Thursday, January 26, 2012

The US Priority at Davos: The Global Supply Chain

A BBC News dispatch from Davos that arrived last night (our time) gives some indication of where our country’s priorities lie with respect to the agenda of the World Economic Forum.  Here is the one-sentence summary of the story:

The US has unveiled a strategy at the Davos World Economic Forum to protect the global supply chain in the event of a terror attack or natural disaster.

Apparently this is a policy that has been approved by President Barack Obama and was the basis for the speech given to the Forum by Secretary of Homeland Security Janet Napolitano.  As the BBC observed, there are definitely virtues to this policy:

The supply chain includes provision of food, medicines, fuel or any goods that underpin the American way of life.

The strategy would plan for worst case scenarios, enabling the government and industries to respond quickly to disasters that could disrupt access to vital commodities.

Unfortunately, the virtues of freely-flowing food and medicine may turn out to be a Potemkin village cloaking issues that are less likely to impact the majority of American citizens (if not the whole 99%).

Once we get past the blue-sky side of the story, we read the following:

Ms Napolitano cited a 2010 incident in which al-Qaeda operatives in the Arab Peninsula plotted to send explosive devices into the US via cargo planes that were thought to be carrying printer toner cartridges.

"That really brought to the forefront of my own recognition that we need to have a sense of urgency about the importance of the global supply chain,'' Ms Napolitano said as she addressed a crowd at the World Economic Forum.

However, the free flow of toner cartridges is just the tip of the iceberg.  The real iceberg can be found lurking in what has become an often-cited analysis piece by Charles Duhigg and Keith Bradsher, which appeared in last Sunday’s New York Times under the headline “How U.S. Lost Out On iPhone Work.”  Since Obama is being credited with this new supply chain protection strategy, it is appropriate to recall the opening paragraphs of this Times article:

When Barack Obama joined Silicon Valley’s top luminaries for dinner in California last February, each guest was asked to come with a question for the president.

But as Steven P. Jobs of Apple spoke, President Obama interrupted with an inquiry of his own: what would it take to make iPhones in the United States?

Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.

Why can’t that work come home? Mr. Obama asked.

Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.

The rest of the article explains the logic behind Jobs’ depressing observation;  and, at the core of the lengthy (not to mention disconcerting to the point of harrowing) argument lies the critical role of the global supply chain.  The bottom line is that just about all American manufacturing is dependent on global supply chains, basically because one would not be able to impress shareholders with dazzling profit margins without them.  Put in the bluntest possible language, America has become a country in which just about any production of goods (and often services) has no substantive use for the American worker.

Obama is certainly right that the protection of global supply chains is currently of significant interest to “homeland security.”  However, excessive dependence on such supply chains should also be treated as a matter of homeland security.  It amounts to having a business culture in the throes of an addiction whose withdrawal could well be disastrous.  If our President were really interested in domestic security, he should be thinking about weaning that business culture away from the debilitating effects of globalization and rebuilding that culture of self-sufficiency that served us so well during the twentieth century.  Such self-sufficiency would require putting more Americans back to work.  This, of course, is what the Occupy movements have been crying for;  and Napolitano’s Davos speech makes it clear that the 1% are doing a good job of hanging tough in ignoring such matters.

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