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the pandemic and its effects showed that the cost benefits of globalization are beaten by the national security benefits of onshoring. i think we will see more

the pandemic and its effects showed that the cost benefits of globalization are beaten by the national security benefits of onshoring. i think we will see more critical manufacturing, even at great expense, move back to the u. s.

alooPotato 4y ago
One thing I'm curious about is how you define "critical manufacturing"? Manufacturing seems like a directed graph where each node is a product or material and the edges are dependencies or inputs to that product. So if you want to onshore manufacturing of a particular product, you need to also onshore all of its dependencies. My contention is that the graph is so densely connected that you end up having to bring entire supply chains onshore and this effectively means every country needs to manufacture everything.
- jl6 4y ago
  > One thing I'm curious about is how you define "critical manufacturing"? It’s a good question. For me, critical means you can’t walk away from a deal because you need the product, meaning you end up being extorted. Food and energy meet this criteria. Do chips? Maybe. And if so, then yes, you’re absolutely right that you would need to secure the supply chain/graph too. Maybe not the whole graph if you work back to the point where there is a diversity of competitive sources.
- sigstoat 4y ago
  > this effectively means every country needs to manufacture everything. depending on your exact goals, it could be worthwhile to bring a little bit of every node on the graph onshore. you retain critical experience, and have at least some hope of ramping up. getting a bunch of functioning, complicated businesses to expand is way easier than creating them from scratch.
  - alooPotato 4y ago
    oh that's interesting. You maintain a skeleton crew of an industry as a hedge in case you need to ramp it up....
    - javajosh 4y ago
      This is, in fact, why I think its great people still have an interest in low-tech methods for doing and making. In a Carrington Event[0] we will need people with that knowledge. Those without it will be much worse off. [0] https://en.wikipedia.org/wiki/Carrington_Event https://en.wikipedia.org/wiki/Carrington_Event
- JamesBarney 4y ago
  I don't think this is true. You really only have to focus on parts of the supply chain that are required to produce, fuel, food, medical, and military equipment that also are not produced anywhere in the world except by a potential a adversary or next to a potential adversary. It's a big undertaking sure, but it's really only onshoring pieces that are produced exclusively in China or next to it.
  - alooPotato 4y ago
    "fuel, food, medical, and military equipment" and "exclusively in China" seems like it'd literally bring in the entire dependency graph.
    - kube-system 4y ago
      I can't think of much now that the US relies on for fuel, food, medical, and military equipment that is exclusively made in China. Especially the latter.
- rgrieselhuber 4y ago
  For countries that want to maintain a high degree of sovereignty and have the resources to do so, it’s probably the way to go. 100% is impossible of course but directionally the smart move.
  - alooPotato 4y ago
    I think what I'm getting at is that unless you do 100% of the graph (at least with your allies) you're eventually going to be dependent on an adversary. Like you might not solve anything by bringing chips onshore if your only supply of silicon for those chips is offshore. So you're just pushing the problem down the stack...
    - samus 4y ago
      Silicon is one of the most common minerals on Earth. Rare metals are a different story.
      - alooPotato 4y ago
        ok that was a bad example but the point still stands
- jimmaswell 4y ago
  If we can at least make sure "the west" has it covered that's a great start, and the US is definitely capable if the will is there. Probably unrealistic for every tiny South American or European country to do literally everything.
- SkyMarshal 4y ago
  Not necessarily, if you find a way to restrict supply chains to allied nations only that you don’t have risk of war with.
  - alooPotato 4y ago
    so cut out china? now bring onshore everything to allied countries.... still seems like a large portion of the graph..
    - SkyMarshal 4y ago
      It's a huge proportion of the graph, it would be like an economic Manhattan project, but 10x bigger. But if things continue on the current trajectory with China's rapid military build-up, base-building around the SCS, threatening Taiwan and the other Asian nations, it may become necessary.
- samus 4y ago
  Some dependencies are fine to leave off-shore if there is a diverse set of suppliers or if they are located in safe and friendly countries.
- kansface 4y ago
  Some manufacturing can presumably be spun up with not too much effort if you have other heavy industry around and access to raw materials. Chip fabs require way more than retooling a line. We could quantify the problem as the amount of time it would take to bootstrap a domestic industry if the current suppliers turned off the spigot.
  - alooPotato 4y ago
    Ahh this makes a lot of sense. So you rank each node in the graph by how many other nodes depend on it PLUS how hard it'd be to spin up that industry if we need to - then tackle the high value ones
- javajosh 4y ago
