction, global economic interdependence was sharply reduced. World trade and investment didn’t return to their 1914 levels until the 1960s.

Could the same thing happen again? Yes, if the United States and Russia or China blunder into a major war. But barring that contingency, it’s unlikely. For all the talk of economic ‘decoupling’, the breaks so far have been quite selective and incomplete. Global trade in goods and services made a strong comeback after the Covid downturn in 2020, though not all areas recovered equally.

With the US having established new barriers to hamper the flow of certain sensitive goods to and from China, its imports from China have risen by only 6% above pre-Covid levels, while its imports from Canada and Mexico have risen by over 30%. In the US case, then, regionalisation seems to have recovered more robustly than globalisation. But look more closely and you’ll find that while China’s share of America’s imports dropped from 21% to 17% between 2018 and 2022, US imports from Vietnam, Bangladesh and Thailand rose by more than 80%. Those figures certainly don’t suggest that globalisation is dead.

It bears mentioning that this new Asian trade with the US is, in fact, intermediated Chinese trade. The US and its allies are still more deeply intertwined with the Chinese economy than was ever the case with the Soviet Union during the Cold War. Western countries can reduce their security risks by excluding Chinese companies like Huawei from their 5G telecommunications networks without incurring the inordinately high costs of dismantling all global supply chains.

Even if geopolitical competition were to curtail economic globalisation substantially, the world would remain highly interdependent through ecological globalisation. Pandemics and climate change obey the laws of biology and physics, not politics. No country can solve these problems alone. Greenhouse gases emitted in China can lead to costly sea-level rises or weather disruptions in the US or Europe, and vice versa.

These costs could be enormous. Scientists estimate that both China and the US suffered more than a million excess deaths as a result of the Covid-19 pandemic that began in Wuhan, partly owing to both countries’ failure to cooperate on policy responses. Success in addressing climate change or future pandemics will require recognition of global interdependencies, even if people don’t like it.

Globalisation is largely driven by technological changes that reduce the importance of distance. That won’t change. Globalisation is not over; it just may no longer be the kind we want.

Redesigning supply chains to meet Australia’s needs

Thanks to the Covid-19 pandemic, we’re more aware of the weaknesses of globalisation and the flaws of managing supply and demand through just-in-time practices.

The problem is clear for Australia’s policymakers, but the solution less so. Some hanker for a return to 1970s-style Australian manufacturing, forgetting it was an inefficient and highly subsidised artefact of an economic policy designed to manage unemployment. Others seek a return to globalisation, dismissing the sovereignty challenges of an increasingly complex and dangerous geopolitical world.

Neither form of extreme optimism is a sufficient risk-mitigation strategy. Whatever approach is adopted, this new insurance policy will come with a price tag that the market won’t meet.

The push to enhance Australia’s sovereign manufacturing capability, particularly in the defence arena, hasn’t yet produced the jobs or economic benefits promised. The defence industry policy statement in 2016 aimed to foster sovereign capability, but there has been virtually no increase in the ratio of defence acquisition dollars spent locally to those going overseas. Good intentions aside, we can’t and shouldn’t manufacture everything.

What should Australia manufacture and how do we decide what’s important? These decisions shouldn’t be based solely on current market forces, or on overly simplistic assessments of future returns on investment for shareholders.

Stockpiling is an oft-discussed response to supply-chain challenges. The 2020 defence force structure plan committed ‘up to $1.1 billion towards building up sovereign weapon-manufacturing capacity and between $20.3 billion and $30.4 billion towards weapon-inventory surety between 2025 and 2040’.

On the face of it, stockpiling appears to be a good idea, but it is expensive to set up, has the potential to distort markets, and risks stockpiling things that become obsolete. Commodities such as fuel have a shelf life, so stocking up when prices are low is only effective when your economy has the scale to turn over that stock. The government-led wool- and wheat-stockpile arrangements of past eras provide stark lessons of the failure of stockpiling to influence markets, manage commodity pricing and shore up supply chains.

