The neoliberal era likely began with the first oil shock in 1973. Eventually, the slowdown in economic growth and the rise of inflation in the developed world required a solution – export employment and import deflation in the form of cheap goods (and services like holidays) obtained from developing countries.

To quote The Matrix, “Fate, it seems, is not without a sense of of irony.” How funny to see the chickens coming home to roost (that’s not a reshoring joke) now that the developed world is importing inflation via supply chains from far flung corners of the globe. While the reflexive impulse is to further expand trade relationships (hello Vietnam, India, Africa!) it seems like the game is over. Unless the Earth starts importing goods and services from the Moon or Mars (assuming their wages are as low as their gravitational pulls), the world economy cannot import its way out of an inflation mess caused by, dare I say, imports themselves.

While much of the rhetoric, even in the Biden Administration, has characterized reshoring as a national security response to a more confident China, this deserves half marks. Mainstream economists cannot bring themselves to realize that the Reagan/Thatcher bargain (“we’ll give away your jobs but you’ll be able to buy the same stuff from other countries”) has shown itself to have faulty long-term logic. Beyond the rising price of goods and services for consumers, globalization has now wrecked the housing market in many countries, as unfettered capital markets deploy cash to historically local assets like housing that have become increasingly tradable.

So what’s the solution to all this? Reshoring without admitting the truth could lead to mistakes, such as an overemphasis on military good or “emergency” goods alone (like vaccines). No, the solution lies in seeing the problem for what it is, and encouraging a sufficient domestic industrial base that can meet the demands of the national economy just in case of supply chain headaches and other black swan events (like wars and pandemics, which I guess are not black swans).

Intentions matter.