  *> ...how you define "critical manufacturing"? This is a good question, and IMHO it's about threat-modelling. Three events come to mind: pandemic, war with China, and a Carrington Event[1]. The last one is interesting because it would destroy most electrical infrastructure, and it's not clear that the US retains the ability to manufacture those components. I'm not sure, but I don't think huge transformers have a ton of components, so your other (valid) concern about dependencies wouldn't apply in that case. Fabs are at least somewhat similar in that they don't recombine a huge variety of components in different ratios like Shenzen does. [1] https://en.wikipedia.org/wiki/Carrington_Event https://en.wikipedia.org/wiki/Carrington_Event
ketzo 4y ago
To be more accurate, the pandemic showed that onshoring beats globalization... in a pandemic. The cost benefits were wildly outstripping the national security benefits before 2020! That's why globalization has thrived! I know that's the point, and I'm sort of willfully misinterpreting what you're saying. But the cost benefits of globalization aren't going away, and people's fears of the pandemic and supply-chain disruption will fade with time. Critical manufacturing simply will not be onshored by participants in capital markets if it costs more. It's the kind of thing that only a government can really make happen, and the U.S. government does not seem willing to impose massive costs on ~all of its largest industries. Semiconductors -- maybe. There's a lot of focus on this particular industry right now, and Intel + the CHIPS Act might be able to make waves in the U.S. But I think it's incredibly unrealistic to expect any significant share of global manufacturing to move back out of Shenzhen any time soon.
- svachalek 4y ago
  I don't think it's fair to say the national security benefits were tested before 2020. Risks are rarely considered until after they are exploited; everything that happens in an airport security line is based on something that actually happened before they added that requirement.
  - ketzo 4y ago
    No, I know -- that's my point. They hadn't reaaaally been tested before, and they probably won't be tested again for a long while. Regardless of whether it is correct to account for the risks of globalization, it's very unlikely that people will -- again, particularly when those people are participants in market economies -- because the risks are so infrequent, unpredictable, and catastrophic that people just don't like to think about them.
- UnpossibleJim 4y ago
  I think this type of thinking, while relevant, ignores other hidden costs associated with off-shoring the majority of our manufacturing. 1. The environmental costs are not insignificant with both the lack of environmental regulation and added ocean shipping (yes, I know people are tired of hearing about environmental impact) 2. The humanitarian cost of offshoring our manufacturing is not insignificant. We may not have the best humanitarian track record in the world, but we aren't setting up suicide netting or sending manufacturing to Uyghur prison camps. 3. NAFTA has increased income inequality https://www.epi.org/publication/briefingpapers_bp147/#:~:text=The%20loss%20of%20these%20jobs,unions%2C%20and%20reduced%20fringe%20benefits https://www.epi.org/publication/briefingpapers_bp147/#:~:tex.... 4. The Trans-Pacific Partnership weakened intellectual protections, food safety regulations and helped destabilize the U.S. economy - creating even more "bubble and bursts" https://inthesetimes.com/article/tpp-free-trade-globalization-obama https://inthesetimes.com/article/tpp-free-trade-globalizatio... Don't get me wrong, I think a certain amount of global trade is not only necessary but healthy. It strengthens treaties and national ties. This reduces war risk and national coalitions... all good things. But a certain amount of self interest and a healthy middle class bolster our own country. We have lost our ability to stand on our own two feet for any amount of time.
joe_the_user 4y ago
The pandemic and its effects showed that the cost benefits of globalization are beaten by the national security benefits of onshoring. That doesn't seem like the way to put it. What you seem to mean is "the pandemic showed serious downsides to globalization and I imagine onshoring would work better". The thing is, the pandemic indeed showed downsides to globalization, financialization and extreme capitalization of industries (though with chip manufacture, that's hard to avoid). But a significant part of this involves companies having no interest in abandoning or modifying their approaches even when it had horrible consequences - because usually it didn't having horrible consequences for the company in particular. Hospitals still only entered into multi-year supply contracts with factories even if, in the case of PPEs, it their workers and patients were dying of covid, 'cause emergency acquisition sets a bad precedent. Etc. States could ameliorate some of these problems with simple regulations but that didn't happen and seems unlikely now 'cause profits matter. I can imagine some gestures to onshoring 'cause that's extra money that can thrown at companies but it seems pretty certain the mechanisms of "globalization" will continue.
jdrc 4y ago
well. thanks to china not being under lockdown for long there were no shortages of goods. globalization is a good thing, we shouldn't want to end it. 'when goods don't cross borders, soldiers do' etc

alooPotato 4y ago

One thing I'm curious about is how you define "critical manufacturing"? Manufacturing seems like a directed graph where each node is a product or material and the edges are dependencies or inputs to that product. So if you want to onshore manufacturing of a particular product, you need to also onshore all of its dependencies. My contention is that the graph is so densely connected that you end up having to bring entire supply chains onshore and this effectively means every country needs to manufacture everything.

