In 2020, following the international spread of the Covid-19 virus, the shutdown of the global economy lead to deep and unprecedented changes in today’s globalized and capitalistic societies. While the public health sector suffered the most during the pandemic years, another sector that was also put under severe stress was supply chains. As defined by Verhoeven, a supply chain is simply put the sequence of processes involved in the production and distribution of a commodity (Verhoeven,2020). As such, many different actors play a crucial role in the movement of physical commodities such as manufacturers, suppliers, transporters, retailers, and customers (Sukati et al, 2012). Following the drastic lockdown measures and even to this day, the efforts to put the economy back on track and “revive” the global supply chain that we all depend on to import and export our products have been slow and insufficient for the most part. In this essay, the causes of the supply chain crisis will be exposed. Following that, the consequences of the crisis will be discussed while analyzing this problem from an international politico-economical perspective.

While it may seem easy to assume that the Covid-19 pandemic is the main driving force behind the global supply chain crisis, it is however a complex multifactorial issue. The crisis can be attributed to problems belonging to three main orders: Political, economic, and social. Nation’s economies have never been more intertwined and co-dependent, due to consumerism driving the importation and exportation of goods and services to virtually anywhere in the world. As such, a simple delay or error in one of the different steps of the supply chain in some parts of the world can easily have global ramifications. This can be clearly illustrated by the impact of Chinese internal policies on the closure of their ports during the pandemic. After the first outbreaks of Covid-19, local authorities’ closure of roads and business zones, as well as direct closure of terminals in Shenzhen port had drastic effects on the international shipping and logistic industries. Shenzhen’s port being one of the largest in the world, the delays caused by the state’s effort to control the spread of the virus led to not only soar in the price of containers worldwide but to a snowball effect that lead to congestion and delays across many south Asian ports (Dempsey, Hale,2021). This event also highlights the power of the Chinese government that on one hand exerts totalitarian power by enforcing a zero-tolerance policy on its citizens and business, but also its ability to directly influence global markets and goods. Conversely, the phenomenon of state-induced pressure on the global and local supply chains can be seen in the United States of America. As a trade war with China is taking place, geopolitical maneuvering orchestrated by the U.S aims to cut Chinese companies off its crucial chip supplies, forcing chip-makers to reduce their production, ultimately leading to a global shortage of electronic chips (Global Times,2021). This represents a concrete example of the power of a politicized economy and a sign of a possible return to American isolationism by going against global markets. The supply chain crisis can also be attributed to supply and demand disruptions following the Covid-19 near 2-year lockdown. As technological and industrial products get more and more complex, requiring more parts and specific materials, the global value chain breaks up the manufacturing process across borders to bring costs down. Raw material can be sourced in a continent, assembled in another, and exported somewhere else. This chain of exportation relies not only on carefully planned and regimented logistical implementation but on the prices of goods and labor in specific parts of the world. As industries shut down progressively, a chain reaction occurs where local disruption either due to lack of labor or material spreads to the different countries, even if the factories themselves are still able to produce and trade is open (World Development Report,2020). Furthermore, a change in the labor force also drastically affected the global supply chain. As technology is slowly pushing workers out of their job or decreasing their pay, people are deciding to quit their job in search of better working conditions. The most well-known example of this shift in the job market can be seen in the sharp decline of truckers around the world. While many millions of workers switched to a work-from-home system that let them focus on their personal and family lives, commercial drivers in charge of transporting the goods through the supply chain to the customers were not granted this option. A failure to retain aging drivers and recruit new ones leads to delays or even the destruction of perishable cargo (Fleming,2021). To put it simply, being a driver was already an unattractive job for many, and this phenomenon got exacerbated during the pandemic, leading to a shortage of drivers and decreasing truck journeys. As journeys become unpredictable or severely delayed, the competitiveness of companies is directly affected, leading to clogging of the supply chain machinery and a direct impact on prices and availability of key products. Finally, some social trends and consumer decisions also played a major role in the creation and exacerbation of the problems in the global supply chain. The supply shock that occurred at the start of the pandemic is a notable example of how the supply chain can crumble in front of an unexpected rise in demand from consumers. On one hand, it revealed the major flows in production strategies but also the erratic behavior of consumers when faced with uncertainty. Panic buying became a major problem, as necessities like toilet paper or sanitary products couldn’t be found on shelves for weeks on end (Kay,2021). The consequent shortage and artificial inflation of the price of items underline perfectly the inability of our current ports, factories, and retailers to match the demand of an ever-increasing and demanding population if no reform of the global supply chain occurs.

