The new core paradigm is a massive mindset shift in awareness from profit maximisation using cheap labour and single sourcing worldwide towards the ability to survive through intense competition (such as the threat posed by Chinese involution), sudden rule changes from national security and geopolitical measures, and greater regionalisation and diversification due to reshoring, nearshoring and friendshoring of both production and distribution networks. You deal only with suppliers and customers you can trust, so you are willing to tolerate higher costs for dependability in times of volatility.
The geoeconomic world, where geopolitics trumps business, is divided into clusters of manufacturing, services/software and tech resource blocs that are connected via global value or supply chains (GVCs). The Strait of Hormuz illustrates vividly how chokepoints can disrupt not only energy supply but also cause damaging economic effects that hurt economies through higher inflation and force them to reconfigure alternative supply chains to ensure continuity. Economic warfare is simultaneous offence and defence, maximising loss on enemies and minimising shocks on self. The trouble is that such warfare is never clean — everyone is hurt, only some more than others.
GVCs are not just unravelling globalisation: they are being rewired from the old hyper-efficient, just-in-time model towards a more resilient, agile and adaptable system defined by the ability to absorb shocks and unforeseen changes. Such changes arise from national security/geopolitics which will not go away, perennial climate and natural disasters, local conflicts, tech disruption, demographics and changing and conflicting value systems.
