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"[globalization] is in fact full of highly externalized costs that make the 'efficiency' in fact a fallacy." Globalization is efficient. Any claim to the contr

• toss1 5y ago
  >>"[globalization] is in fact full of highly externalized costs that make the 'efficiency' in fact a fallacy." Fair enough I think where we disagree is on the definition of "efficiency" and globalization. I agree that there is definite value and efficiency in globalization. It is certainly more efficient to obtain materials only on the other side of the planet rather than go without. And this kind of global trade has certainly been happening for millenia, at some level. But global trade is not globalization. Globalization is more exporting work to arbitrage labor rates for things that could perfectly well be built at locally, and that kind of globalization has only been happening for a few decades. For efficiency, if you externalize enough problems and tail risk, anything can be "efficient". Arbitrage of labor rates is superficially efficient, but it is mostly externalizing costs. These costs begin with hollowing out local economies and increasing local poverty and costs to society as a whole, but arguably more important in the long term is losing key skills, know-how, intellectual property, and industrial capabilities. Perhaps most critical is the loss of knowledge and control of manufacturing key military/defense goods, and creating a potential strategic failure. Transfer of economic power and capability to benefit the current quarterly statements is efficient today, but can cost superpowers their position. While the US thinks it is exploiting China's cheap labor, China is exploiting the West's current profits myopia to gain strategic economic and military advantage, and they are succeeding. Burn massive amounts of artificially cheap and subsidized fossil fuels on ships, rail, trucks, airplanes, etc. to transport everything half way around the globe, and the costs do not accrue for decades, but are coming due now. That's not efficient, it's externalization. Build global just-in-time supply chains with 100 links, and the whole economy becomes subject to weakest link failure. Of course, while it doesn't fail, you have become "more efficient" by not incurring costs of building locally and storing inventory. All of these things are appear more efficient when longer term considerations and tail risk are ignored. It is like the economy pre-2008, it seemed very efficient to package all the mortgage loans into AAA-rated mortgage-backed-securities... it worked for years ... until the risk came to the surface and we came within literal hours of a global monetary system crash and did endure a global recession. So, it is all very efficient at a narrow enough point of view. But, it is not antifragile, it is brittle - when any of it fails, the geopolitical situation, the supply chain, the climate, etc., you're thoroughly forked. Add in the costs of entire continents or even the globe of becoming totally forked, and repairing that, then I'm not sure the conclusion is that massive globalization is most efficient.
  • chmod600 5y ago
    Interesting. A lot to explore there. How much is unskilled labor arbitrage versus specialization by region? What does "brittleness" really mean?
    • toss1 5y ago
      Most of it starts out with lower-skilled labor arbitrage. However, in China, they are specifically working to steal technology from the west, by both requiring local "partnerships" for any business, and requiring exposure of IP, and training of workers. So, they are trying to leverage the low-cost labor abritrage into their own capabilities. They are big enough that if they can keep the arbitrage going long enough, a generation or two, the original local industries in other countries are hollowed out and no one knows how to build it anymore. This has already happened. This is also supported by keeping their own labor & environmental laws skirting abusive levels, so even if the wages increase, the overall costs are still lower than the other country. If we are very lucky and diligent, we may be able to overcome that by leapfrogging them with automation, but we still need to become a bit protectionist to overcome the differences in labor and environmental protections to bootstrap a higher-skilled and much more automation-leveraged labor force. also, we need to financially encourage non-Just-In-Time inventory management to reduce risk. The problem is again the short-term profits are increased by JIT management, but the tail risk of being screwed by supply chain issues is also largely increased. E.g., I just saw a headline on HN that BMW is eliminating touchscreens on several lines of cars because of chip supply issues. Higher costs, lower profits, and less-satisfied customers, but hey, they delayed the expense for those chips and didn't pay for warehouses to store them! And that is an example of "brittleness" — too many single points of failure, that do not have a redundant backup system. Avoiding this is why it is smarter to have multiple sources for every item, maintain inventory, power your factory (or especially data center) with feeds from two grids, etc..