Critical supply chains and the lesson of I Pencil

Given the interruptions to international trade as a result of the coronavirus there’s a series of calls that we must bring closer to home, somehow control, supply chains of what might be called “critical” items.

As Don Boudreaux points out there’s a certain difficulty with that:

Instead of a collection of distinct supply chains, our modern economy is a single globe-spanning web of interconnectedness. Within this web every output is the product of countless inputs and each kind of input typically is used to produce countless different kinds of outputs. This web of interconnectedness – the complexity of which is beyond human comprehension – is indispensable for our modern mass prosperity. Yet its existence – its ‘everything-is-connected-in-some-way-to-everything-else’ reality – means that there are no objective and clear lines separating “critical supplies” from “uncritical” ones.

We can reach the same conclusion by re-reading I Pencil. No one does actually know how to make a pencil because the supply chain to do so is that entire global economy. Therefore we can’t in fact build supply chains that are transparent to our concerns about a pandemic.

But the lesson goes further than that. We also can’t build supply chains that are transparent to any other concern that we might have. Those insistences on fair wages say, or certain environmental practices, or blood minerals, whatever will be next in the list of fashionable concerns. The full supply chain for anything at all is the entire global economy. As it’s not possible to track all of that then it’s not possible to track the absence of those agreed and admitted evils from a specific supply chain. The adventure is simply impossible from the start.

It’s not even possible for us to know the supply chain let alone manage it.