The globalized, laissez-faire economy that defined business for years is giving way to a whole new set of considerations, according to Michael Chertoff, the former secretary of the Department of Homeland Security.
While companies have focused for years on the fastest, cheapest and easiest way to produce products and do business, Russia’s invasion of Ukraine and the rise of China have increased attention to national security as a business consideration, Chertoff said.
Since the start of the war in Ukraine, Russia has been weaponizing the global supply chain to serve its interests, the former Homeland Security secretary told attendees of the Fortune CEO Initiative Summit in Palm Beach, Florida on Thursday.
Russia has already halted natural gas exports to Europe and heightened fears of a deepening global food crisis after backing out of a UN-brokered deal to export grain via the Black Sea before joining the deal this week.
“This is a deliberate effort by the Russians to use the possibility of energy shortages and food shortages as a way to leverage so that support for Ukraine starts to dwindle,” Chertoff said.
But Russia’s actions are not an isolated phenomenon, Chertoff said. For 10 or 15 years, the field of geopolitical conflicts has gradually spilled over into the economy.
“Vectors and areas of conflict are more than you think with tanks, planes and ships,” Chertoff said. “Economy, food, information – all of these areas are where there is competition, conflict and even wars.”
This growing trend has pushed corporations further and further into the throes of geopolitics and put economic issues at the forefront of national security.
Chertoff pointed to the recently passed CHIPS and Science Act, which aims to increase U.S. production of semiconductors, as a positive step taken by the government to avoid a fallout similar to what Europe is currently facing with natural gas.
Semiconductors are a key component for a range of electronic devices such as computers and smartphones, but also for military equipment. However, the majority of semiconductors are made in China and Taiwan, leaving the United States at risk of having its supply cut off.
Although relocating operations to the United States may conflict with the traditional corporate mentality of producing products in the most efficient way at the lowest price, the national security implications are becoming increasingly difficult to ignore. , Chertoff said.
“There was a time that would be considered a ‘no no.’ You would want to have the cheapest, cheapest supplies, and you don’t want to have excess capacity,” Chertoff said. is that it’s a great way to fall off a cliff.”
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