On 13 July 2022, the FT published this opinion article: No, the global economy is not breaking into geopolitical blocs. Since 2015, I have been arguing that the world is heading for global city-states and a new Hanseatic League. Terms like ‘Friend-Shoring’ and ‘geopolitical blocs’ are – essentially – similar.
“US Treasury Secretary Janet Yellen has proposed friend-shoring as a means to insulate global supply chains from external disruption or economic coercion. The idea is for a group of countries with shared values to deploy policies encouraging companies to spread manufacturing within that group.”Washington Post, 23 June 2002
These ideas are floating as a result of:
(i) the disruptive impact on global supply chains due to continued Covid-19 restrictions in China;
(ii) the Western sanctions on Russia due to the 2022 Russian invasion of Ukraine;
(iii) the increasing threat of a Chinese invasion of Taiwan.
Doing business with friends makes more sense than with potential enemies; especially during geopolitical tensions. The term ‘economic hostage‘ has been around for several decades but its impact has never been clearer than now (eg, leased aircraft, forced nationalization of foreign companies).
The Chinese Silk Road Economic Belt strategy (2013-today) was an early attempt to ‘friend-shoring’. Its turnkey projects took place with Chinese resources (eg, capital, management, workers); without any local resources. Subsequently, these projects were accused of debt-trap diplomacy.
The paramilitary Wagner Group might be viewed as the Russian equivalent of ‘friend-shoring’.
For decades, globalism thrived on pragmatism but failed when ideology became a priority. Initially, it appeared that nationalism was the answer. Nationalism is, however, about cultural ideology (eg, language, religion). From an economic perspective, nationalism has (many) disadvantages (eg, Brexit).
Friends have common pragmatic interests while respecting each other’s ideological differences.
Note: all markings (bold, italic, underlining) by LO unless in quotes or stated otherwise.