The Vulnerability of Globalization to Not Just Physical, but Logical Chokepoints

Scholars of geopolitics have been talking about geographical chokepoints for decades. The Strait of Hormuz for oil, Malacca for Asia, and Gibraltar for the Mediterranean are all raised as fine examples of narrow waters that, if blocked, can bring national economies tumbling down. Their strategic values remain paramount, and their controls a matter of national security. The recent blockage of the Suze Canal, a manmade geographical chokepoint, showed just how vulnerable the world economy is when such a narrow body of water is suddenly rendered inaccessible. Billions of dollars of trade are lost and the attention of global media remains fixated on the blockage.

Interestingly, while Egyptian authorities, with global support, attempt to dig the giant container ship out of the shallow waters that made it immovable in the middle of the Suez Canal, others are taking a different lesson from this sudden ordeal. These individuals argued that the Suez Canal blockage once again showed the dangers of hyper-globalization, in which the production of essential products is dependent on global supply chains that require just-in-time delivery of goods across oceans. Because black swan events like a canal blockage are not factored into the transport of goods across the world, ultimately it is the consumers that suffer.

Their solution, logically, is creating domestic supply chains for at least the very essential products. Pointing to the inability of many countries to produce sufficient masks and other personal productive equipment for domestic use in the early stages of the COVID-19 pandemic, these individuals argue that the geographical vulnerability of chokepoints like the Suez Canal made it doubly important for countries to expedite the reshoring of production lines. Never mind that ships crossing the Suez Canal are often carrying oil and other natural resources with no domestic alternatives, these individuals see it wise to work on plans that reduce the dependence of global trade on these chokepoints.

That lack of domestic alternatives speaks to the logical chokepoints that cloud the judgment of advocates for reshoring of production. Yes, national security, in the form of providing domestic consumers with essential products whenever needed, is undoubtedly important, but getting everything that a country needs to be made at home is not the only way to resolve the issue of insufficient supplies. Proposing reshoring as the ultimate solution not only discounts the difficulty of reshoring from a practical sense of whether inputs needed for domestic production are even available but also prevents out-of-box thinking that could lead to cheaper solutions.

As such, the determination to reshore can almost be termed a "logical chokepoint." Just as ships can find alternative routes around Africa or the Arctic to bypass the Suez Canal, alternative ways can be thought of to fulfill domestic needs for essential products without having to resort to the expensive and sometimes futile exercise of establishing separate domestic supply chains for all essential products. The out-of-the-box thinking would be necessary to reduce the world's dependence and reliance on chokepoints, by making the chokepoints not so strategically important and vulnerable to disruption.

One way of thinking is to always have a Plan B. The Egyptian authorities reopened an old canal route when the main Suez Canal was blocked, allowing smaller ships to bypass the blockage. The same thinking should be applied in supply chains. For every essential product, there should be multiple sources located in different geographies. If one source is cut off, consumers can quickly turn to alternative sources to meet their needs. Yes, it might be more expensive to source smaller batches of the same products from many different places than a larger batch from one place, but for many rich countries, that is still cheaper than attempting to make the same products at home.

The other way to drastically reduce demand for what are usually considered essential products. Suez Canal blockage would not be so devastating if consumers simply did not need the products being carried by ships crossing it. Oil and other natural resources being carried across the world, in particular, can be replaced by renewable energy, in line with the goals to reduce climate change. If anything, the canal blockage should be a great time to reflect global consumerism and people, at the individual level, to come up with plans that reduce their own goods consumption and carbon footprints.

Finally, the inability to get more goods all the time should be a sign that consumers and producers need to think about how to make existing products last longer. The move away from one-time plastic bags, containers, and utensils is a good sign, but more can be done for other consumables like clothing, shoes, and electronics. Companies should be working toward charging higher prices for products that can last decades, instead of encouraging consumers to buy cheap, new, "fashionable" ones that last no more than two years. If everything produced and shipped across the world can be used for much longer, there is less need to get new ones immediately.