The Great Winding Down: De-Globalizing

The urge to embrace glittering abstractions is boundless. In the nineteenth century, Karl Marx saw how ruthlessly capitalism exploited and oppressed workers. So he proposed a simple reversal of fortune: put workers on top. Forget about unions and collective bargaining. Declare a “dictatorship of the proletariat.”

But what does that even mean? From ancient Rome (where the word originated) to the present day, a “dictator” is a single individual. Yet whole point of the misery of labor is that workers in their millions are the many, and owners and oligarchs, who control their fates, are the few. So how do you make a “dictatorship of the proletariat”? You create and empower someone like Stalin. Communism was a logical conundrum that, just like a too-successful dog, ate its own tail.

Globalization is another one of those seductive abstractions that, on close examination, doesn’t make a lot of sense. The bare abstract theory had a certain glitter. Let people who are good at making something, or who live near the needed raw materials, produce that thing. They have a “comparative advantage” and will be more efficient than others. Everybody will be better off.

But is that so? Where do the people in the rest of the world get the money to pay for that thing? What do they sell in return? And what about the workers who used to compete with the ones with the “comparative advantage”? Do they go back to farming, or subsist as hunter-gatherers? If so, how can they become a “market” for the goods they no longer make? Or do they revolt and become Yellow Jackets in France or MAGA insurrectionists in the US?

When you start thinking practically, in terms of cause and effect, seductive attractions fall apart. That’s precisely what the US’ economy and politics did after the US sold most of its factories and skilled jobs to China. We are now living the dismal aftermath: we no longer even make most of the things we need to stay healthy and enjoy modern life.

And as for efficiency, is it really “efficient” for Britons and Americans to eat New Zealand lamb? In the early seventies, when I was a science fellow at Cambridge (UK), there were sheep on the “backs” of its great medieval-origin colleges. Why were they there? They kept the grass trimmed naturally and provided wool and food.

When I visited Cambridge again thirty years later, fossil-fueled machine mowers had replaced the sheep, and Britons were eating New Zealand lamb. Did shipping all those sheep, or their refrigerated meat, halfway around the globe make society more “efficient”? And what about the contribution to our carbon burden of global warming made by that shipping and by the mowing machines, not to mention the cost of making and maintaining them?

But enough of how simplistic, self-contradictory and ultimately silly the glittering abstraction of “comparative advantage” has been. Let’s look at five specific reasons why globalization is coughing up blood on its deathbed right now, today.

1. Displacing Skilled Workers. Despite all his umbrage at their oppression, Marx had made a fatal error regarding workers. He didn’t think of them as people. Instead, he thought of them as an abstraction, the “proletariat.” So he couldn’t even imagine how they might be misled, divided, and exploited by the very people who ostensibly set out to help them. In the end, those people became their dictatorial oppressors and sent workers who stood up for themselves to the gulags.

Capitalists made a similar error. Their goal was “efficiency” of production, that is “efficiency” in using the “factors of production,” namely land, labor and capital.

But they ignored a crucial difference among the three: land and capital are inanimate. When you despoil land, it does nothing but rot. When you waste money, it’s just gone. But when you oppresses people and make them suffer, they revolt. They may not do it intelligently or “efficiently,” but they rebel. In so doing they can change society forever. Just ask the French. Or the Russians. Or Americans now living under the Demagogue’s long shadow.

And so when American capitalists—our own oligarchs—sold most of our factories and jobs overseas just to lower labor costs, our displaced skilled workers rebelled. It took them two generations, from the eighties until now. But however slowly, they eventually came to see that the solid middle-class lives that they had had and had hoped for their children were vanishing, and that there was (and is) no easy way back. So they put on their MAGA hats, suspended their better judgment, and put a self-obsessed showman and grifter, untroubled by experience or morality, into the White House. They did so just because he claimed to have their backs.

We are still dealing with the consequences of American workers’ belated understanding of a dismal truth: our oligarchs sold their jobs and good middle-class lives overseas for the benefit of the oligarchs themselves and their shareholders. (The abstract theories of comparative advantage and free trade were just convenient excuses.) They got rich, and their Chinese factories came to dominate global commerce. But workers’ communities in developed nations were destroyed, and their children are left without the secure future that their own parents had had.

If you don’t see this still as a powder keg about to explode, then you might want to review history. At the turn of the last century, Germany (along with England) held the heights of human culture, in music (Bach, Brahms and Beethoven), literature (Göthe, Heine, and Schiller), and science and math (Einstein, Euler, Gauss, Planck, Schrödinger and Von Hemholz). A mere three decades later, Nazis were goose-stepping on the parade grounds of Nuremberg.

