Suez Highlights the Fragility of Globalization

Photo: Suez Canal Authority.

The global supply chain is an elaborately choreographed ballet, nowhere more than in the flow of containers through which 60% of the world’s seaborne trade travels. Calibrating a stream of over 800 million boxes each year entails sophisticated tracking that makes sure containers reach their destination. The system reaches down to the crane operator who stacks each box in a specified position on the ship, and ensures enough empty boxes are on site to load the next shipment.

Last week the ballet turned into a mosh pit, when a character named MV Ever Given stepped out of its choreographed role to disrupt the entire dance. It blocked the world’s most critical trade chokepoint, the Suez Canal, an artery carrying 30% of the world’s container traffic. Effects radiated across the planet. Oil prices ticked upwards. Ships were held up at major ports from Rotterdam to Newark. Store and e-commerce deliveries were delayed. Both Amazon and Ikea had shipments on the Ever Given itself.

In our just-in-time world, where ships act as precisely scheduled floating warehouses, a week’s interruption creates a backlog that lasts a lot longer. It may only take days to relieve the maritime traffic jam and restore normal canal operations. But leading container shippers predict it could take weeks or even months to sort it all out, as off-schedule ships pile into congested ports. The shipping industry was already struggling with impacts of the pandemic on operations and the way it has shifted consumer purchases from restaurants and entertainment to consumer goods. Containers were short in Asia where much shipping emerges, and costs were way up.  Then the canal blockage piled on. It is “going to result in one of the biggest disruptions to global trade in recent years,” reported MSC, the world’s second leading container shipper.

That a single ship veering slightly off course could disrupt the entire global economy sounds a loud klaxon, signaling the fragility of trade networks and our globalized world in general. It is only one of a number of systems breakdowns we have seen in recent years.  In 2008, when the bankruptcy of Lehman Brothers interrupted money flows, the global financial system had a meltdown.  In 2020, when a bat virus spread to humans, it ruptured a world economy and health care system unprepared for a pandemic.  In a deeply interconnected global system, all it takes is one falling domino.

Bloomberg columnist Chris Bryant calls this out in his piece, Suez Shows Civilization Is More Vulnerable Than We Think The blockage came as a reminder that even an advanced civilization like ours has points of acute vulnerability . . . And we often don’t pay enough attention to them until something goes wrong. Systems designers strive to avoid these single points of failure, so that transport, energy and communication networks are able to withstand attacks or unexpected calamities . . . But global infrastructure, defined broadly, still has a surprising number of pinch points. These can be difficult to remedy, as creating back-up options is expensive and counteracts economies of scale.”

Economies of scale has driven the explosion in ship sizes that led to the Suez blockage. It is fundamental to the logic of globalization and the neoliberal capitalism that underpins it, the idea that the market knows best.  Release the market from regulation, and it will produce the optimal results. Take trade barriers down between nations so global supply chains can seek out the lowest-cost, most efficient producers. Let capital flow freely so it can find the most productive investments. Squeeze costs out wherever you can.  Even if it means the private hospital chain no longer warehouses protective equipment. Or the auto manufacturer does not stockpile computer chips vital to keep assembly lines running.  Just-in-time delivery is better for the bottom line, until there’s a pandemic or the canal is shut down. That the latter lasted only a week is a bullet dodged for many industries.

The Suez blockage underscores “the fragility of global trade,” writes C. Uday Bhaskar, the director of India-based think tank Society for Policy Studies, in Hindustan Times. “While the worldwide logistic management chain has acquired a high degree of efficiency by way of manufacturing goods to tight schedules and keeping inventory/warehouse/shipping costs to the bare minimum, even while ensuring timely delivery to the customer, an unforeseen accident such as the Suez closure can lead to a cascading downstream disruption of trade with attendant economic consequences.”