The recent effort to map supply chains is welcome, but modern supply chains are complex and mapping takes time. The result may be an impressive infographic that attempts to simplify the picture, but then what? On what basis do we determine which parts of the supply chain are more critical than others? How do we assess the importance of one supply chain over another? Who would be brave enough to prioritise fertiliser over baby formula?

Supply-chain mapping may identify risks, but it won’t help us identify vulnerabilities to ensure resilience. This point was highlighted in the 2021 by the Productivity Commission, which noted that managing risks ‘does not mean that all disruptions identified by a firm can be avoided’ and that it also has costs.

There’s no question that our supply chains need to be resilient to withstand disruption, which in turn suggests a need to focus on the vulnerable parts of supply chains. The problem is that what makes a supply chain, or part of one, resilient can change and often what makes a supply chain vulnerable is out of our control.

Last year’s shortage of AdBlue (a diesel exhaust additive to reduce emissions made from urea) provides the perfect case study. The supply chain was ‘resilient’ up until the point that a trading partner, in this case China, made policy adjustments in response to domestic needs. The first factor was that the price of fertiliser (urea) was increasing, which was increasing the cost of food production and therefore the cost of food for Chinese consumers. The second was the need to improve Beijing’s air quality in the lead-up to the 2022 Winter Olympics.

China’s policymakers decided to have more urea available for domestic use and to make more AdBlue available for diesel vehicles in Beijing. These two decisions reduced the amount of fertiliser and AdBlue available for import into Australia. The result: a supply-chain vulnerability that we did not foresee.

This example highlights that a confluence of factors can lay the groundwork for a perfect storm that results in a supply chain becoming vulnerable. It also highlights the reactive nature of Australia’s approach to supply chains. Asking, ‘What’s the next AdBlue?’ is the wrong question. Instead, we should focus on what we can influence and what confluence of factors may render a supply chain vulnerable.

If we’re expecting to leverage northern Australia’s geostrategic position, we must appreciate that the north will need to accommodate surges in Australian and allied expeditionary forces. That will generate surges in demand for housing, water, food and fuel in addition to the air, land and sea capability that militaries rely upon.

Lifting supply-chain resilience and understanding potential vulnerabilities are essential if northern Australia is to play an effective role in our defence and security. It is a mistake to assume that we can transplant into northern Australia at a moment’s notice anything we need. Accepting that highways and rail in the north can be cut for weeks during the wet season positions it as a pseudo–developing nation and a highly ineffective geostrategic contributor.

Leveraging the north for defence and security goes beyond ensuring that infrastructure there is robust; it must have what’s expected in a modern advanced nation. Getting there will require articulation of the whole-of-community capability needed in the north and how governments, businesses and communities will collaborate to establish that capability. And it must be acknowledged that it will take time and coordinated investment to develop and sustain the workforce, build the operational capability, and establish the social infrastructure essential for the north to play its role effectively.

Policy decisions by other nations are out of our control, so let’s stop using them as an excuse for our broken supply chains and stop allowing them to shape our national positioning. We need a new definition of supply-chain vulnerability, one that emphasises the things we value as a nation so we can make the right policy decisions and achieve the best investment outcomes.

For too long, our approach to supply chains has prioritised low cost over other factors. But cheaper is not always better if it comes with an unacceptable risk. Of course, we should improve the supply chains we have, but what’s more critical is that we redesign our supply chains to meet future needs.

Globalisation strikes back

The northern summer of 2021 has come to be largely defined by the ongoing Covid-19 pandemic and accelerating climate change. Both are manifestations of globalisation and the reality of a world increasingly defined by the vast and fast cross-border flows of just about everything, from goods, services and capital to data, terrorists and disease.

Little nowadays stays local for long. The lethal coronavirus that first appeared in Wuhan, China, didn’t remain there, and greenhouse gases emitted anywhere warm the atmosphere and ocean everywhere.

These two crises demonstrate the woeful inadequacy of efforts to address the problematic aspects of globalisation. The so-called international community has again shown itself to be anything but a community. The supply of Covid-19 vaccines is billions of doses short of what’s needed. The funds to pay for global immunisation are likewise billions of dollars short. Governments are putting their countries first, even though fast-spreading variants are emerging in under-vaccinated populations elsewhere and are indifferent to political borders.

