The Supply Chain Shortage Explained
The Great Pandemic wasn’t the only reason for the shortage. Here are the real reason’s why were experiencing them.
You may have seen story after story discussing a shortage of semiconductors affecting everything from vehicles to laptops to e-cigarettes. All this is the result of a supply chain shortage, where the supply of goods and products can’t get to the ports fast enough. There is almost this surprise among the pundits and economists that there was no way we could have possibly seen this coming. In hindsight there was, all the Great Pandemic did was reveal it.
There are several reasons why the United States is currently experiencing a supply shortage, and most of them are not all linked to the pandemic. Let’s go through some of the reasons and highlight why.
No Domestic Manufacturing of Goods
The shortage is a result of offshoring our manufacturing base from the United States to countries with lower labor costs because of free trade. Our country along with many others are becoming very dependent on semiconductors and other electronics (i.e. cars, computers, AI, cameras, home security systems, hell even vibrators). The free trade policies promoted by corporate America starting with Ronald Reagan and continuing with his successors promised that it would lead to the growth of domestic manufacturing, more computer chips, and trickle down to domestic manufacturers. Instead, here’s what happened.
In 1990 the United States accounted for 37% of global manufacturing of semiconductors, today it’s down to 12% and will continue to shrink. Meanwhile China has surpassed the supposed “greatest country in the world” and is projected to account for nearly one quarter of all manufacturing by 2030. This isn’t the fault of the People’s Republic of China; this is the fault of corporate giants in the United States deciding we don’t need higher paying jobs anymore. While more and more manufacturers shut down the vacuum was filled by China and they became a major trading partner to us.
If you have hospitals with no inventory nearby that leaves them vulnerable to a disruption in the supply chain undermining the whole argument about it being the best business model. While it works for small businesses it appears in hindsight to be a terrible idea to have no inventory in place. Just look at what happened last year when hospitals all over the world relied on the just in time system with no inventory. Nurses had to wear garbage bags, even in the United States of America the supposed best country in the world.
When I saw photos of that I couldn’t believe the hospitals had copied a business model that’s supposed to be used for vehicles. Whose bright idea was it to convince hospitals to have virtually no inventory?
After the 9.0 Japanese Earthquake in 2011, Japan suffered a supply chain issue over semiconductor chips which lasted for nearly two years. The government recognized how reliant they were on these valuable commodities so they decided to create a small national stockpile. Much like the United States Strategic Petroleum Reserve is there to provide 5 million barrels of oil during an emergency, Japan did something similar. Which is why during the pandemic Toyota did not face a shortage during the first six months of the pandemic. Although they don’t manufacture as much as other countries, they had a stockpile ready just in case.
Although inventory does take up space having a small amount of it in case of an emergency is not a bad idea. It’s like a ‘in case of emergency break glass’ type of situation or like car insurance. You don’t use it often, but if you ever get into an accident boy are you glad to have it in the first place. Even Amazon didn’t consider the fact that stockpiles of some essential supplies during rumors would come in handy after the WHO announced that coronavirus was a viral agent of concern by early February. They could of, they just chose not to bother until it directly impacted their business.
Greedy Corporations Taking Advantage of it
Wages are not responsible for inflation, corporate monopolies who control everything are. The corporate media wants you to scapegoat employees who only had a $0.50 bump in pay and not the CEO of Dollar Store which got a $10,730,000 compensation package last year and raked in a record $1.3 billion from all 7,400 stores.
Big business and shareholders hope you’ll scapegoat workers who risked their own health during the pandemic, while ignoring the real systemic problem: greed. Tyson, Kroger, and others all raised their prices the moment they saw an opportunity to do it. After making billions in extra revenue during the pandemic instead of cutting their salaries (as most small business owners do) they are using it as a way to price gouge you and millions of hard-working Americans during a once in a century pandemic.
In 1962 when U.S. Steel threatened to raise prices the Kennedy administration negotiated a deal to prevent an increase which would have led to inflation. That April after the deal was done Roger Blough the CEO of U.S. Steel told Kennedy in the Oval Office that he would raise prices by $6 a ton, which enraged the President who called it “a wholly unjustifiable and irresponsible defiance of the public interest.” In retaliation the Department of Defense awarded contracts to build submarine fleets to smaller steel makers who did not raise their prices. Within two days U.S. Steel dropped their planned price increase soon after that announcement.
Surging Online Demand
During the pandemic as retail, restaurants, trucking companies, airlines, and others shut down there was an uptick in online demand. As people became confined to their homes, they wanted to do something to pass the time so they ended up buying more goods. It’s the reason Jeff Bezos saw his net worth surge $87 billion during the pandemic, and largely profited off of it backs of its workforce which saw its pandemic hazard pay get taken away during the winter coronavirus surge.
All these combined to contribute to the supply chain bottleneck currently being experienced at the port of Los Angeles and others around the world. It wasn’t wages which went up slower than inflation, it wasn’t only localized outbreaks, it was a failure to manufacture domestic goods and a failure to keep some inventory. The just in time model is not designed for this, and we need to address this so basic supplies like nurses are not forced to use garbage bags instead of gowns.