The Shanghai Lockdown and the “Supply Chain” Fallacy

[Matt Beasley]

The Shanghai Lockdown and the “Supply Chain” Fallacy
by Dan Sanchez, April 8, 2022, fee dot org

The virus that locked down the world has returned to China
in full force. And I don’t mean the Wuhan coronavirus.
Nearly every world government emulated China’s authoritarian
response to Covid-19. That is what sent civilization spiraling
into crisis, not the coronavirus itself. The mind virus of
central planning, as applied to epidemic diseases, spread from
the Chinese Communist Party to the halls of power throughout
the “free world.” That ideological pandemic is a far more dire
threat to humanity than any superbug.

Now China’s fever for authoritarian “public health” policy has
spiked again. As The Wall Street Journal reported yesterday,
“Stringent government measures to contain the country’s Covid-19
outbreak, the worst in more than two years, are locking down tens
of millions of people, mostly in and around the industrial
heartland of Shanghai.”

This has been a nightmare for those tens of millions directly
impacted. And the economic havoc will not be quarantined in China.
It will reach us all. “Manufacturers are struggling to keep some
of their China operations going,” according to the Journal, as
the expanded lockdowns “choke off supplies and clog up truck routes
and ports, heaping more pressure on the stretched global supply chain.”

Tim Huxley, chairman of a Hong Kong container ship company, warned
Journal readers that the supply bottleneck will have major consequences
for western consumers. “It’s anything from electronic goods, domestic
goods, furniture—you name a household brand or chain store in the U.S.
or Europe and you can bet they will have something stuck in a factory
on a truck coming out of Shanghai.” This means even higher prices,
lower availability, and less selection—in other words, a reduced
quality of life—for us all.

Again, it won't be the coronavirus making us poorer, but the fallacy,
embraced by officials from Beijing to DC, that central planners
can manage society-wide problems, like “healing” a global pandemic
or “fixing” a global supply chain.

As the great economists Ludwig von Mises and F.A. Hayek explained,
societies and economies are inconceivably complex, and it is literally
impossible for anyone to centrally plan something so far beyond their
comprehension. To think otherwise is, as Hayek called it,
a “fatal conceit.” The fatal conceit of central planners is manifest
in the very term “global supply chain.” The metaphor of a “chain”
portrays the economy as something static and linear: something simple
enough for a single mind to “fix.”

But, as Leonard Read vividly showed in his classic essay “I, Pencil,”
even a seemingly simple good like a pencil is not the product of a
single supply chain. Every good in the economy is descended from a
vast “family tree” of innumerable factors of production. And all the
family trees of all goods are intricately interconnected, making the
economy, not a “chain,” but as economist Murray Rothbard depicted it,
“a highly complex, interacting latticework of exchanges.”

This vast, dynamic latticework is self-healing and self-fixing:
through the actions and interactions of its constituent individuals.
Blundering, arrogant central planners only get in the way and make
things worse. That has been the lesson of free-market economists
and social theorists going back to Adam Smith. The western world
partly embraced that lesson, and it flourished as a result, becoming
a beacon to the world. Starting in the 1970s, even Communist China
emulated its example, opening up its markets. This was a humanitarian
miracle for the Chinese people and a boon for us all. If not for
Chinese manufacturing being integrated into the global division of
labor, it is hard to imagine the west having the modern high-tech
living standards and super-comfortable working conditions we enjoy
(however precariously) today.

Whereas once China liberalized in emulation of the west, now the
leaders of the “free world” are emulating (and, in the case of
Canada’s prime minister, openly admiring) the authoritarianism of
the CCP. As crises continue to mount, it is clear that this turn
toward tyranny is putting our future at risk.

If we don’t want the prosperity and material security we have built
up over generations to vanish, we must rediscover the ideas and
principles that created it in the first place.

https://fee.org/articles/the-shanghai-lockdown-and-the-supply-chain-fallacy/