As a result, the pandemic remains an intense threat. The death toll thus far is said to be over four million, but the real figure is several times higher, owing in some cases to flawed reporting systems and to deliberate undercounting by populist leaders in Brazil, India, Hungary, Russia and elsewhere. The economic consequences are likewise substantial, with the pandemic estimated to have reduced global GDP by over 3%. Approximately 100 million people have fallen back into extreme poverty. Inequality between and within countries has spiked.

What makes these developments all the more frustrating is that we know what to do about Covid-19 and possess the means to do it. Several safe and extraordinarily effective vaccines exist. What remains to be done is to scale up production to meet global demand.

In some countries, such as the United States, what needs doing is the opposite: to increase demand to meet the available supply. Vaccine hesitancy, fuelled by partisan politics or misinformation circulating on social media, television and talk radio, has become dangerously widespread. If vaccination were complemented by public-health measures known to slow the spread of disease—masking, social distancing, readily available and accurate testing and contact tracing, and quarantining—there would be far fewer and less severe infections, and the pandemic as we know it would fade away.

The effects of the other crisis, climate change, have arrived sooner than many anticipated. For years, the tendency has been to put off any concerted response to the threat, despite clear and growing evidence that the planet is warming. As is often the case, the urgent crowded out the important. But the summer of 2021 is showing that climate change is both important and urgent.

Its effects are many. In the US, wildfires in the west rage out of control as the temperature climbs, and smog has blanketed swaths of the country. Europe and China are the scenes of massive flooding. In Africa, Latin America and the Middle East, there are signs of prolonged drought. The loss of life has been relatively modest, but it could well grow. Economic effects will likewise mount. The number of people who are being internally displaced or forced to migrate is rising sharply as large tracts of territory become inhospitable to human life.

There is much talk about how to slow or stop climate change, but it’s mostly just that. The United Nations climate-change conference (COP26) in Glasgow in November will continue to emphasise an approach whereby individual countries offer voluntary commitments to reduce their emissions.

This is important, but it’s obvious that many countries are focused more on economic growth at all costs, and are unable or unwilling to adopt energy paths that will meaningfully reduce their contribution to climate change. It remains to be seen whether there’s the will to adopt tariffs that raise the prices of goods made in factories fuelled by coal, or to impose sanctions against governments that refuse to stop the destruction of rainforests that absorb carbon dioxide. Also to be determined is whether wealthier countries are prepared to make available the funds and technologies that poorer countries need to shift to a greener energy mix.

At the same time, focusing on slowing the rate of climate change, however necessary, is insufficient. A good deal of climate change has already happened, and more will happen regardless of what is decided in Glasgow. Efforts to adapt to existing or inevitable effects of climate change, to make cities and rural areas alike better able to withstand pervasive heat and sprawling wildfires, more frequent storms and floods, and more severe drought, will also be needed. Resilience will be as important as prevention.

Lastly, we must accelerate both the development and regulation of new technologies that promise to remove CO2 from the atmosphere or reflect sunlight away from the earth. Such potential responses to climate change are unproven and controversial. But if the collective failure to deal with Covid-19 is any indication, we had better be prepared to consider them sooner rather than later. There is no escape from globalisation; the only question is whether and how we choose to manage it.

Rethinking national and global supply chains

Two adages come to mind as I write this: ‘Don’t put all your eggs in one basket’, and ‘A chain is only as strong as its weakest link.’ Taken together, the two maxims sum up current anxieties about supply chains.

Almost anything and everything that is produced in the world nowadays may be the result of a supply chain: a series of steps in which raw materials and components are produced, assembled and then marketed in a single country or around the world. Some products can require thousands of steps that include hundreds of businesses in dozens of cities or countries.

Supply chains were largely constructed and maintained with little thought given to their resilience. Keeping costs down was paramount. This meant often depending on a single low-cost supplier or producer and limiting inventory size. ‘Just in time’ was the concept that reflected the desire to minimise the gap between when an item was produced or purchased and when it was sold.