What made the difference? A huge reversal of fortune, culminating in the Weimar Inflation—the worst a developed nation has ever experienced. Both had resulted primarily from the Allies’ vindictive terms of peace and demands for reparations at the end of the First World War.

And don’t think for a moment that today’s rebellion is confined to the US. It’s also behind the disorder of the Yellow Jackets in France, Marine Le Pen’s recent close approach to the French Presidency, and Britain’s uncharacteristic Brexit. How else could a nation that once had a trading empire on which the Sun never set turn its economic back on its closest neighbors? How else could it do so after helping forge an Enlightenment-based alliance with a whole continent after centuries of war? These very questions suggest the depth of the angst of the skilled workers who once had made Britain great.

2. Supply-chain problems. Today “supply-chain problems” have become cliché. The vast chain of global supply of physical goods, parts, raw materials and subassemblies is breaking down. The Covid-19 pandemic is the most immediate cause, but the effect has been a long time coming.

The basic problem is again the glittering abstraction of “efficiency.” Raw materials, parts and subassemblies generally cost less where labor is cheaper, so we make this stuff where workers are paid less and have fewer rights. We don’t worry much about geography, shipping cost, labor troubles (let alone rebellion), local pollution, local disasters, crime, political instability, or anything so unlikely as a tsunami or a pandemic.

Not only that. Since inventory costs money to store and maintain (purchase loans bear interest), we cajole business to minimize its inventory. We urge it to use the same “just in time” system for manufacturing that the Japanese invented. Don’t consider for a moment that the Japanese have a geographically small country and one of the most ethnically homogenous, orderly and mutually respectful societies on Earth. Can’t anyone, anywhere emulate their methods, regardless of political instability or distance?

The Fukushima nuclear disaster, provoked by a tsunami, might have been a tiny signal that, as the Bible says, “time and chance happeneth to them all.” Japan and Germany—two societies best known for the quality and ingenuity of their engineering—started shutting their down their nuclear power plants, without much of a plan for replacing their carbon-free “baseload” power. But otherwise, the “efficient” program of just-in-time, globally intricate supply chains went marching on, like a herd of lemmings, toward the cliff.

The pandemic was the cliff. Car production in the US and Europe shut down for want of computer chips from factories in Taiwan. Groceries, toilet paper and made-in-China masks and other PPE to fight the pandemic began disappearing, sporadically and unpredictably, from store shelves.

Just recently, Viking Cruises informed my wife and me that a near-polar cruise we had signed up for two years ago was being canceled. Not just postponed. Canceled. The reason: the brand new ship for the cruise would not be ready in time, or on any reliable schedule. What parts or systems the “efficient” global supply chain failed to provide on time Viking didn’t say.

When you design an intricate global manufacturing system bent on squeezing the last penny out of every part and every step, without much thought to the myriad real natural, human and engineering risks factors, you have a disaster waiting to happen. That’s what our much-vaunted “just in time” and “efficient” global supply chain has become and still is: a disaster in the making. Now that the pandemic has shown how vulnerable the whole system is to leakage, leaks are growing like gaps in a rusted-out hull.

No one should consider the cancellation of a luxury cruise a catastrophe (except perhaps the putative ship’s crew.) The plight of the millions who will go hungry or starve for want of food and fertilizer from a now-embattled Ukraine won’t be so easy to laugh off.

3. Culture and Politics. And so we come to what may ultimately may give the coup de grace to globalization: people. The seductive abstractions underlying our minutely globalized supply chain fail to take them into account. Not only are the workers people, and thus prone to rebelling when neglected or mistreated. The workers, their managers and the oligarchs who control them live and operate within the context of local and regional laws, societies and cultures.

Sometimes those cultures believe strange things. Sometimes they do disastrous and self-destructive things. Sometime they start wars for nothing more than delusions in a dictator’s head.

Then politics, writ both small and large, comes into play. Show us all where the mechanistic theory of “efficiency” in global supply chains takes politics into account, and you might get a Nobel Prize. You might get the same kind of Nobel Prize that Daniel Kahneman got (and his colleague Amos Tversky should have shared, but missed by dying too soon). These two Israeli thinkers first debunked the absurd notion that people reliably act rationally in economic matters.

In the social sciences, Kahneman and Tversky were much like Galileo and Copernicus in astronomy. Those two showed us that, despite our species’ enormous self-regard, our little blue planet is not in fact the center of the Universe.

How does politics come into play in supply chains? Let me count the ways. Sometimes you want your own nation’s people, and not anyone else’s, to have the good jobs and good pay that come from skilled manufacturing. That desire seemed to have faded out along with nineteenth-century mercantilism as an economic theory. But today it’s coming back into vogue with a vengeance.

