I have no academic background in economics and whenever I delve into the subject I’m soon confronted by maths that is so many pay grades above me I can’t even see the top. Thus, I keep my observations at ground level.
So, when I witness reshoring trends, it triggers memories of the ‘80s when offshoring was the management guru’s go to move. At the time, I recall researching offshoring and stumbling across the theory of comparative advantage. I ignored the maths and went for the simplest explanation I could find.
Here goes: Imagine two countries would like access to commercial airliners and cruise ships. One has an abundance of aerospace engineers and the other has a long open coastline. The obvious solution is one country specialises in manufacturing commercial airliners, the other country specialises in manufacturing cruise ships and they exploit excess production capacity by trading products. Hopefully that description is right.
The fact the supply chain supporting such activity snapped a couple of years ago doesn’t dissolve the logic of comparative advantage. Offshoring and reshoring will continue. However, the rate and direction depend on what different countries decide to specialise in.
That decision is split between political desire, culture, society and resources. In the world of manufacturing, resources surely must take the lead role: labour, IP, skills, raw materials, energy, space and more. Logically, if a country wants more manufacturing, a different sector will have to lose their share of such resources, voluntarily or by force.
I watch with interest as the battle lines are drawn, with labour and skills currently leading the charge.