This essay was submitted to Open Philanthropy's Cause Exploration Prizes contest.
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I am convinced that one of the most unseen, urgent needs facing the world today is the diversification and regionalization of logistics and supply chains, especially for manufacturing. I became convinced of this issue’s importance after covid and China’s zero covid policy. My convictions were strengthened when Russia invaded Ukraine. Now, with the crisis going on in the Taiwan Strait and the predictable but disappointing analysis being focused solely on international relations, I am convinced that it is a totally unseen, neglected problem. Or, perhaps it is not fair to say it is an unseen problem. It is entirely acknowledged that much of the international economy could be screwed if the Taiwan Strait is blockaded, but it is treated as an act of God that can only be avoided through international relations.
But the problem can be entirely pre-empted by opening up manufacturing in other places! China’s human resources are unparalleled, high in quantity and organization. But they are not irreplaceable. The U.S. can invest in more manufacturing in Latin America, maybe even the Caribbean. Western Europe can invest in more manufacturing in Eastern Europe, the Near East, and Northern Africa. I don’t say this to downplay complicating factors or even to say that China can be entirely replaced. I say this because we can bring (comparative) prosperity to small nations and communities in the short-term and at least prevent international manufacturing from grinding to a halt if things do truly come to a head with Taiwan.
What can be done to diversify manufacturing?
Hopefully I’ve convinced you of the value of this line of inquiry. The next question is how feasible it is. All the good ideas in the world are worthless if the timing isn’t right, so can we get this done on a reasonable timeline? I believe so, although we don’t have a ton of time to spare. Analysts think that China will be prepared to attack Taiwan in five years. Estimates for building manufacturing facilities are much more certain, but frustratingly variable. Facilities can take less than a year or several years, depending on the complexity of the facility and the location it is being built in. For our timeline, I think we can say that building cutting edge semiconductor manufactories is not realistic. But there are plenty of low-to-moderate complexity facilities that we can build in coastal areas on that timeline.
The next barrier is where to put these facilities. There is no point in putting them in places that are too corrupt or unstable. I will use the Ease of Doing Business Index to decide which countries are most eligible for our purposes. The most obvious choice is Georgia. As an ex-soviet satellite, it is only a developing nation. But its low corruption and economic reforms has it ranked 7th on the Easy of Doing Business Index, below the U.S. and above the U.K. However, there are some real risks to opening facilities in Georgia. It is, obviously, right next to Russia. It has already been invaded by them in 2008 and is currently under partial occupation. This makes it unfit for our purposes, as it is in a very similar position to Taiwan and the Ukraine. The possibility of it being annexed is very real. Sadly, this will rule it out along with a number of similar countries like Armenia.
Scratching a number of promising Eastern European nations off of our list because of Russia, the next most promising place is Morocco. At 53rd place, it is the last country with the ‘very easy [to do business]’ classification. Its location at the head of the Mediterranean is excellent. Its GDP per capita of $3,629 makes it very appealing from a wage standpoint. Its population of 37 million will not be taking over the entirety of China’s manufacturing any time soon, but it is undoubtedly capable of a significant amount of labor.
Why aren't others working on this?
Your next question might be why no one is doing this. There are two groups that we might expect to act on this. The first one is, obviously, private business interests. But the truth is that most private businesses outsource manufacturing. They do not have the expertise or the interest to build their own facilities, so they simply use what is available. There are those who do build their own facilities, but, of course, these are built for private use at whatever scale they need. They don’t build a bunch of excess facilities ready and waiting to be used. China is fairly unique in building out a bunch of factories for general purpose industry.
The next group that could theoretically help with this are NGOs. The first reason they don’t provide much help in this area is practical. A factory by itself is largely useless. Setting up supply chains requires a lot of work and domain knowledge. Most NGOs don’t know suppliers for resources or outlets for the goods. The second reason they don’t provide help is aesthetic. As most people involved in effective altruism know, people often prefer emotional resonance and good appearances over practical assistance. Industrialization and building factories sound/feel bad, not good, especially to the left-sympathetic types that tend to work in NGOs. There is something romantic about helping a people maintain their traditional way of life. There is nothing romantic about plugging more people into capitalism.
What can we do about it?
This leads to the last question: What can we do about it? I only have preliminary suggestions for you at the moment. If there is interest, I or someone who reads this, can look into it more. I think the best option is to partner with other interested parties that can provide domain expertise. For example, we might go to the Moroccan government and convince them to partner with us in creating a financial and legal package to lure in potential manufacturers, then go and network with businesses to try and draw their interest.
Alternatively, if Morocco isn’t interested but a business or NGO is, we could do it in reverse. Taking the pitch to different nations to see if any of them are interested. I do think getting a government’s blessing and involvement is necessary if we want to create anything that scales.
I know that I am well below the expected word count for these papers, which makes me question whether I need to do a much more in-depth analysis or there are some factors that I’m missing. But I feel like I have done well introducing the topic and hopefully piquing the reader’s interest. I don’t want to weaken the essay to increase the word count. If my entry does not qualify for any of the prizes, I understand, but I hope you will at least post it in places that people can see it for the sake of discussion. I think this is an important issue.
Thank you for your attention,
Matthew Burnett