Siren Songs

by | March 29, 2021

The beaching of the Ever Green in the Suez Canal is more than a mere shipping headache. It is a metaphor for our times, a dramatic symbol of what has gone wrong and could still go wrong.

In open water, the Ever Green must be a sight to behold. Stacked high with colorful containers destined to harbors rimming the world’s oceans, it is a literal symbol of a globalized economy. It is often said, without a hint of exaggeration, that every item that touches our fingertips, whether a cell phone, a computer keyboard, an article of clothing, a piece of furniture, an automobile steering wheel, or a pair of running shoes spent part of its ‘life’ inside a container, making the trip from factory to doorstep. 

Now bow to stern blocking one of mankind’s greatest engineering feats and most important transportation waterways, the Ever Green has become a tangible manifestation of globalization run aground. 

It all drips with irony. What Nasser could not, a wayward vessel has: Closed the Suez Canal. What nativists, nationalists, populists and other anti-globalization types could not, an engineering marvel of the globalized economy has: Put sand in the wheelhouse of borderless commerce.

There may be some who are quietly rejoicing the grounding of the Ever Green. If so, they miss the point. There are important lessons to be drawn from this fiasco, but few are cause for glee.

To begin, Schadenfreude about globalization’s grounding reflects ignorance about economics and human welfare for at least four reasons.

First, containers, and the ships, trucks and trains that move them about, are visual representations of our material needs and wants. If for moral, ethical or environmental reasons we prefer a world with less, then we must change our preferences, not the delivery mechanisms of our desires.

Second, globalization and its close cousin, capitalism, are wrongly maligned. Together, they are the biggest poverty and deprivation eliminators known in human existence. Globalization, like capitalism, is incapable of serving all equally, nor even benefitting all. Yet no other economic system serves so many so well, nor allocates resources with near the efficiency of free markets.

Third, global capitalism exists because of choice and mutual benefit. It is not compulsory nor is it zero sum. Free trade, whether between close individuals, within a community, inside the borders of the nation-state, or with individuals abroad is positive sum.

Fourth, globalization brings mankind together. While that may not assure the survival of our species, history strongly suggests engagement offers a better path to peace and survival than the track records of autarky, nationalism and nativism.

At the same time, the grounding of the Ever Green is a reminder of the fragilities of modern capitalism and globalization.

The blockage of the Suez Canal and images of idle shipping in the Ever Green’s (non-) wake are reminders of our reliance on long supply chains and just-in-time inventory. When they work, they deliver goods exactly when we want them and at the lowest possible prices. But when they don’t, we become vulnerable to critical shortages and higher prices. This time captain error may be to blame, but next time it could be a well-planned terrorist or military attack. Unfettered markets are masters at delivering efficiency, not redundancy.

That is why, if we are to rely on markets, we must also have mechanisms, called governments, to ensure that safeguards are in place to allow commerce to flow even in times of duress. History suggests globalization requires a hegemon to ensure that the seas and canals remain open. When, as has recently been the case, the hegemon loses appetite for that role, a valuable public good is diminished. A reluctant US may not be responsible for the Ever Green’s grounding, but the ship’s fate and the disruptions it has caused should serve as a reminder that more than just fancy technology and impressive logistics are required if goods are to safely transit from production to market. 

The blockage of the Suez is also a metaphor for the disruption to global commerce that trade wars and pandemics could still unleash. In a plausible scenario, such outcomes could rival the supply shocks of the 1970s. Such an outcome would confront central bankers with unpalatable choices between restoring maximum employment and combatting soaring inflation—only this time against a backdrop of the greatest political threats to democracy and civil society since the 1930s.

Before long, technology and brute strength will refloat the Ever Green and send her on her way. We wish her smooth seas and a stable rudder. 

But for the world economy, dislodging phantasies of anti-globalization, self-reliance and autarky will prove the more difficult and enduring task. The Ever Green may have been beached by a simple captain’s error, but globalization and capitalism risk being drawn to dangerous shoals by sirens of false promises that, if heeded, will cause much greater human misery than the grounding of a single ship.