But that was pre-Covid-19. Early in the crisis, there were acute shortages of personal protective equipment and pharmaceutical ingredients. Now, supply chains are functioning, but often with long delays tied to shipping. The question of how best to increase supply-chain resilience is now front and centre.

Future outbreaks of infectious diseases could prove far more disruptive. In addition, any of the increasingly frequent and severe effects of climate change—including wildfires, hurricanes and floods—could shut down a production site for weeks or months. Likewise, wars between countries can’t be ruled out, and wars within them are relatively commonplace. Then there’s the potential for work strikes, nuclear accidents, earthquakes, mechanical breakdowns and terrorism.

A second reason for heightened concern over supply chains is how reliant the world has become on China, the world’s largest manufacturer, for critical goods. The pandemic revealed that many countries depend on China for the bulk of their PPE, and China’s decision to block exports of these goods led to widespread shortages. There’s also the concern that an increasingly assertive China might seek to exploit the world’s dependence on it for political purposes.

There are a number of ways to manage these risks. One is to reduce dependence on a single domestic or foreign supplier of a critical commodity or component. This could translate into contracting with, say, half a dozen suppliers, so that if something were to happen to one or even several of them, dependent countries wouldn’t be crippled.

The problem is that ensuring adequate redundancy can be difficult. There may not be alternatives with the needed quality and capacity—and developing them can be expensive and take months or years. But it may be worth doing in certain areas, especially among close partners and allies.

A second approach is to require that some or all of a critical component, medicine or technology be manufactured domestically. This is no guarantee against disruption, because a domestic plant can also be taken offline for any number of reasons, but it creates jobs and reduces some of the uncertainty of depending on foreign sources far away and beyond one’s control.

But reshoring will take time and add costs to production, which would have to be passed on to consumers or be offset by government subsidies. And a larger government role in the economy is often a recipe for waste and corruption.

International trade is underpinned by the concept of comparative advantage, which holds that a country should produce what it is relatively good at and import those items that are relatively more expensive for it to produce. Supply-chain resilience, however, will necessarily mean making some economically inefficient decisions, as countries will want to strengthen their national security by producing items for which they don’t enjoy a comparative advantage.

But there’s another consideration. Who gets to decide when a government can deem that some or all of a particular item must be produced at home? Mandating domestic production resembles nothing so much as import substitution, a form of protectionism in which domestic producers are given priority over international rivals.

Think about it: if every country were to mandate domestic production of ‘strategic’ items, global trade, a powerful engine of economic growth, would drastically shrink just when more growth is needed to lift the world out of the pandemic-induced recession. At a minimum, any move towards increasing domestic production of designated items would need to be implemented in a coordinated fashion at the World Trade Organization, something likely to be easier said than done.

There is one more path to consider: stockpiling. Governments could build and fill stockpiles of critical components needed for their economy and society to provide the necessary cushion against inevitable supply-chain disruptions. Some already do this for oil and select minerals and commodities. Stockpiles could be filled naturally, whether by imports or market-induced domestic production, to avoid the pitfalls of protectionism. Stockpile pooling or sharing arrangements could also be established with other countries to reduce vulnerabilities further.

Any increased resort to stockpiles involves higher costs, as they must be filled, and some of what is purchased may go unused or become unusable. And it’s impossible always to know in advance what will be needed. Still, stockpiling makes good sense.

The Covid-19 crisis has revealed that interconnectedness brings benefits as well as risks to us all. In order to address some of these risks, supply chains will need to be rethought, with more emphasis put on supplier diversification, domestic production and stockpiling. The challenge will be to strike a necessary balance ensuring that a targeted and limited industrial policy doesn’t become a cover for expensive policies that threaten trade and economic growth.

Technology is driving another global power shift

Since 2017, America’s national security strategy has focused on great-power competition, and today much of Washington is busy portraying our relationship with China as a new cold war. Obviously, great-power competition remains a crucial aspect of foreign policy, but we must not let it obscure the growing transnational security threats that technology is putting on the agenda.

Power transitions among states are familiar in world politics, but the technology-driven shift of power away from states to transnational actors and global forces brings a new and unfamiliar complexity. Technological change is putting a number of issues—including financial stability, climate change, terrorism, cybercrime and pandemics—on the global agenda at the same time that it tends to weaken governments’ ability to respond.

