In a piece at The Hill Annelies Goger and Joseph W. Kane make a good point about the supply chain issues that are one component of the economic problems we’re facing. Our supply chain problems did not start with the pandemic but go back much farther:
Shippers and retailers would have been better able to cope with this year’s challenges if public and private leaders had not been so laser-focused on minimizing short-term costs such as labor and inventory. With supportive export-oriented policies and financial deregulation, companies have spent 30-plus years reducing warehousing space, subcontracting and outsourcing production, restructuring work arrangements to cut costs and delaying investments in transportation infrastructure.
In other words, we thoroughly starved the redundancy and agility out of these systems and dramatically increased our reliance on imports, because doing so delivered shareholder profits and “just-in-time†access to cheap goods — until the day our supply chains couldn’t deliver. So it is not surprising that we now face a broken system with no easy fix.
I entertained the possibility of going into a long digression at this point on how “dumping” by other countries, notably Japan, European countries, Taiwan, South Korea, and then China, combined with government inattention, industry consolidation, short-sighted management, labor unions, and ill-considered environmental laws have synergistically worked to cause one industry after another, starting with steel in the 1960s, to vacate our shores, setting the stage of supply chains that are otherwise hard to explain. Rather than that, I will only say that we can never expect American managers, whether in manufacturing or energy production and distribution or whatever to create the redundancy necessary to avoid bottlenecks in place in the absence of substantial government action. That will be fought tooth and nail by economists clinging bitterly to neoliberal doctrines about trade and anarcho-capitalists or minarchists who disapprove of most government action. If they have a plan for the private sector’s addressing the situation without prodding from the government, I’d like to hear it.
“With supportive export-oriented policies and financial deregulation, companies have spent 30-plus years reducing warehousing space, subcontracting and outsourcing production, restructuring work arrangements to cut costs and delaying investments in transportation infrastructure.”
Nonsense. Nobody says “well, the financial industry is deregulated…….let’s cut our warehouse space.” The biggest drivers gutting the US manufacturing footprint have been managed trade (dumping, really), environmental policy and offshoring to reduce labor costs. On the last point you can blame government, consumers and large corporate businesses. The only guy speaking up about it was accused of being a Russian spy. And we don’t invest in infrastructure because government is too busy buying votes with transfer payments, including the most recent “infrastructure bill.”
The question no one wants to grapple with on supply chains is that government policy created a hysteria that had knock on effects. No one looked at the costs of policy. We wouldn’t be talking about supply chains without covid policy. We didn’t turn the world upside down in the late 60’s. I’d like to know where we are going to miraculously find these effective government policymakers. They seem to have been in awfully short supply to date.
A fine point for the record. The steel industry did not “vacate” our shores. US steel production – in broad terms – has chugged along at + – 100 million tons since 1970. To be sure, the composition of the US facilities and ownership has changed dramatically. What has really happened is that worldwide consumption has been chugging along at 5-6% for many decades, fulfilled by foreign producers.
For villains of the type you describe consider consumer electronics, the textile industries or, say, everyone’s darling: Apple.
What is described is what have seen for the last 20 years. Everything has moved to just in time ordering. Consolidation resulted in fewer options and contributed to shortage when on eo fate few remaining suppliers had problems. I know Drew says this is not a problem for his companies and they always make sure the evaluate risk and have alternate supply chains but certainly is not what I as an end used see. We buy through 2 very large purchasing agents so we are buying in quantity and are in theory a preferred customer. Cant imagine, well I can since I have seen it, what smaller individual entities live with. The thing is that it has worked pretty well for quite a while. It just wasn’t built to tolerate large changes.
Steve