About the Authors

Larry Hatheway

Larry Hatheway has over 25 years experience as an economist and multi-asset investment professional. He is co-founder, with Alexander Friedman, of Jackson Hole Economics, LLC, which offers commentary and analysis on the global economy, policy & politics, and their broad implications for capital markets. Prior to co-founding Jackson Hole Economics, LLC Larry worked at GAM Investments from 2015-2019 as Group Chief Economist and Global Head of Investment Solutions, where he was responsible for a team of 50 investment professionals managing over $10bn in assets. While at GAM, Larry authored numerous articles on the world economy, policy-making and multi-asset investment strategy. Larry was also the lead investment manager for various mandates, funds and an actively managed multi-asset index. Larry also served on the GAM Group Management Board, was Chairman of the GAM London Limited Board and served as member of the GAM Investment Management Limited Board. Larry was also Chairman of the GAM Diversity & Inclusion Committee. During his tenure at GAM, Larry was based in London, UK and Zurich, Switzerland. From 1992 until 2015 Larry worked at UBS Investment Bank as UBS Chief Economist (2005-2015), Head of Global Asset Allocation (2001-2012), Global Head of Fixed Income and Currency Strategy (1998-2001), Chief Economist, Asia (1995-1998) and Senior International Economist (1992-1995). During his tenure at UBS, Larry was also a standing member of the UBS Wealth Management Investment Committee. While at UBS, Larry worked in Zurich, Switzerland, London, UK (various occasions), Singapore and Stamford, CT. At both GAM Investments and UBS Investment Bank Larry was widely recognized for his appearances on Bloomberg TV, CNBC, the BBC, CNN and other media outlets. He frequently published articles and opinion pieces for Bloomberg, CNBC, Project Syndicate, and The Financial Times, among others. Before joining UBS in 1992, Larry held roles at the Federal Reserve (Board of Governors), Citibank and Manufacturers Hanover Trust. Larry Hatheway holds a PhD in Economics from the University of Texas, an MA in International Studies from the Johns Hopkins University, and a BA in History and German from Whitman College. Larry is married with four grown children and a loving Cairn Terrier, and resides in Wilson, WY.

Alex Friedman

Alex Friedman is the co-founder of Jackson Hole Economics, LLC, a private research organization which provides analysis on economics, politics, the environment and finance, and develops actionable ideas for how sustainable growth can be achieved. Friedman is a senior leader with two decades of experience growing and transforming organizations in the financial and non-profit industry. He was the CEO of GAM Investments in London and chairman of the firm’s executive board. Previously, he was the Global Chief Investment Officer of UBS Wealth Management in Zurich, chairman of the UBS global investment committee, and a member of the executive board of the private bank. Before moving to UBS, Alex Friedman served as the Chief Financial Officer of the Bill & Melinda Gates Foundation. He was a member of the foundation’s management committee, oversaw strategic planning, and managed a range of the day-to-day operating functions of the world’s largest philanthropic organization. Friedman also created the foundation’s program-related investments group, the largest impact investing philanthropic fund in the world. He started his career in corporate finance at Lazard. Friedman served as a White House Fellow in the Clinton administration and as an assistant to the U.S. Secretary of Defense. He is a member of the board of directors of Franklin Resources, Inc. (Franklin Templeton), a member of the Council on Foreign Relations, Chairman of the Advisory Board of Project Syndicate and a board member of the American Alpine Club. Friedman is a regular contributor to a range of newspapers and thought leadership groups and is also the author of Babu’s Bindi, and The Big Thing, both children’s books. He is an avid mountaineer and rock climber and led the first major climb to raise money for charity through an ascent of Mt. McKinley. Friedman holds a JD from Columbia Law School, where he was a Harlan Fiske Stone Scholar, an MBA from Columbia Business School, and a BA from Princeton University.

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