jl6 4y ago
> One thing I'm curious about is how you define "critical manufacturing"? It’s a good question. For me, critical means you can’t walk away from a deal because you need the product, meaning you end up being extorted. Food and energy meet this criteria. Do chips? Maybe. And if so, then yes, you’re absolutely right that you would need to secure the supply chain/graph too. Maybe not the whole graph if you work back to the point where there is a diversity of competitive sources.
sigstoat 4y ago
> this effectively means every country needs to manufacture everything. depending on your exact goals, it could be worthwhile to bring a little bit of every node on the graph onshore. you retain critical experience, and have at least some hope of ramping up. getting a bunch of functioning, complicated businesses to expand is way easier than creating them from scratch.
- alooPotato 4y ago
  oh that's interesting. You maintain a skeleton crew of an industry as a hedge in case you need to ramp it up....
  - javajosh 4y ago
    This is, in fact, why I think its great people still have an interest in low-tech methods for doing and making. In a Carrington Event[0] we will need people with that knowledge. Those without it will be much worse off. [0] https://en.wikipedia.org/wiki/Carrington_Event https://en.wikipedia.org/wiki/Carrington_Event
JamesBarney 4y ago
I don't think this is true. You really only have to focus on parts of the supply chain that are required to produce, fuel, food, medical, and military equipment that also are not produced anywhere in the world except by a potential a adversary or next to a potential adversary. It's a big undertaking sure, but it's really only onshoring pieces that are produced exclusively in China or next to it.
- alooPotato 4y ago
  "fuel, food, medical, and military equipment" and "exclusively in China" seems like it'd literally bring in the entire dependency graph.
  - kube-system 4y ago
    I can't think of much now that the US relies on for fuel, food, medical, and military equipment that is exclusively made in China. Especially the latter.
rgrieselhuber 4y ago
For countries that want to maintain a high degree of sovereignty and have the resources to do so, it’s probably the way to go. 100% is impossible of course but directionally the smart move.
- alooPotato 4y ago
  I think what I'm getting at is that unless you do 100% of the graph (at least with your allies) you're eventually going to be dependent on an adversary. Like you might not solve anything by bringing chips onshore if your only supply of silicon for those chips is offshore. So you're just pushing the problem down the stack...
  - samus 4y ago
    Silicon is one of the most common minerals on Earth. Rare metals are a different story.
    - alooPotato 4y ago
      ok that was a bad example but the point still stands
jimmaswell 4y ago
If we can at least make sure "the west" has it covered that's a great start, and the US is definitely capable if the will is there. Probably unrealistic for every tiny South American or European country to do literally everything.
SkyMarshal 4y ago
Not necessarily, if you find a way to restrict supply chains to allied nations only that you don’t have risk of war with.
- alooPotato 4y ago
  so cut out china? now bring onshore everything to allied countries.... still seems like a large portion of the graph..
  - SkyMarshal 4y ago
    It's a huge proportion of the graph, it would be like an economic Manhattan project, but 10x bigger. But if things continue on the current trajectory with China's rapid military build-up, base-building around the SCS, threatening Taiwan and the other Asian nations, it may become necessary.
samus 4y ago
Some dependencies are fine to leave off-shore if there is a diverse set of suppliers or if they are located in safe and friendly countries.
kansface 4y ago
Some manufacturing can presumably be spun up with not too much effort if you have other heavy industry around and access to raw materials. Chip fabs require way more than retooling a line. We could quantify the problem as the amount of time it would take to bootstrap a domestic industry if the current suppliers turned off the spigot.
- alooPotato 4y ago
  Ahh this makes a lot of sense. So you rank each node in the graph by how many other nodes depend on it PLUS how hard it'd be to spin up that industry if we need to - then tackle the high value ones
javajosh 4y ago
*> ...how you define "critical manufacturing"? This is a good question, and IMHO it's about threat-modelling. Three events come to mind: pandemic, war with China, and a Carrington Event[1]. The last one is interesting because it would destroy most electrical infrastructure, and it's not clear that the US retains the ability to manufacture those components. I'm not sure, but I don't think huge transformers have a ton of components, so your other (valid) concern about dependencies wouldn't apply in that case. Fabs are at least somewhat similar in that they don't recombine a huge variety of components in different ratios like Shenzen does. [1] https://en.wikipedia.org/wiki/Carrington_Event https://en.wikipedia.org/wiki/Carrington_Event