Sometimes you want to have manufacturing onshore—on your shore—because manufacturing skill produces better, stronger and more accurate weapons. You might want to have not only those weapons, but their essential components (like semiconductor chips) under your control. This is already a big factor in the War in Ukraine, as Russians discover how many parts that they need for advanced weaponry are made offshore, and Americans consider how may weapons parts Russia or China might some day use against them.

Sometimes differences in culture can cause supply problems through a multi-step chain of causation. Take China, for example. Today it’s the world’s factory. Yet it also has a unique, culturally based way of dealing with the Covid-19 pandemic. It’s home-made vaccines are not as good as the US’ and Europe’s mRNA vaccines, so China doesn’t rely on vaccines alone. It also relies on draconian city-wide and province-wide lockdowns. It has from the very beginning of the crisis, in Wuhan and Hubei.

This peculiar (to China) approach has two principal consequences. The first is obvious: when a whole city locks down to keep the virus from spreading, manufacturing there slows down and begins to halt. So can manufacturing anywhere in the world, if it depends on unique products or promised supply from a locked-down city. Right now, that has been the principal effect of the pandemic on long supply chains.

The secondary effect of Chinese lockdowns is less obvious. To the extent the lockdowns are effective in protecting the vast majority of Chinese from exposure to the virus, they produce a Chinese population that has little natural or acquired immunity to it. To the extent the Chinese vaccine is less effective than those in the West, this lack of natural immunity becomes more pronounced. As a result, supply chains from China will become even more vulnerable with every new mutation of the virus, as long as the pandemic lasts.

A tertiary effect is more political. As Chinese supply chains slow down, and as the Chinese deficit in immunity to a pandemic becomes more apparent, Chinese people will be more reluctant to deal with outsiders and to travel, consult and cooperate with them, especially inside China. In other words, cultural differences in pandemic response, which themselves have cultural roots, will reinforce China’s cultural and trade isolation, totally apart from geopolitical and cultural forces that push in the same direction. Among the net results will be supply chains that are more likely to break under stress, and therefore are less reliable.

4. Legal and governmental stress. Part of the problem of neglecting the role of people is neglecting how they govern themselves. Not only do people around the world have different cultures. They also have different laws and governments. In these matters, too, people often behave in different and unpredictable ways.

A classic example is Russia’s current push to use its supply of fossil fuels, on which Europe relies, to coerce Europe into accepting Putin’s atrocity-ridden invasion of Ukraine. Parts of Europe now must contemplate the dim prospects of six months without adequate heating, lighting or industrial energy, just to uphold principles of national sovereignty and basic human decency. Then there’s the even dimmer prospect of an aggressive nuclear power led by a deranged dictator putting troops and weapons right up to Europe’s border. So the abstract notion of comparative advantage doesn’t look so glittering now, does it?

Sure, by virtue of propinquity and the nature of its underground oil and gas pools, Russia may have a comparative advantage in serving Europe with oil and gas. It may even be the most “efficient” supplier. But very “rational” leaders, including those in once-pacifist Germany, are working hard, even letting their people suffer, to export billions in weapons and supply, just in order to give their neighbors in Ukraine “comparative advantages” that have little to do with classical free-market economics.

If you were to name the most promising fields of science and technology now under development, you would probably include genomic medicine, quantum computing, robotics and artificial intelligence. Each of them has enormous prospects for commerce, trade and industry.

But each also has enormous implications for national security. A nation that can fend off a pandemic better than others has an obvious advantage in staying strong. Quantum computing offers incomparable advantages in computing scope and speed, allowing its masters to break others’ security codes and deny them secrets and privacy. Robotics promises tireless factory workers and fearless, pain-immune soldiers. And AI offers advantages in everything from manufacturing, through population surveillance, to better and even autonomous weapons.

So the hypothetical “rational economic actors,” who base their buying and selling decisions only on quality and price, exist only in the minds of economists. They are fictions of abstract imagination. Real people operate, much of the time, on the basis of national, religious, ethnic, linguistic, sexual and personal chauvinism.

As nationalism, racism, and religious and other intolerance increase—under the stress of population pressure, global warming and political demagoguery—these factors will increasingly dictate decisions on making, selling, hoarding and saving natural resources and manufactured products that use them. They can become as important everywhere as avoiding Russian oil and gas are in Europe and the Western world right now.

5. Global Warming. Global warming likely has already reached a “tipping point.” Further warming may be baked in, regardless of how well or how poorly humanity reduces its CO₂ emissions.

