Proof global shortages are turning economy upside down

WHEN the bosses of big industrial conglomerates are reduced to scavenging like Steptoe & Son to get their hands on vital components, it’s obvious something has gone badly wrong in the global economy.

The very idea that global captains of industry are ordering subordinates to dismantle domestic appliances for their semi-conductor chips shows we are in the realms of Alice In Wonderland.

We had better get used to it, though. The old pre-pandemic, pre-Ukraine war world, when the global supply chains that power modern economies whirred away seamlessly, can no longer be taken for granted.

Microchips are a particular problem because they are at the core of all the essential machinery of our lives, from cars to smartphones to fridges. And it is not easy just to ramp up production. They may be tiny, but their fabrication is an elaborate process involving more than 3,000 steps.

(As an aside, the current supply crisis does make one question the wisdom of the UK Government, which has failed so far to intervene in the sale of a Welsh microchip factory to China and which previously permitted our national champion Arm to be sold to Japanese investors in 2016.)

Unfortunately, the supply bottlenecks go far beyond semi-conductors. They have even hit the other variety of chip – prices are going up due to a shortage of sunflower oil, much of which comes from Ukraine. As for the fish that would have been served alongside, it turns out we were importing loads from Russia.

MOST people don’t devote much thought to the intricacies of supply chains. Until recently, they haven’t needed to: stuff simply appeared when we wanted it. But the economic model underpinning such luxuriant availability may be vanishing before our eyes.

A combination of factors, including Covid-19, Vladimir Putin’s vile aggression, a rise in economic nationalism and climate change, is playing havoc with the supply of vital goods and foodstuffs.

The question at this stage is whether it is a temporary setback or early rumblings in a seismic change to the global economic order.

For the past three decades, the dominant assumption has been that the fall of the Berlin Wall and the Gorbachev reforms heralded a permanent triumph for capitalism and liberal democracy. But history has followed a different course – one that has torpedoed the just-in-time global supply chains that underpin our lifestyles. These cheap, fast and efficient supply lines are only feasible in a world with open borders, where goods can be transported without wrecking the planet.

Faced with war, Covid-19, and global warming, it falls apart. Even Brexit, whether you voted Leave or Remain, is a challenge to globalisation, as is the rise of Marine Le Pen in

France. Politicians are likely to continue to be devilled by supply chain dilemmas in the coming years. To mention just one, rare earth minerals such as lithium are crucial in the fight against climate change, as they are used in electric car batteries. So it is extremely problematic that one of the world’s biggest deposits, worth an estimated $1trillion, is in Afghanistan, under the control of the Taliban.

Future historians may look on the shortages and cost of living crisis we are suffering now as an ominous sign of difficult times ahead.

Seamless supply chains can no longer be taken for granted