INTRODUCTION
Major crises such as the ongoing COVID-19 pandemic often trigger economic, political, and societal actors to rethink how economic activities should be organized. In Germany, too, the pandemic unveiled a serious shortage of personal protection equipment, medical devices, disinfectants, semiconductors, and pharmaceuticals, underlining the fundamental dependence of economic life in each nation on well-functioning transnational supply chains. While a shortage of certain drugs was already attributed to the global organization of production before the pandemic broke out, this experience became even more widespread. Of course, this triggered the usual debate about whether a shortage in the supply of particular goods and services is the result of market or policy failure. Also, questions regarding the need for de-globalization, re-location, and the back-shoring of production arose anew. Although some voices in the German discourse currently demand de-globalization, we deem a de-globalizing of production to be highly unlikely. Instead, we argue in favor of profoundly rethinking global production and supply networks towards increased reliability, resilience, and hence, sustainability. Respective re-organization requires a focus that goes beyond the interests of firms and includes the involvement of and collaboration with all relevant stakeholders along the supply chain: trade unions and workers, governmental and non-governmental organizations, and the broader public. Obviously, while transnational institutions could support this development, they have so far by and large failed to do. While some national or local institutional contexts may favor this, others will not.
THE DISCOURSE IN GERMANY: GREATER RELIABILITY RATHER THAN LESS GLOBALIZATION
Germany marshalled reasonably well through the first wave of the COVID-19 crisis in the spring of 2020 but continues to be heavily hit by the second wave, which hit the country in the autumn of 2020. The country has a high exposure to global markets with an institutional environment that is beneficial for improved cooperation, within and among organizations. Nevertheless, in the early days of the pandemic the extent and kind of outsourced production, the limits of globalization, the need for de-globalization as well as for the return to regional production, at least for critical goods and services, became a matter of heated discussion. In an export-oriented country such as Germany, the discussion was, however, never driven by the wish to ‘opt out of economic openness’ (Witt, Reference Witt2019) altogether and to recreate jobs via a wholesale back- or re-shoring of production. Rather, the important part of the critical debate about global production targeted the quality of working conditions in the developing world[Footnote 1] – a topic that was already being aired before the outbreak of the pandemic, epitomized by cases such as the Rana Plaza catastrophe. Closely related to this topic is the proliferation of global production, culminating in too complex and fine-sliced, extra-long, fragile, and hard-to-manage supply networks. Like a magnifying glass, the pandemic only made these topics more visible and in urgent need of being attended to.
Depending on where one looks, during the first wave in the spring of 2020, German firms fared better than expected and probably better than lead firms operating from other European countries that were more heavily affected by the outbreak. One reason was the fortunate political management of the crisis at the time, strictly informed by the development of scientific knowledge that increased on an almost daily basis about the spread of the virus and its consequences for people's health. Other helpful conditions included: (1) a still quite well-equipped and decentralized public health system (which, before the crisis, was even criticized for having overcapacities) with comparatively good – though not ‘world-beating’ – testing and tracing abilities; (2) an exceptionally well-positioned state budget (‘schwarze Null’) throughout the last decade, allowing for financially powerful stimulus packages; as well as (3) the existence of crisis-proven mechanisms, in particular ‘Kurzarbeit’ (working short hours, up to 67%, whereby temporarily as much as 87% of the income is paid for by the federal government), which was later adopted in some form or other by many European countries.
Nevertheless, across some supply chains the repercussions of the crisis were quite strong, especially for more peripheral single part suppliers and small and medium-sized firms, with some globally active system suppliers suffering, too. While some firms announced their plans in light of this experience to backshore manufacturing critical parts in the future, particularly substitute their Chinese and Indian suppliers with European ones, it remains to be seen whether such announcements will actually be put into force.
Another important aspect is that globalization is often misunderstood as being something that simply happens abroad. However, for a country like Germany, which combines exposure to world markets with comparatively high wages and public benefits, the response to the pandemic also reveals the importance of local institutions for globally outreaching production. The connection between global production and well-functioning local infrastructure has become clearer, with reference to health care, pharmacies, kindergarten, schools and colleges, critical retail stores, transportation, and highspeed internet. During the pandemic, even an importance-marginalization tension characterizing this infrastructure has come to the fore, quite unexpectedly in a country such as Germany with a coordinated market economy marked by relatively high working standards, industry-wide collective bargaining, and codetermination rights (‘Mitbestimmung’). The source of this tension is the fact that the more jobs are classified as being essential for managing the pandemic (as, e.g., in health care, nursing homes, logistics, retailing, and transportation), the less workers are paid and the poorer are their working conditions, including fewer options for participation which, considering their added exposure to COVID-19, has become a bone of contention. Besides causing problems for global production and supply networks, this also reiterates an old observation: It is not globalization per se, but the interplay of national and transnational institutions and policies, societal forces, and the economic organization of production that decide on the balance between winning and losing.
