In addition to making the world sick, the coronavirus pandemic has dramatically illustrated the high costs of the global supply chain.
For 40 years, economists have promoted globalization based on supply chains that rely heavily on cheap nonunion Chinese labor — working without adequate safety or environmental protection — to assemble sophisticated parts from around the world that are made into final products and then reshipped largely to consumers in rich countries. This was said to be an ideal international division of labor that optimized returns to all participants.
Usually unmentioned was the boost this supply chain model gave to corporate profits. As Stewart Paterson, author of “China Trade and Power,” notes: “This was the largest labor arbitrage in the history of economics.” In addition to benefiting from cheap labor, companies such as Apple, General Electric, and Cisco were awarded subsidies and tax breaks by Beijing.
Now, however, the hidden costs of globalization are becoming apparent. One is US dependence on China for critical pharmaceuticals and medical supplies, such as face masks and other personal protective equipment. The New York Times reported that while China makes half the world’s medical masks, it has refused to export them and is buying more on the world markets. China has since signaled to the Trump administration its willingness to provide PPE. India, another major supplier of key pharmaceuticals and PPE, has just imposed a ban on exporting many of them. The hidden cost of this high dependence on the global supply chain for medical items alone is enormous and multiplied by the thousands of other key products and technologies for which the United States is also dependent on China.
Nor did American workers mostly move into equivalent or higher-paying jobs as the result of globalization. Rather, as MIT economist David Autor and his colleagues have noted, most of the 2 million to 2.4 million American workers displaced by globalization either did not get jobs or got lower-paying jobs. Moreover,