Front End | Electronic Components Supply Network
Geopolitical tensions dominate risk in the Thucydides Trap
It is not widely realised but politics plays a key role in commercial competition, alongside more obvious influential factors such as economics, human relationships, technical advances and the law. Much of the longer-term geopolitical tension affecting global electronic component markets can be put down to the souring of the relationship between the US and China, although Russia is currently adding fuel to the fire of uncertainty. In this article Adam Fletcher, chairman of the Electronic Components Supply Network (ecsn), examines some of these political factors and discusses the impact they have on UK organisations
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olitical considerations play an important role when deciding on policy goals in international business. In the UK for example the Conservative party tends to favour lightly regulated market-led policy solutions while the Labour party is focused on more direct control and state ownership policies. This has tended to lead to ‘stop-go economics’, as a different set of policy goals are put forward to achieve the desired outcome each time the leadership changes following a general election.
Globally there is a very wide diversity of political systems: A huge divide exists between the aims and aspirations of various countries, but most recognise the need to interact effectively within the geopolitical environment. When ideologies clash governments either act to accommodate the needs of others in a bid to achieve their aims or rush to construct barriers, which almost always leads to internal political conflict, heightened tension between nations and occasionally, to military action. Commercial organisations must navigate a path through these often-diverse policies, regulations and laws, but for the past sixty years there has been a generally healthy inter-dependence amongst nations aided by internationally respected non- governmental organisations with a proud
12 September 2022
record of helping to regulate activity and resolve disputes.
US / China - caught in the “Thucydides Trap”?
Born in Athens in 460BC, Thucydides was a noted military general and historian and is today considered the father of the school of political realism. He viewed the political behaviour of individuals and the subsequent outcomes of relations between states as being constructed upon, and ultimately mediated by, fear and self- interest. Thucydides recognised that Sparta was frightened by the growth in Athenian power and foresaw the inevitability of the Peloponnesian war between his city-state and Sparta.
In his book ‘Destined for War’ the American political scientist Dr Graham Allison adopted the term the “Thucydides’ Trap” to describe the “natural, inevitable discombobulation that occurs when a rising power threatens to displace a ruling power... [and] when a rising power threatens to displace a ruling power”. He hypothesised that the structural stress that results from the “Thucydides’ Trap” makes a violent clash between two controlling parties the rule rather than the exception. His research revealed that in sixteen historical instances of an emerging power rivalling a ruling power, twelve resulted in warfare.
Components in Electronics
In his book Dr Allison goes on to argue “that the US and China are currently on a collision course for war” but academic, military and political opinion on the prospect remains divided. Despite all the current political rhetoric over Taiwan, trade sanctions and trade barriers, we have to hope that Allison’s analysis is incorrect, and the two countries will be able to arrive at a mutually satisfactory political solution. If not, our current preoccupation and concerns over the cost- of-living and rising energy costs could pale into insignificance!
Less nationalism, more inter- dependence
Almost all products including electronic components and many associated services are reliant on inter-dependencies between organisations and countries. It’s very apparent that over the last forty years there has been a wholesale transition of manufacturing away from western economies towards Asia Pac countries, often led by commercial organisations seeking to maximise their profit and facilitated by a political class largely ambivalent to the changes. Western politicians were happy whilst their national economies were growing but today’s imbalance needs to be both understood and addressed. A small degree
of political ‘tweaking’ is required, and commercial organisations need to be encouraged to embrace the modifications that will result. It’s worth remembering the way global trade has developed and been operated over time and realise that wholesale changes are very likely to be problematic and could actually result in lower economic growth. Beneficial ‘tweaking’ in country ‘A’ may well have a negative outcome in country ‘B’ and might give rise to an increase in geopolitical tension.
Supply security
Many column inches have been given over to analysis about the current transition away from single sourced, single geographic location manufacturing of electronic components and systems, suggesting that organisations are moving their focus away from ‘dividend delivery’ to ‘security of supply’, but I doubt this trend will become widespread any time soon, primarily because the ‘balance sheet’ economics of lean or just-in-time (JIT) manufacturing systems have proved over the last fifty years or so to be very effective, efficient and successful. There will certainly be some short-term changes but in the longer term the drive for enhanced profitability and ‘dividend delivery’ will quickly return to the fore.
www.cieonline.co.uk
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