During the second wave, which began in the autumn of 2020 and hit Germany as hard as most other European countries (though not quite as hard as the UK and the US) and is still prevalent here at the time of writing, testing and tracing as well as hospitalization capacities (particularly in terms of staffed intensive care units) were stretched to the limit. The working conditions of health workers became even more precarious. The reasons for these significantly worse developments in the second wave are still being discussed, but one important cause could be the decentralized political system which pursued a collaboratively coordinated (rather than hierarchical) approach. This approach leaves most decisions on public health measures concerning how to tackle the pandemic to the states (‘Länder’) and communities (‘Gemeinden’), while the federal government is confined to moderating and financing the process and its outcomes. While such a decentralized system may be advantageous in times of extreme uncertainty (as was the case during the first wave of the pandemic), more centralized, straight-forward decisions and clear strategic leadership may have been more effective once the remedies were better known (see, e.g., Moynihan, Reference Moynihan2009).
It was not until the end of 2020 that the federal government was able to convince state governors to adopt its more robust stance and once again, after a soft but ineffective shutdown in the autumn, to go for an almost complete shutdown, initially until January 10, then until January 31, and recently prolonged and tightened until March 7, 2021. On a more positive note, the federal government was able to offer another huge economic stimulus package, building on already made decisions regarding temporarily subsidizing investments, and guaranteeing purchases in order to stimulate conversion processes and increase the local production of personal protection equipment, disinfectants, vaccines, and medical devices. Moreover, these stimuli allowed firms to retain their employees during the pandemic, and enabled workers to combine childcare and work – although often for lower wages.
COLLECTIVE ORGANIZING TO MAKE GLOBAL PRODUCTION MORE RELIABLE – ALSO LOCALLY
Empirically, global production networks have shown, at least from a German perspective, a surprising level of reliability, particularly in some critical areas such as food and drinks, oil and gas, transport, logistics, and even drugs. However, those at the periphery of global production networks, mostly located in the global south, suffered significantly from the reduced demand, cancelled orders, and delayed or even suspended payments. The long-term consequences of this organizational failure, due to the inadequate preparation and management of global production networks for and in crises, are still unclear. In principle they could lead to a return to a less relational approach to governance, that is, either a more market-driven externalization or a more hierarchical internalization. In our view, however, it seems more plausible for lead firms and governments to put more effort into making global production networks more reliable, resilient, and sustainable. Facets of such sustainability include not only economic reliability in terms, for instance, of the continuity of production and supply. A further important facet is social sustainability, particularly with respect to the working conditions of employees both in the global south and in the home countries of the lead firms. And this facet immediately leads to the local infrastructure, which enables global production.
This, however, requires concerted input from all the involved parties, and will almost certainly increase the costs of global production. Above all, more interorganizational collaboration will be needed in such networks when more emphasis is put on reliability and resilience (Sydow, Schüßler, & Helfen, Reference Sydow, Schüßler, Helfen, Biggiero, de Jongh, Fischer, Priddat, Wieland and Zicari2021). Germany, where legal institutions and societal norms by and large support collaboration (Lane & Bachmann, Reference Lane and Bachmann1997), may be better prepared than others for such a rethinking and restructuring of global production networks, i.e., towards more intelligent coupling rather than decoupling. But the difference is not likely to be significant enough to speak of a German ‘Sonderweg’.
In practice, the reliability and resilience of a global production network both across the supply chain and regarding the tight coupling with local infrastructure can be increased by allowing for more slack resources and building in more redundancies. Apart from bringing more production ‘back home’, lead firms can, for instance, change inventory strategies, switch from single to dual sourcing strategies, and avoid ‘overconcentration of global supply in one or very few locations, which exacerbates the negative effect of tightly coupled interdependence in the global network’ (Li, Reference Li2020: 504). This move is typically accompanied by the challenge to domesticate emerging competition that may be easier to handle when the second (or third) supplier is – as in the case of concurrent sourcing – an internal one that can be disciplined by hierarchical fiat. A further opportunity to increase the resilience of production and supply networks lies in technologies that map vertical relationships using data analytics that help to detect bottlenecks early. Overall, slack, redundancy, and looser coupling despite intensified collaboration (also with trade unions, governmental and non-governmental organizations) may not only lead to a quicker response and deeper learning but – due to increased ‘adaptive capacity’ (Staber & Sydow, Reference Staber and Sydow2002) – also to a better preparedness for handling crises in general and pandemics in particular. Building more reliability and redundancies in local infrastructure, at the same time, requires mitigating the importance-marginalization tension mentioned above. This includes negotiating higher wages for workers that are part of the critical infrastructure as well improving working conditions in hospitals, nursing homes, and kindergartens, for instance.
Theoretically, the growing tension between organizing for such a capacity on the one hand and minimizing production and transaction costs on the other is less interesting than the fact that the present pandemic challenges the current form of global production networks even in those parts of the world that provide institutionally favorable conditions. Here, the current pandemic underlines the value of rethinking global production networks as being more societally embedded and it has shown the immense role of governments, labor-market intermediaries, and professional associations in governing such networks. This can also urge researchers to re-conceptualize the governance of global production networks with a more inclusive and collaborative idea in mind (Coe & Young, Reference Coe and Yeung2019). In addition, the present crisis demonstrates that a globally networked economy, traditionally organized around manufacturing goods, depends on the proper functioning of intelligently coupled local infrastructure as well as of other, less prominent value-creating networks such as those in industrial services and logistics. This lends further credibility to the idea of considering inter-network connections, inter-field relations and societal embeddedness when organizing for more reliable, resilient, and sustainable societies.
