The world has awakened to the danger of production bottlenecks in the wake of the COVID-19 outbreak. Not only are there shortages of personal protective equipment, but governments in Japan and the West fear over-reliance on Chinese nodes in the global supply chain. Those concerns overshadow another growing danger: the prospect of systemic failure that results from deep interconnections among key economic actors.

The phrase “too big to fail” (TBTF) penetrated popular consciousness in 2008 as the collapse of financial institutions in the United States sloshed through the global financial system like a tidal wave in a bath tub.

Financial entities around the world were deeply interconnected, lending and borrowing massive quantities of money to and from each other. As a result, the failure of one threatened to bring down all the others. Entire financial systems were threatened as the contagion spread. The near implosion of the world’s financial system — it’s called the global financial crisis for a reason — prompted regulators and politicians to impose new strictures to prevent this from happening again.