ketzo 4y ago

To be more accurate, the pandemic showed that onshoring beats globalization... in a pandemic. The cost benefits were wildly outstripping the national security benefits before 2020! That's why globalization has thrived! I know that's the point, and I'm sort of willfully misinterpreting what you're saying. But the cost benefits of globalization aren't going away, and people's fears of the pandemic and supply-chain disruption will fade with time. Critical manufacturing simply will not be onshored by participants in capital markets if it costs more. It's the kind of thing that only a government can really make happen, and the U.S. government does not seem willing to impose massive costs on ~all of its largest industries. Semiconductors -- maybe. There's a lot of focus on this particular industry right now, and Intel + the CHIPS Act might be able to make waves in the U.S. But I think it's incredibly unrealistic to expect any significant share of global manufacturing to move back out of Shenzhen any time soon.

svachalek 4y ago
I don't think it's fair to say the national security benefits were tested before 2020. Risks are rarely considered until after they are exploited; everything that happens in an airport security line is based on something that actually happened before they added that requirement.
- ketzo 4y ago
  No, I know -- that's my point. They hadn't reaaaally been tested before, and they probably won't be tested again for a long while. Regardless of whether it is correct to account for the risks of globalization, it's very unlikely that people will -- again, particularly when those people are participants in market economies -- because the risks are so infrequent, unpredictable, and catastrophic that people just don't like to think about them.
UnpossibleJim 4y ago
I think this type of thinking, while relevant, ignores other hidden costs associated with off-shoring the majority of our manufacturing. 1. The environmental costs are not insignificant with both the lack of environmental regulation and added ocean shipping (yes, I know people are tired of hearing about environmental impact) 2. The humanitarian cost of offshoring our manufacturing is not insignificant. We may not have the best humanitarian track record in the world, but we aren't setting up suicide netting or sending manufacturing to Uyghur prison camps. 3. NAFTA has increased income inequality https://www.epi.org/publication/briefingpapers_bp147/#:~:text=The%20loss%20of%20these%20jobs,unions%2C%20and%20reduced%20fringe%20benefits https://www.epi.org/publication/briefingpapers_bp147/#:~:tex.... 4. The Trans-Pacific Partnership weakened intellectual protections, food safety regulations and helped destabilize the U.S. economy - creating even more "bubble and bursts" https://inthesetimes.com/article/tpp-free-trade-globalization-obama https://inthesetimes.com/article/tpp-free-trade-globalizatio... Don't get me wrong, I think a certain amount of global trade is not only necessary but healthy. It strengthens treaties and national ties. This reduces war risk and national coalitions... all good things. But a certain amount of self interest and a healthy middle class bolster our own country. We have lost our ability to stand on our own two feet for any amount of time.

joe_the_user 4y ago

The pandemic and its effects showed that the cost benefits of globalization are beaten by the national security benefits of onshoring. That doesn't seem like the way to put it. What you seem to mean is "the pandemic showed serious downsides to globalization and I imagine onshoring would work better". The thing is, the pandemic indeed showed downsides to globalization, financialization and extreme capitalization of industries (though with chip manufacture, that's hard to avoid). But a significant part of this involves companies having no interest in abandoning or modifying their approaches even when it had horrible consequences - because usually it didn't having horrible consequences for the company in particular. Hospitals still only entered into multi-year supply contracts with factories even if, in the case of PPEs, it their workers and patients were dying of covid, 'cause emergency acquisition sets a bad precedent. Etc. States could ameliorate some of these problems with simple regulations but that didn't happen and seems unlikely now 'cause profits matter. I can imagine some gestures to onshoring 'cause that's extra money that can thrown at companies but it seems pretty certain the mechanisms of "globalization" will continue.

jdrc 4y ago

well. thanks to china not being under lockdown for long there were no shortages of goods. globalization is a good thing, we shouldn't want to end it. 'when goods don't cross borders, soldiers do' etc