Global supply chains failed, countries closed ranks and blocked exports, then began bidding wars on basic medical supplies. The penny finally dropped that by finding the cheapest providers in the global economy, globalised companies introduced a national security issue not many considered. They are reliant on the good will of others for basic supplies.
China, in particular, positioned itself as the global factory for widgets, undercutting everyone. Companies around the world marvelled at how cheaply they could get their widgets. Then the widget train stopped almost entirely. That warm feeling of reduced cost and increased profit froze over. When they turned to local markets they quickly realised the local factories had long since been put out of business unable to compete.
So what now? As the widget shortages mount it leaves companies facing an uncertain future with likely much reduced profit. This hasn’t fully come to fruition yet as many companies are in ‘hibernation’ but soon they will face stark choices.
Governments will likely look inwards in order to learn from that mistake and make sure they don’t have to beggar thy neighbour again.
This could fuel a shift from globalisation to localisation. End products would invariably become more expensive and pressure on wages would increase to compensate. All of which could ultimately result in problems with inflation.
Factory countries could find themselves struggling for the first time in a long time. A generation ill equipped to weather tough times could falter setting the scene for a more popularist agenda.
Couple this with huge unemployment, a fearful society that won’t spend and we could be in for a rough ride.
Of course things could go back to before the outbreak. Indeed the stock market rallies would infer just that, but a company that survives and doesn’t address the huge risk they took on globalisation would be foolish not to realise their narrow escape.
Scary stuff but not entirely unexpected. Warren Buffet cashed in and hasn’t seen opportunity yet.
Should this be a warning to us all?