Dayen on TAP: The Ever-Present Threat of Supply Shocks

Last night, a Singapore-flagged 948-foot container ship called the Dali lost power twice in Baltimore Harbor. When the crew regained control, they could not avoid slamming into a support column of the Francis Scott Key Bridge, almost immediately sending the entire span tumbling into the water. The video is terrifying. Several people remain missing, including members of a crew that was doing pothole maintenance on the bridge. Fortunately, the ship was able to make a distress call that prevented more cars from entering the bridge span at the time of the collapse.

This is a huge blow to the city of Baltimore. Its harbor sits on the other side of the former bridge, and it’s impossible to determine how long it will take for debris to be removed to make it safe for ships to reach the port. The Port of Baltimore happens to be the country’s leading import/export point for automobiles and light trucks. The Baltimore Banner estimates 15,300 direct and 140,000 indirect jobs from port activity. All of that will be on hold at the moment, as cargo must shift to other ports. There are also six large cargo vessels essentially stuck in the harbor without a way out.

It takes time for companies that previously relied on the Port of Baltimore to shift their logistics. It’s not the largest port in the U.S. (that would be the Ports of Los Angeles and Long Beach), but for a nontrivial amount of goods, it’s a vital artery and now it’s shut down. Decisions have to be made to compensate for the loss.

The larger point here is that supply resiliency is an enduring need. One of the arguments against rethinking supply chains amid the pandemic crunch was that COVID was a world-historical event whose equal we will never see again, and we shouldn’t overreact by reconfiguring a system that otherwise works well. This wasn’t even true at the time of the supply chain problems, which had as much to do with extreme weather as manpower shortages due to sickness. In a globalized world, any incident at any time can have ripple effects, from a fire in a factory to storm surges to, yes, a power outage on a cargo ship leading to a bridge collapse.

We know that climate change is intensifying some of these incidents that aren’t attributable to mechanical failure or human error. And geopolitical concerns, whether in Ukraine or Taiwan or places we don’t yet know about, can snarl supplies.

That’s why the Biden administration’s effort to increase manufacturing capacity in critical sectors was such an imperative, along with the job gains and revitalization of industrial communities. Redundancy and diversification make problems like the Key Bridge tragedy less impactful to global commerce. Yesterday’s announced $6 billion investment aimed at reducing emissions at industrial facilities is an important contribution to cleaning up global manufacturing, potentially mitigating some of the variances in extreme weather that is driving supply shocks, and setting up the U.S. as a clean-manufacturing leader, which could spur more investment and supply chain diversification.

As I wrote two years ago, “The overall goal is to re-create a coherent national logistics system, in which government regains the power to regulate and coordinate what has been privatized … The growing threats to long, concentrated supply chains make re-engineering away from a tightly interconnected system essential rather than optional.”

In other words, the pandemic wasn’t an anomaly, but a warning.