The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

Watching A Hero Die

07/15/2020

My hero is dying.  Over the last forty years, I have admired him and prayed for him, which makes it so painful to watch him now, crippled with arthritis and writhing in pain.  Before he graduated, his professors adored him, especially his mathematical ability.  Sadly, at his graduation, on January 1, 1994, he was shot in the leg, shattering the bone.  My hero walked with a limp for the rest of his short life,  Still, he preserved, getting somewhat stronger, despite those whose who were threatened by him.

He created enormous wealth for the world, far beyond the imagination of King Midas.  He did this worldwide.  Of course, not everyone benefited as much as others, but my hero tried to help them into the new world he had created.  Unfortunately, the people he tried to help turned against him eventually.  The new trustees from his Washington college turned against him.  Those world leaders, who had become wealthy, started fighting with each other for the spoils of wealth and power that my hero had created.  Wars followed, naturally.

His death will be a slow one, full of suffering.  Still I’m praying for at least a partial recovery – some day – so the world can retain some of the wealth he has created.

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Obviously, I’m talking about the globalization that has created so much wealth around the world, and I hope it will survive, in some fashion.  Before NAFTA was born on January 1, 1994, both conservative and progressive economists testified before Congress that millions of people would be collateral damage and must be protected.  Instead, Congress reaped the benefits of globalization without paying the costs.  Those people were deserted by Congress.  They were the under-educated and under-skilled workers in small communities across America, whose employers left the country.

They are described brilliantly in J.D. Vance’s Hillbilly Elegy, explaining their unwavering anger at Washington and their unwavering support for President Trump.  Globalization hurt them.  Now, Trump and the pandemic are crushing  globalization.  Revenge is sweet, for some people.

As employers left America, they enjoyed larger profits.  In the pursuit of ever-more profit, the “bean-counters” whittled pennies.  Companies became ever-more dependent on foreign producers.  We became so dependent that we lost our resilience.  For example, who decided it was a good idea to trust China and manufacture our medicine there?  We may need China more they need us.  Our supply chain has become too inelastic.  In pursuit of larger profits, the bean-counters made us more and more dependent on foreigners.  There is an implicit cost to losing flexibility in the supply chain.  That cost is resilience.

Bottom Line:  This re-shoring will take several years.  It will be slightly inflationary, with consumers paying slightly higher prices.  It will be bad for Asia but good for Canada and Mexico.  Sooner or later, the overwhelming logic of globalization will reverse this re-shoring, and maybe we will do it right next time.

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