Posts Tagged ‘Global Supply Chains’

The shortages of catastrophe

June 22, 2021

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. 

[snip]

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.

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