The reasons are three: methane release from (1) melting permafrost and (2) dissociating deep-sea methane hydrates, and (3) the loss of an immense heat sink when most or all of the ice in our glaciers and at our poles melts. (Readers who paid attention in high-school physics know that the latent heat of melting a cubic centimeter of water—80 calories—is enough to raise the temperature of that same cubic centimeter of water, once melted, to 80 degrees centigrade, or 176 degrees Fahrenheit, i.e., 83% of the way to the boiling point of water.)

These three effects all operate independently of future emissions of CO₂. They make it likely, although perhaps not inevitable, that major parts of the globe, beginning with equatorial lands and the tropics, will become uninhabitable to humanity by the end of this century. How will that affect supply chains and commerce? Likely severely.

The globe’s division into habitable and uninhabitable zones will provoke mass migrations of refugees. Those migrations will make the current exodus from war-torn Ukraine look like a grammar-school field trip.

In fact, some experts already consider the current exodus of migrants from Syria, the African Sahel, and Central America to be partly motivated by drought- and/or flood-caused failures of agriculture. The displacement resulting from runaway warming, with all the stress, resistance (in safer areas), hostility and wars that result, will further motivate people to make goods, including food, nearer where they are used or consumed.

* * *
At the end of the day, the so-called “science” of economics is not merely dismal, as John Maynard Keynes once described it. In its innate coddling of Mankind’s enormous self-regard, it’s about where astronomy was just after the discoveries of Kepler, Copernicus and Galileo. It’s still mired in mechanistic abstractions, based on a non-existent rational humanity, which bear little resemblance to reality. Our actual reality is a planet overpopulated with seven billion people who can, and often do, act irrationally. They foul their own nests, destroy each others’ lives wantonly, and generally act against their own long-term interests.

It was comparatively easy to shift from an Earth-centric view of the Universe to a Heliocentric view of the solar system. Why? Nothing real in self-seeking human life (except humanity’s collective ego) turned on the shift. Yet even so, Galileo found himself nearly excommunicated and executed for daring to recommend the shift.

In economics, we are just beginning to emerge from the self-delusion that: (1) we all act rationally in business and trade; and (2) we can build a global economic system based on rational self-interest in a world of nationalism, national politics, geopolitics, and religious, ethnic and racial chauvinism, not to mention pandemics and global warming exacerbating all of the above. So far, our conception of economics and “free trade” has virtually ignored the human element and a number of known (and recently experienced) risk factors.

Kahneman’s and Tversky’s insights have hinted at how hard it is and will be just to fight global warming. A recent Frontline series drives home how hard. It shows how successful a mere two self-interested corporations (Exxon the Koch Brothers’) have been in delaying serious US effort to address climate change for decades.

We haven’t even begun to apply similar insights to deal effectively with pandemics and different cultures’ responses to them. We haven’t begun to deal rationally with carbon-free nuclear power, or how best to use it to curtail runaway global warming. We are just starting to formulate a plan to deal with a Russia led by a fanatical new tsar who seeks to dominate his neighborhood by controlling the remaining supply of the fossil fuels as they run out and the world looks for better alternatives.

At this point, only two things are clear. First, the deeply engrained notion that free global trade makes everybody better off is as wrong on as many levels as the notion of our little blue planet at the center of the Universe. But unlike that bit of ancient, erroneous self-regard, the global-trade-as-panacea nonsense could help cause the partial or complete self-extinction of our species.

Second, we don’t have the time or data to develop a holistic alternative theory that works. At least we don’t have time to stave off a collapse in public health, the global economy, and global climate or an even more devastating war that might go nuclear.

Instead, each society—and perhaps each locality—is going to have to look to its own advantage and risk factors and do the best for its people. Each will have to avoid all-encompassing, abstract economic theories as the intellectual snake oil they are.

The best we Americans (or anyone else) can do is to work with others to secure mutual advantage that lasts beyond the short term. Where that is not possible, we must protect our own interests, our own workers and our own economic goals. In all this, practical cause-and-effect reasoning, not abstract theory, should be our guide.

This does not mean that we should become yet more selfish. The wider the scope of mutual advantage, the better. But it does mean that we should stop ignoring practical consequences of our actions, like the easily foreseeable results of selling most of our factories to China, or the failure to do anything about global warming in the vain hope that others will act first. Leadership is not an abstract theory: it’s a real facet of individual and national character.

But we must put seductive, unproven, abstract theory aside, at least for a decade or two. We must let practical politicians—NOT demagogues—do their thing. If doing so helps avoid the disastrous practical effects of abstract theories like Communism, just-in-time globalism, and our half-century-long (and ongoing) neglect of real workers’ interests, our entire species will have been blessed.


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