The beancounter logic of economic efficiency benefits private corporate interests. But by ignoring broader considerations of public good, it squeezes resilience out of the system. Resilience is broadly beneficial, but maintaining it costs money. When market logic prevails, the bottom line is the final arbiter. Then when a hard wind blows, it stresses adaptive capacities to the breaking point.

In an increasingly disrupted world, winds are literally blowing harder. In the case of the Ever Given, the desert sandstorm that blew the towering ship into the bank may have roots in an increasingly chaotic climate.  Meteorologist Jeff Masters notes a cold front surged over Egypt March 23. It spurred uncommonly strong winds of 29-35mph south-southeast across the Red Sea at the canal entrance where the ship ran aground. Just the angle needed to push the ship out of the deep channel at the canal’s center. Gusts up to 70mph were reported. Making the situation worse, the cold front was preceded by near record heat in the region. Dried soils contributed to the sandstorm and visibility problems for the ship.

Notes Masters, “ . . . the large-scale weather pattern responsible for the sandstorm was quite extreme, and climate change could have contributed to make this event more extreme.  Observations of the upper-level air patterns at 500 millibars (about 18,000 feet) on that date showed a very amplified and wavy jet stream pattern, with a strong ridge of high pressure over the Middle East and a strong trough of low pressure just to its west over the central Mediterranean Sea . . . There has been a sharp increase in similar ‘global weirding’ extreme jet stream patterns in summer.”

The increasingly wavy jet stream is tracked to warming in the Arctic.  A strong temperature difference between the Arctic and equator keeps the jet stream defined and steady. When the difference decreases, the jet stream becomes slower and more wavy, carrying cold air far south and warm air far north. The effect both contributes to sea ice loss and is caused by it. At least, more and more scientists believe this to be the case.

One of the preeminent researchers in the field is Penn State’s Michael Mann. In response to Masters’ inquiry, Mann responded, ““Our work certainly supports the increased incidence of persistent weather extremes of this sort (in fact, there’s a new study just out that further confirms that these events are indeed increasing in Europe during the warm season), so the connection is plausible but not confirmed.”

Adds Masters, “While the connections to climate change of the grounding of the Ever Given and closure of the Suez Canal are speculative, the event serves as a warning that climate change can be expected to cause an increase in extreme events that will impact critical global trade chokepoints.” He cited a 2017 report from Chatham House which pointed to 14 global chokepoints vital to shipping food needed by 2.8 billion people. Between 2002-17, all but one experienced interruptions.

Our globally interconnected world leaves us increasingly vulnerable in so many ways. And it is becoming worse as disruptions intensify. The Suez blockage is only the latest instance. It is time to reconsider the economic logic of globalization, and move to a broader social and ecological framework that guides away from private interests towards the public common good. That will bring us back to places and communities.

In a book that was a bible of the 1990s anti-globalization movement, The Case Against the Global Economy, and For a Turn to the Local, co-editor Jerry Mander asked, “. . . does this system work? . . . Who benefits from this? Will it be working people who, in the United States at least, seem mainly to be losing jobs to machines and corporate flight? Will it be farmers who, thus far, whether in Asia, Africa, or North America, are being maneuvered off their lands to make way for huge corporate monocultural farming . . ? . . . And what of the ecological results? Can ever-increasing consumption be sustained forever? Are we, as individuals, as families, and as communities and nations, made more secure, less anxious, more in control of our destinies? . . . even at it optimum performance level, the long-term benefits go to a tiny minority of people who sit at the hub of the process and to a slightly larger minority that can retain an economic connection to it . . . “

Mander’s questions and conclusion are as cogent as when they were first published 25 years ago. As is the prescription of the book, economies more oriented to the local, to communities, and to ecosystems. People who have advocated such a return to the local have been dismissed as starry-eyed utopian dreamers going against inevitable trends. If the past week has demonstrated anything, it is that those who believe we can keep running the global machine as we have without breakdowns are the real fantasists. And that nothing could be more practical or realistic than looking for ways to bring economics closer to home.

This first appeared on Patrick Mazza’s Substack blog The Raven.