The next redefinition of global supply chains

EDITORIAL: "The collapse of manufacturing: The financial crisis has created an industrial crisis. What should governments do about it?" The Economist, 21 February 2009.

The breakdown of global supply chains as part of the economic crisis is real, so much so that when they come back--as they inevitably will--we're likely to see a rewired world.

The supply chains represent the globally integrated nature of manufacturing today, and that giant net reflects the structure of trade: Asia exports and barely consumes and the West--relatively speaking--consumes and barely exports. The lack of domestic consumption in Asia means that the internal traffic there is nil, except for the connectivity that pushes exports outward. That simply has to change in the post-crisis world, so the chains will be suitably configured.

Does that portend a certain amount of re-regionalization?

Hard to see otherwise.

But regionalization is hardly the reversal of globalization. America had state economies that became sectional economies that became a continental economy. That's a natural progression.

In terms of globalization's initial two big pillars, Europe and America, that's been the natural trajectory. But with rising third pillar Asia, the state economies went straight into global nets with little development of regional integration.

So we saw the same "external improvements" in each state without the commensurate regionalization. America the Leviathan obviated the need for the NATO equivalent, and without that, the economic integration is muted--so no equivalent of the EU.

All of this means that this crisis caught Asia way too early in its development and--yet--really was a necessary precursor to such development. So a real chicken-v-egg problem: globalization can't advance any further with Asia's integration because of the imbalances it creates in its current, decidedly focused form (export-driven), especially when that structure means that the current reserve currency of note, the U.S. dollar and the global demand center attached to that automatically cheap credit, is likewise imbalanced.

In short, a deglobalization phenomenon, resulting in a rewiring of global supply chains, is the next logical step in globalization's advance. We simply could not go any further with the structure we had.

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[Louis Heberlein]

The US Commerce and Defense Departments pioneered technologies and logistics that not only fostered outsourcing mass production jobs abroad, and to computers, but made global mass customization opportunities available.

The opportunities were essentially ignored by most US business investors even though we had a Clinton Labor Secretary that wrote early books on the unfolding transformation.

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