For Want of a Horseshoe Nail

For the want of a nail the shoe was lost,
For the want of a shoe the horse was lost,
For the want of a horse the rider was lost,
For the want of a rider the battle was lost,
For the want of a battle the kingdom was lost,
And all for the want of a horseshoe-nail.

I agree with the point that Joe Nocera makes in his piece at Bloomberg. Donald Trump has been remiss in not increasing the availability of Personal Protective Agreement (PPE) enough:

Hospitals now routinely reuse masks that are supposed to be discarded after one use. Nitrile gloves, which are primarily made in Malaysia, Vietnam and Thailand, have become almost impossible to get. (It didn’t help that Malaysia, where 75% of the gloves are manufactured, was in lockdown recently.) By early next year, needles are going to be scarce, according to supply-chain experts I’ve spoken to.

And that was before the recent spike in Covid-19 cases and hospitalizations. When I asked Marc Schessel what was in short supply now that daily positive cases in the U.S. were regularly topping 100,000, he replied, “Masks, gowns, all of it. It’s going to be a real [expletive] very soon — much worse than Round One.”

Schessel should know. He is the founder and chief executive officer of SCWorx Corp., a company that provides supply-chain management software for the hospital industry. When it first became clear that the PPE supply chain was breaking down, hundreds of hospitals asked him to see if he could source protective equipment. He turned over much of his day-to-day duties at his company to other executives to focus on finding PPE.

Over the last nine months, Schessel has seen it all. Early on, he saw hospitals lose millions of dollars by naively making “down payments” for PPE that was being dangled by fraudsters. He watched deals for millions of masks — deals he thought he had locked down — vanish at the last minute. Warehouses that were supposed to be filled with N95 masks turned out to be empty. He’s seen hedge funds flip shipments of PPE as if they were oil futures, driving up the price as they bought and sold. Sometimes, legitimate PPE orders from abroad got delayed by Food and Drug Administration problems. Most of the PPE he could get his hands on cost three, four or five times their pre-pandemic price. And on and on.

and correcting that problem should be a high priority for the incoming Biden Administration. He proposes

• Using the Defense Production Act to “take over” PPE sourcing and distribution
• Getting FEMA to “create new supply chains”
• Getting the Defense Logistics Agency to distribute PPE
• Forbid trading by hedge funds (?)
• Again using the DPA command companies to start manufacturing PPE

Ignoring the legal problems with his plan which are formidable, I think he’s drastically underestimating the scope of the problem. Supply chains work like that little verse at the top of this post and you can’t just wave them into existence. Each step must be present.

Although the U. S. still produces a lot of the world’s cotton, just to pick one example, step by step we have been getting out of the cotton processing business for decades. We no longer have the gins or spinners or looms for making yarn or cloth. Most of the clothing manufacturers have left, too. We no longer make the gins or spinners or looms or sewing machines. We don’t mine the metal or produce the other materials for making them. We don’t have the people with the diverse skills.

That can all be remedied but don’t underestimate the vast amount of industrial subsidies, time, and attention that will be required. What we have learned over the last eight months is that we can’t afford to specialize as much as we have been and, in particular, we can’t specialize in consumption.