The shortages of catastrophe

Many people have noted how a tiny group of billionaires have increased their share of the world’s wealth during the coronavirus pademic.

A blogger named Umair Haque pointed out that this is no coincidence. There are shortages of all kinds of thing across the economy, driven by the pandemic.  This has driven up prices, mainly to the benefit of corporate monopolies and other big businesses, and of the multi-billionaires who control them.

The shortages ripping across the economy are forcing up prices dramatically — and weirdly. The prices, for example, of used cars are skyrocketing. Clothes and food have gotten dramatically more expensive, from what I can see. And of course electronics — well, good luck getting them.

But this isn’t inflation. Sorry, armchair economists. I know that American pundits love to spout seriously on this issue — but they’re wrong. Inflation is a “wage price spiral.” This is something very, very different. Your income isn’t going up, at least not nearly as much as prices are. And prices are going up because of what economists call an “exogenous shock” — an act of God, or in this case, at least, an act of humankind.

These are shortages of catastrophe. They’re caused by what Covid did to global supply chains. It happened something like this — I’ll oversimplify to make the point easy to grasp. For a year or so, the world plunged into lockdown. Demand ground to a halt for many, many things. Retail stores closed in a tidal wave.

And then as lockdown was lifted, demand began to rise. But by this point, global supply chains — which operate on a “just in time” principle — were wrecked, shut down for too long, unable to cope again with normal levels of wants and needs. 

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Covid’s ripped the global economy apart — but the next wave of shocks coming our way are going to be much, much bigger. Think about climate change. Electronics were already expensive due to microchip shortages as Covid increased demand, but then there was a fire at one of the main suppliers of microchips in the world.

What is climate change going to do? Cause megafires, megafloods, megatyphoons. And yet increasingly, our civilization’s production of stuff is centralized. Your iPhones come from a few megafactories, and so do all those big TVs, cars, even medicines, food, and clothes. That reflects the mega corporations who make megaprofits from all these products — centralization in production reflects centralisation in profits.

One fire took out the factory which supplies much of the world’s microchips. Now imagine what happens as climate change intensifies, and megafires, megafloods, and megatyphoons become the norm. All that centralised production is at severe risk. Maybe this year the iPhone factory burns down, maybe next year, the Tesla factory does. And so on.

But that — massive risk to production — is just one effect. There’s also a massive and heightened risk to distribution. Think how fast Covid shut down distribution — it’s one reason things are more expensive now. Sending things by boats and planes and trucks is harder in an age of lockdowns and checks and so forth. But now imagine what happens if a megatyphoon takes out this shipping lane, or that fleet of super carriers. Or what happens if a mega flood makes that entire region — which products have to travel through — impassable. Or what happens as ports begin to drown.

Disease, drought, floods and storms would disrupt international trade no matter what the trading system.  But global supply chains are much more fragile than they need to be because of the neoliberal drive to prioritize cost-cutting and short-term profits over stability and sustainability. 

In fact, there would probably be breakdowns in that delicate system even without climate- or disease-related crises.

The problems, though, are threefold.

• One, that means that basic goods aren’t going to get to people — we’re talking things like medicine, food, water. Not just the idle electronics I need for my life of relative privilege. Those shortages will have real and lasting effects, serious ones.
• That brings me to the second problem, which is that the impacts of those shortages isn’t going to be equally or fairly distributed. The already powerless are going to suffer most. Who’s not going to get clean water and clean air? Well, probably the people on the bottom of the ladder.
• The third problem, though, may be the biggest, and it brings me full circle. All this reflects a certain distribution of power.

Who got richer during the pandemic? Billionaires did. More than 50% richer. Why? Because they were able to profiteer like crazy. Prices on Amazon, if anything, went up — as Matt Stoller has discussed. That’s because Amazon had a mega-monopoly, in a time of disruption. Hence, Bezos went from being mega rich, to being stupendously rich.

That brings me back to inflation. No, this isn’t inflation — the “wage” part of “wage price spiral” is still stuck at flat. This? This is inequality widening to levels that would make Rome cry. Did you get richer during the pandemic? I didn’t think so. Bezos, Gates, Zuck, and Buffett did. And still are.