The realm of transnational relations outside of government control includes, among others, bankers and criminals electronically transferring funds, terrorists transferring weapons and plans, hackers using social media to disrupt democratic processes, and ecological threats such as pandemics and climate change. Covid-19, for example, has already killed more Americans than died in the Korean, Vietnam and Iraq wars, yet we spent little to prepare for it. Nor will Covid-19 be the last or worst pandemic.

Individuals and private organisations—ranging from WikiLeaks, Facebook and foundations, to terrorists and spontaneous social movements—are all empowered to play direct roles in world politics. The spread of information means that power is more widely distributed, and informal networks can undercut the monopoly of traditional bureaucracy. The speed of online transmission of information means that governments have less control over their agendas and citizens face new vulnerabilities.

Isolation is not an option. America’s two oceans are a less effective guarantee of security than they once were. When the United States bombed Serbia and Iraq in the 1990s, Slobodan Milosevic and Saddam Hussein couldn’t respond against the US homeland. That soon changed. In 1998, President Bill Clinton launched cruise missiles against al-Qaeda targets in Sudan and Afghanistan; three years later, al-Qaeda killed 3,000 people in the US (more than the attack on Pearl Harbor) by turning America’s civilian aircraft into giant cruise missiles.

But the threat need not be physical. America’s electrical grids, air traffic control systems and banks are vulnerable to cyberattacks that can originate anywhere within or outside US borders. Oceans don’t help. An attack could come from 10 kilometres or 10,000 kilometres away.

Democratic freedoms, in addition to infrastructure, are vulnerable to cyberattack. In 2014, when North Korea objected to a Hollywood comedy that mocked its leader, it launched a successful cyberattack that threatened free expression.

Many observers assume that because huge technology companies such as Facebook, Google and Twitter originated in the US, they are instruments of American power. But in the 2016 US election, Russia was able to use these companies as weapons to influence the outcome. Others can follow the model.

The information revolution and globalisation are changing world politics in a way that means that even if the US prevails in great-power competition, it cannot achieve many of its goals acting alone. Regardless of potential setbacks to economic globalisation, for example, the effects of climate change—including extreme weather events, crop failures and rising sea levels—will affect the quality of life for everyone, and the US can’t manage the problem alone. In a world where borders are becoming more porous to everything from illicit drugs and infectious diseases to terrorism, countries must use their soft power of attraction to develop networks and build regimes and institutions to address these new security threats.

The case for the world’s leading power to provide leadership in organising the production of global public goods remains stronger than ever in this ‘neo-feudal’ world. But the 2017 US national security strategy says little about these threats, and actions like withdrawal from the Paris climate agreement and the World Health Organization are steps in the wrong direction.

As the technology expert Richard Danzig summarises the problem:

Twenty-first century technologies are global not just in their distribution, but also in their consequences. Pathogens, AI systems, computer viruses, and radiation that others may accidentally release could become as much our problem as theirs. Agreed reporting systems, shared controls, common contingency plans, norms, and treaties must be pursued as means of moderating our numerous mutual risks.

Tariffs and walls cannot solve these problems.

In some areas of military and economic public goods, unilateral US leadership can provide a large part of the answer. For example, the US Navy is crucial in defending freedom of navigation in the South China Sea, and in the current global recession the US Federal Reserve provides the crucial stabilising role of lender of last resort.

But on other issues, success will require the cooperation of others. As I argue in my book Do morals matter?, some aspects of power in this new world are a positive-sum game. It is not enough to think in terms of US power over others. We must also think in terms of power to accomplish joint goals, which involves exercising power with others.

That type of thinking is missing from the current strategic debate. On many transnational issues, empowering others can help the US to accomplish its own goals. For example, the US benefits if China improves its energy efficiency and emits less carbon dioxide.

In this new world, networks and connectedness become an important source of power and security. In a world of growing complexity, the most connected states are the most powerful. In the past, America’s openness enhanced its capacity to build networks, maintain institutions and sustain alliances. The question now is whether that openness and willingness to engage with the world will prove sustainable in US domestic politics.