A KEY POINT TO BEAR IN MIND ON GLOBALIZATION WAS AN UNDERLYING ASSUMPTION THAT THE DEVELOPED WORLD WAS OUTSOURCING ‘LOW END’ MANUFACTURING...
However it overlooks the point that US and Europe were fully complicit in the outsourcing processes of globalization. They were looking for ever cheaper sources of manufactured goods and materials, as part of the ‘efficiency’ drive of ‘just in time’ production processes to maximize profits, and lower investment costs in order to improve returns on equity (ROE) and investments (ROI). As but one example, by 2018 China’s production of intermediate goods was larger than the total output of all other developed economies. While this facilitated the processes of the financialization and commoditization of everything, it was underpinned by linear and solutions based thinking. Had there been greater application of critical, lateral and systemic thinking, it would likely have fostered greater awareness of the accumulating imbalances in the global economy, as well as the increased and complex interconectivity, concentration and supply chain risks, which were so brutally exposed by the Covid-19 pandemic and the Russian invasion of Ukraine.
A key point to bear in mind on globalization was an underlying assumption that the developed world was outsourcing ‘low end’ manufacturing, which would allow it to reallocate resources to developing high end, higher value production. Whether there was much thought given to the risks from technology transfers, and the likelihood that China and other countries would also look to develop higher level production, just as Japan and South Korea had done in the decades following World War II is a matter for debate. But that risk was likely seen as subordinate to maximizing profits, particularly given that the lowering of security concerns after the Cold War fostered a Wild West mentality in expanding businesses into Central and Eastern Europe and South East Asia, and was also evident in the ‘dot com’ bubble. Most western economies abandoned any remants of their industrial strategies, and took a very ‘laissez faire’ approach to the regulation of their respective financial sectors. The latter resulted in explosive sector growth which ultimately culminated in the global financial crisis (GFC), and all the measures to preserve what was and is a financial sector that is no longer fit for purpose. But that is a topic for a different discussion.
China was little better in reforming and adapting its financial sector to its rapidly growing economy. But the GFC made it painfully aware that it needed to secure the supply chains for its vast and rapidly growing industrial sector, especially in its drive to develop higher end products. It formalized what had hitherto been a rather piecemeal approach in its Belt and Road initiative in 2013, which also served to expand its political sphere of influence. It also offered some protection from growing trade tensions with the US and EU. As the latter tensions have grown, China has sought to circumvent tariffs and sanctions by outsourcing production to other countries (so-called connector economies such as Vietnam or Mexico), as well as deepening its supply chain of raw materials, and secondary and tertiary processing thereof. The latter underlines a simple point about so-called ‘critical minerals’, which are not actually scarce, as the epithet implies.
5 | ADMISI - The Ghost In The Machine | Q2 Edition 2025
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28
