Can globalisation survive current shocks?

Malaysia has banned the export of chicken products from 1 June 2022, Introduced to protect Malaysian domestic supply, the ban covers live poultry, whole carcasses, chilled and frozen meat, chicken parts and chicken-based products, 

Variants of Hainanese chicken rice are a popular local dish in many parts of Asia and especially in Singapore where it is a ubiquitous national dish. On June 2 2022 CNN carried a story written by Heather Chen on the impact on Singapore of the Malaysian ban. 

The Malaysian ban is the latest in a series of interconnected flow-on effects that began with covid related damage to global supply chains that were then further damaged by the Russian invasion of Ukraine which restricted supply of oils and grains from those countries and led to the application of sanctions on Russian activities that further affected trade. Then add the effects of drought in parts of the world. The end result is a perfect storm now affecting billions of people. 

Australia has not been immune from these various effects. At one level the country has benefited from record prices for agricultural products, coal and natural gas. Here I couldn't help noting the irony that the controversial Adani mine whose economics were so doubted now looks like a profitable short term bet with current thermal coal prices well above break even. At a second level, consumers are suffering from continuing supply shortages in supermarkets and along supply chains with high prices for vegetables, meat and especially energy.  

It is unclear how these various effects will work themselves out. I suppose my main longer term concern lies in the impact on globalisation. Globalisation has become a hotly contested topic. From my perspective, while globalisation has had costs it has also facilitated economic growth that has lifted millions out of poverty. Now the world risks a shift back to national autarchy not seen since the great depression. 

At a personal level, I underestimated the fragility of the interconnected global economic system. To illustrate this, consider the case of Just In Time production, more recently known as Lean Manufacturing. Central to this are interconnected production systems designed to reduce inventory costs by bringing in supplies just when needed. With time, these systems became globally complex. They also became dependent on a small number of critical suppliers for products such as computer chips. Recent supply chain disruptions have have had ripple effects along these complex chains, They have also changed price relationships disrupting the financial models built into the production processes. In Australia, for example, shortages of building materials have had disruptive supply and price effects that have dramatically slowed construction including house building, adding to problems associated with labor shortages. 

I don't think anybody knows just how global systems will adjust to current shocks. The economic outlook has certainly become darker with some commentators talking about the risk of global depression. I think (hope that) these concerns are overstated, but the risks are there.