The lockdowns following the Covid-19 outbreak are for the most part over, however many different sectors and aspects of daily life are still being affected by the global supply chain crisis. While the issue main seems only economical at first, it has also altered both the political and social dimensions of society. Political consequences of the global supply chain crisis take on different forms around the world. Policymakers have been introducing new laws and measures to alleviate the symptom of the crisis. United States president Joe Biden announced that the country’s biggest ports as well as major retailers will temporarily increase their operations to 24 hours a day, seven days a week to compensate for the lockdown measure (Grimes,2021). Consequently, the lack of cooperation between the Chinese block and the US has only accelerated the rise of economic nationalism and tensions. Corporations and shipping companies are under more and more pressure from the government to reduce the number of steps present in the chain, especially the ones outside of their respective economic zones (Shih,2020). Governments are also looking at investing in renewable energies that they can produce at home as the delays and price hikes in the sector observed during the 2019-2022 period are still present. A certain movement of “slowbalization” is getting traction as both people and governments are realizing that the crisis is a result of outsourcing and interdependency on other countries to assure the supply of key materials and energy. The global supply chain crisis also had a deep impact on consumers that reshaped markets and day-to-day life. An investigation conducted by CNN revealed that the recent crisis left the most precarious part of the American population even more vulnerable. As the price of food and energy keeps on rising, the everyday citizen’s salary and buying power are stagnating at best and decreasing in many places (Crush,2021). Corporations having reported unexpected losses, employees are faced with mass lay-offs to cut costs. Furthermore, the rising in food costs is also limiting donations to food banks and other non-governmental organizations that provide key care to vulnerable populations. Interestingly, the previously mentioned “chip-war” that was a consequence of the trade war between the biggest economic powers had and still has noticeable effects. The chip shortage was also felt in schools, where most of the equipment like laptops and projectors rely on chips that they can’t get their hands on. The students are therefore unexpected victims of the global failure of the supply chain.

The global supply chain can also be analyzed not only in terms of causes and consequences but through the different international political-economy perspectives and structures. The recent failure of the global supply chain has kindled a new wave of mercantilism as economies and governments shift towards protectionism and deglobalization (Sally,2020). The first major observable shift is from markets to states. Governments that were supposed to be economically liberal have increasingly increased interventions to regulate prices and the supply of commodities. For example, programs in the United Kingdom such as “eat out to help” are government-sponsored incentives for individuals to go out to eat to boost the hospitality industry. Grants for music venues and similar services were also handed-out to save those businesses from closure. But the biggest subventions and bail-outs were given to boost up hedge funds and other financial institutions that would have probably gone bankrupt if the state didn’t intervene. Conversely, states are also shifting to unilateralist governance. Competing interests and uncertainty are pushing governance to prioritize their direct interests over those of the allied countries or members of the same international groups such as the European Union or the G20. On the other hand, the supply chain crisis also revealed glaring flaws in the liberal system that has become the prominent IPE system in western society but also in Asia. Outsourcing of labor to lower costs has backfired and weakened most economies. As discussed before, most products are a result of a multi-country, multi-subsidiary process that relies on open borders, accessible raw materials, and a fluid working force that can travel and adapt. However, the supply chain crisis illustrated very well that the foundations of modern liberalism (neoliberalism) are not strong and flexible enough to adapt to a global event of this magnitude. Essential parts of the liberal economy such as truckers, retail workers, and dockers were marginalized by governments and not compensated enough for their key role in limiting the effects of the crisis. As such, unions in the United States have seen a surge in new members, and protests such as the one observed in various parts of the country and Canada are a sign that liberal hegemony in the West is prone to counter-movements. At an individual level, the global supply chain crisis changed the way that individuals consume and how they do it. More ethical, “homegrown” products are starting to get more popular as imported products become rarer. States have now more challenges to overcome to not only return society’s life “back to normal” but also trust to regain after they fail to respond to the situation. From an interstate level of analysis, economic and political tensions were reinforced between the major trading poles of the world. More globally, the supply chain crisis was the major economic event of the last decade, reminding us after the 2008 crisis that the status quo is very vulnerable to “black swan events” (Taleb). In conclusion, the global supply chain crisis is a stark reminder that in today’s world, the majority of the developed world is interdependent. Be it at a social, political, or economic scale, the Covid-19 pandemic and subsequent shutdown of industries and key links in the supply chain transformed how we live, govern and interact with our neighbors. As the restrictions are easing up in most countries, we have to start thinking about preventive measures so that we rely less and less on the global supply chain but we also need to adapt our technologies and infrastructure to overcome challenges like the crisis. A rise in automation and a return to protectionism seem to be two of the most notable changes in the short-term future.

 

 

 

 

 

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