Thread by @ProfPaulPoast

The "Ever Given" has indeed given: not just memes, but a teachable moment.

Let's explain why the global economy is extremely fragile.

[THREAD]

The @nytimes just ran a story on this very issue

nytimes.com/2021/03/26/bus…

Much work in International political economy (IPE) & International Economics discusses two extreme forms of disruption to the flows of goods & services in the global economy.

On the one end, IPE focuses a lot on policy restrictions -- tariffs or non-tariff barrier regulations -- and how these come about (i.e. interest group pressure; firm interests).

Two recent examples include...

... @BobbyGulotty's book...

press.uchicago.edu/ucp/books/book…

...& @sarahbauerle's book

cambridge.org/core/books/mer…

On the other end, #COVID19 shows how an extreme global shock can bring the the global economy to a virtual halt.

For example, see...

...this new @voxeu paper by Natalia Martín Fuentes & Isabella Moder (both of the @ecb)...

voxeu.org/article/scarri…

...this new @IntOrgJournal piece by @ProfKMcNamara & @ANewman_forward ...

cambridge.org/core/journals/…

...or this Emerging Markets Finance and Trade paper by C.T. Vidya & K.P. Prabheesh (@IITHyderabad)

tandfonline.com/doi/full/10.10…

In contrast to these two extremes, the Ever Given debacle shows that there is a more fundamental fragility to the global economy: small shocks that can bring down the whole thing.

This fragility is inherent to the networked nature of the global economy: supply chains, shipping routes, inter-firm trade.

This is a big theme in @thoatley's work. See...

...here in @RIPEJournal ...
tandfonline.com/doi/abs/10.108…

... and here in @ISQ_Jrnl (with @whinecough & @sarahbauerle)
academic.oup.com/isq/article-ab…

These networks create the potential for "small" (sometimes seemingly random events) to have huge global economic consequences.

Think of the refinery fire last year in Louisiana

dallasnews.com/business/energ…

Here's the thing. Governments know this. And they can leverage it.

This goes to the heart of what @ANewman_forward & @henryfarrell call "Weaponized Interdependence"
belfercenter.org/publication/we…

A good example of this process was (and is) 5G internet development and access
globalasia.org/v14no3/cover/w…

Indeed, the fragility of the global economy is not new.

Consider how a key focus of the @USNavy is to keep open "choke points" (one of which is the Suez Canal): narrow maritime passageways through which cargo ships must travel.

IR scholars have written on how governments could seek to disrupt the global economy by closing off one of these choke points (see @ProfTalmadge in @Journal_IS)...

belfercenter.org/publication/cl…

... and why pirates are a threat
tandfonline.com/doi/abs/10.108…

Which, of course, brings us back to Suez and the Ever Given. While this wasn't a case of piracy or a government blocking the choke point, it illustrates how it doesn't take much to accomplish that aim.

A cruiser or two could do the trick...or, in the case of the Bosphorus strait, a really long chain

In sum, the shipping debacle in the Suez provides a great lesson on the inherent fragility of the global economy (and how governments can exploit it). Oh, and a source for great memes 👇

[END]

Addendum 1: While the above thread highlights the fragility of the global economy, worth noting that this can be a short-term problem.

Longer term, adjustments can be made.

That appears to be the case in this specific instance...

wsj.com/articles/compa…

... and can be a feature of many global markets, such as the market for rare earth metals today (explored by Eugene Gholz and @LlewelynHughes recently in @RIPEJournal)...

tandfonline.com/doi/abs/10.108…

...or (in one of my favorite examples) the 19th century market for cotton.
smithsonianmag.com/history/how-am…

So the global economy is not fragile in the "it will all permanently vanish"-sense

But it is fragile in the "one small thing creates a huge mess costing lots of folks globally a lot of money"-sense

And THAT second type of fragility could be exploited by governments.