April 10, 2020
My Dear Reader,
In a pandemic which has claimed many lives and even more jobs, it can be hard to see any positives, and even fewer ramifications, given that we are still so close to the event itself. However, I would contend that there has been some great changes to the world that will soon become apparent.
First of all, I would begin to question the economic power of China following this pandemic. Not just because it started on their shores, but because some of the greatest industrial producers have begun to understand the danger of an epidemic like this and its effect on the global economy and supply lines. In a recent Washington Examiner article on the subject, writer Sean Higgins speculates that:
“The ones who are dealing with the virus best are the ones that diversified their supplier base previously, ISM chief Thomas Derry told the Washington Examiner. “The move to diversify definitely accelerated in the fall when the 25% U.S. tariffs on Chinese goods became apparent. Getting alternate sources of supply became the primary strategy for many companies,” Derry said. “The combination of the tariffs and now the coronavirus outbreak has accelerated it even further. Companies that were on the fence and saying, ‘One of these factors we could deal with,’ are now saying this is too much.” It isn’t that China is now viewed as toxic by businesses, Derry added. It still has a lot of advantages, such as modern infrastructure. But the days when companies thought that China was a one-stop source have passed.”
This should be looked at with great interest and even more excitement. While I would assume that a move away from China could hurt larger companies’ stock due to wage increases and supply redistribution, I would think that any loss would be temporary. Perhaps this will be Trump’s greatest legacy, his Reagan moment when he took the last communist power to task, and for that, the world should be grateful.
The only disappointing aspect of the Asian redistribution project is the fact that those factory jobs won’t be returning to the United States. With the cost of union labor, business taxes, and real estate, our commerce would be better served in India and the rest of southeast Asia. But I would argue that a strong alliance with India would effectively counterbalance China in the region given their population and development. This also doesn’t discount their history with the British, and though it was checkered to say the least, it helped spread the western philosophy of republicanism that now seeds India’s government. This in turn makes them a better natural ally than either Burma, Vietnam or Cambodia.
Hopefully this will be the lasting effects of the Wuhan flu, and not the economic devastation we see today.
To your Creation and Potential,