If you understand all the above, then you come to a grim conclusion. The decades of catastrophe we face now — climate change in the 30s, mass extinction in the 40s, and the final collapse of our ecologies in the 50s — are going to cause inequality to grow even wider. Billionaires got richer during Covid — and they’re going to get even richer from climate change, then from mass extinction, then from ecological collapse. They’ll become the world’s first trillionaires, and then maybe even the world’s first quadrillionaires.

Why is that? Because all those waves of catastrophe are going to cause huge exogenous shocks. They’re going to create shortages and supply chain disruptions and massive falls in production capacity. But the world is still going to need stuff — electronics, clothes, medicine, lumber. Those who have power and money — billionaires — are going to be sitting pretty. They’ll be able to use the monopolies they’ve already built to profiteer like the world has never seen before.

Can you imagine a world demanding basic goods — only to meet massive shortages — and all its resources in the hands of a few billionaires? They’re going to jack up prices as hard and fast as they can — and grow their fortunes. I know — and you know — because that’s what they just did.

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The waves of catastrophe heading our way are going to be the greatest in human history — and they’re going unleash the greatest wave of profiteering in human history, too. We had a tiny, tiny taste this last year of what happens when shortages of the basics hit nations — prices skyrocket, and the mega-rich get mega-richer, incredibly fast, because they control production, distribution, and supply of an economy’s basic goods.

Now imagine a whole world growing short of basics — clothing, electronics, food, water, air, money itself — because good can’t get made, produced, distributed as easily, as fast, as efficiently as before. Every year, factories shut down, supply chains break, distribution networks fail, shops close — this year, its megafires, next year, the ocean’s uncrossable, and so on.

What happens in that world? Three things do. 

• One, huge, huge profits are made, from these shortages.
• Because two, prices rise astronomically, and no, that’s not inflation, because your income never rises fast enough to match, and so you get poorer.
• That leads to three — a sense of unfairness and desperation, which fuels rising extremist movements, leads to a loss of faith in democracy, institutions, people, each other, the future.

Bang. There goes the neighborhood.

That’s how a civilisation collapses.  We’re on that path.  Covid teaches us the lesson in no uncertain terms.  We weren’t prepared for a relatively minor catastrophe like it — millions died, millions more still will, you got poorer, billionaires got richer, fascists rose.  Sound like a future you want? 

Now take the next wave of catastrophes — climate, extinction, eco-collapse — and imagine how much faster and harder the very same effects are going to be, from death and suffering, to inequality, to you growing poorer in real terms no matter how much harder you work while billionaires get richer, to societies destabilizing into factions of supremacists and crazies and fanatics while the number of sane people seems to shrink.

The future?  It’s going to be a lot like the last year, except much, much worse, in pulsating waves of ruin, punctuated by short breaths of seeming normality — just enough to lull you back to sleep — because a world of nonexistent systems and institutions, only billionaires profiteering off misery, death, ruin, and collapse, is also one of intensifying economic, social, and political fragility, to the point of total implosion.

Covid’s a dry run for the future of catastrophe.

The good news is this: there are things we should learn, about how fast and hard collapse happens, how fragile our societies are, economically, socially, politically, culturally.  A few months of a pandemic — and they snapped like twigs. 

And if you think things are “normal” now, go ahead, again, and tell me why you’re paying 30 percent more for the same stuff — while billionaires who have more money than they’ll spend in ten lifetimes pile up even more of it.  Billionaires who could end a pandemic multiple times over, but don’t lift a finger.

Like I said: lessons to be learned.  The bad news?  We’re still not really learning them.

As I wrote, we the people and our leaders would have a hard time ahead no matter what our political and economic system. 

But the owners and managers of the world’s big corporations, and the governments who serve their interests, have little incentive to develop alternatives.  We can see this in the response to the coronavirus pandemic.  The powers that be are only interested in treatments that are protected by patent monopolies.

Stein’s Law says that if something cannot go on forever, someday it will stop.  Either there will be a course correction or a crash.  The odds against a course correction are great, but the improbable is not the same thing as the impossible.

LINKS

The Future of the Economy is Even More Dystopian Than You Think  by Umair Haque for Eudaimonia and Co.

Struggle in Container Shipping Goes Beyond the Suez Fiasco and Backed-Up Ports by David Fickling for Bloomberg.

Tags: Coronavirus Pandemic, corporate monopoly, Global Supply Chains