Bringing the catastrophic consequences of moving our industry overseas into the light
I read a very detailed and eye-opening article recently with profound cause and effect analysis resulting in a strong possibility for an inevitable financial system collapse.
The original article is long and detailed (with lots of charts) but I will do my best to summarize the key information below.
The unique blogsite “Our Finite World“, contends that the offshoring of industrial production, initially seen as a cost-saving and pollution-reducing strategy, has introduced significant global financial risks.
As fossil fuel supplies deplete and prices spike, the economic foundation of offshored industrialization becomes unstable. This instability is exacerbated by geopolitical tensions, supply chain vulnerabilities, and growing economic disparities.
The reliance on international trade for essential resources creates a precarious situation where spiking energy costs lead to inflation and reduced production.
High levels of debt and the volatility of global energy markets further increase the likelihood of a financial collapse, revealing the hidden dangers of moving major industries overseas.
In This Article
- The Beginnings of Offshoring and Its Driving Forces
- Energy’s Crucial Role in Industrialization
- The Unintended Consequences of Moving Industry Overseas
- Potential Financial Collapse Due to Industrial Offshoring
Offshoring industrialization once seemed like a promising strategy for economic growth. However, this practice is now creating significant financial risks globally. As fossil fuel supplies dwindle and geopolitical tensions rise, the world faces the potential for a severe financial collapse.
The Beginnings of Offshoring and Its Driving Forces
Industrial offshoring began in the United States in 1974, triggered by the oil price spikes of 1973-1974. Moving industries overseas helped reduce costs and pollution domestically while providing cheaper goods for American consumers. However, this strategy relied heavily on stable, affordable fossil fuel supplies and cooperative international trade relationships.
Energy’s Crucial Role in Industrialization
Industrial production is deeply rooted in the use of fossil fuels. While electricity plays a role, fossil fuels are essential for generating the high heat required in manufacturing processes. As fossil fuel prices fluctuate and supplies become less certain, the economic foundation of offshored industrialization weakens.
The Unintended Consequences of Moving Industry Overseas
- Supply Chain Vulnerabilities: The COVID-19 pandemic exposed the fragility of global supply chains, leading to shortages and empty shelves.
- Geopolitical Tensions: Countries that control essential resources are less inclined to trade, increasing geopolitical conflicts.
- Economic Disparities: Offshoring has contributed to wage and wealth disparities, as high-paying industrial jobs disappeared in advanced economies.
Potential Financial Collapse Due to Industrial Offshoring
The reliance on international trade and fossil fuels has made the global economy vulnerable. Spiking fossil fuel prices, geopolitical conflicts, and the inherent instability of supply chains create a precarious situation. As a result, there is a significant risk of financial collapse. Here’s why:
- Price Instability: Fossil fuel prices spike when supplies are constrained, leading to economic volatility.
- Reduced Production: Without sufficient fossil fuels, industrial output declines, resulting in fewer goods and services.
- Inflation: Rising energy costs contribute to inflation, reducing consumers’ purchasing power and economic stability.
- Debt Levels: High levels of debt combined with economic instability increase the likelihood of a financial crash.
The Bottom Line
Offshoring industrial production was initially seen as a solution to rising costs and pollution. However, as fossil fuel supplies dwindle and geopolitical tensions rise, this strategy poses significant financial risks.
Understanding the connection between energy, industrialization, and economic stability is crucial as a primary argument for learning from our current situation and avoiding future global financial vulnerability as a result of industrial offshoring.
Not even a gold-backed currency can save an economy if it is not industrially self reliant.
Read the full, detailed article from Our Finite World here: https://ourfiniteworld.com/2024/05/21/reaching-the-end-of-offshored-industrialization/
