Thread by @matthewstoller

1. Here's the real lesson from the Suez boat mess. The geniuses running world trade tried to stick a really big boat into a too small yet critical canal. The implications of that reality are scary. mattstoller.substack.com/p/what-we-can-…

2. I love the Suez story because it's so easy to understand None of the idiocy is masked by fancy rhetoric of Ivy credentialled McKinsey bullshit.

https://twitter.com/BrandyLJensen/status/1375115719231336461

3. The reason this disruption to global commerce seems so dumb is because it is. First let's go the ship. It was big. Really big. It weighs 220,000 tons, and is as long as the Empire State Building is high.

It's a floating island, "Too Big to Sail." ft.com/content/3dc797…

4. Had they not unstuck it relatively quickly, not only would world trade have been royally screwed, but consumers would have experienced shortages of things you don't want to run out of, like toilet paper. finance.yahoo.com/news/stuck-sue…

5. As it is, shipping did get really messed up, and there will be significant delays. Insurance rates are likely to go way up now. …list.maritimeintelligence.informa.com/LL1136306/Afte…

6. The argument behind making such massive boats was efficiency, since you can carry more at a lower cost. The downside of such mega-ships should have been obvious. Ships like this are really hard to steer in tight spaces like ports and canals.

7. The rise of mega-ships is paralleled by the consolidation of the shipping industry itself. In 2000, the ten biggest shipping companies had a 12% market share, by 2019 that share had increased to 82%. mattstoller.substack.com/p/what-we-can-…

8. Big shipping lines are already a problem. We've seen how fragile big firms can translate financial shocks into trade shocks, such as when Korean shipper Hanjin went under and stranded $14 billion of cargo on the ocean while in bankruptcy. wsj.com/articles/billi…

9. It’s also much harder for small producers and retailers to get shipping space, because large shippers want to deal with large clients. And fewer ports can handle these mega-ships, so such ships induce geographical inequality. ship-technology.com/features/featu…

10. Dumb big ships owned by monopolies are the result of dumb big ideas, the physical manifestation of what Thomas Friedman pushed in the 2000s with The World is Flat, the idea that “taking fat out of the system at every joint” led to peace and prosperity. wired.com/2005/05/friedm…

11. Just make ships bigger, went the thinking, until a big boat got stuck in a canal, harming global supply chains. It seems so dumb. And it is. But it’s also reality, because for whatever reason, a lot of powerful people at one point thought Thomas Friedman was a genius.

12. And it goes way beyond shipping. Now our supply chains are thinned out and tightly coupled, with little inventory on hand, meaning supply problems in one area cascade quickly into full-on weird industrial crashes. Example in 2010: hollywoodreporter.com/news/industry-…

13. These crashes are happening constantly. There have been serious shortages of flu vaccines, IV solution, pharmaceuticals, semiconductors, etc. Bedding makers can't get enough foam, ammunition makers can't get brass/primers. usatoday30.usatoday.com/news/health/20…

14. The home construction industry is apparently at risk right now because of a shortage of flat steel form ties, a small piece of metal that ties together aluminum panels. These cost less than a dollar apiece! foxbusiness.com/markets/home-c…

15. Industrial crashes are happening in unpredictable ways, shutting down important production systems in semi-random fashion. These were rare prior to the 1990s. But industrial crashes were built into the post-1990s globalization, which prioritizes efficiency over resiliency.

16. Just as ships like the Ever Given are bigger and more efficient, they are also far riskier. And let's be clear, what happened in Suez is a minor problem compared to what *could* happen with these giant dumb ships. mattstoller.substack.com/p/the-big-dumb…

17. The answer to these design problems in globalization is relatively simple. One, break up monopolies, because monopolies are chokepoints. Two, re-localize production with tariffs and friction in trade. Three, reduce debt-heavy firm financing.

18. All of these design changes increase resiliency and reduce systemic risk. Doing them will require taking on concentrated corporate power. But not doing them leads to industrial crashes, and ultimately, social collapses. mattstoller.substack.com/p/what-we-can-…

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