Any Storm in Our Ports

 

It’s pretty obvious from the White House generated charts above that anything that is predicated on services is much less impacted in terms of supply chain issues than goods and manufacturing.  Some arenas cannot be exported, like construction and transportation. Services that require materials or hard imports or are experiencing the greatest number of unfilled jobs are obviously more impacted than services based more on artificial intelligence analytics or government support. Prices for just about everything are soaring. Companies that contracted their manufacturing during the COVID downturn – particularly in the manufacture of silicon chips – have simply been unable to catch up. The ripples from this reality are everywhere, particularly in the automotive sector to basic appliances. Why is this happening, and when will it subside, if ever?

Some argue that the supply chain drag started with the trade wars between China and the United States, literally cutting off a number of imports, and just got so much worse as a combination slackened demand with locked down factories, driven by the pandemic, made a bad situation so much worse. Many contemplating a return to the workforce remain hesitant as COVID is still a serious risk where people mix… as on factory floors, retail, hospitality and offices. Pay levels have not kept up with general cost of living increases, so mass resignations have distorted the economy even more. Low interest rates have sent housing and corporate shares through the roof, even as the moratorium on evictions has pretty much ended. Rents are exploding as homelessness has reached new records.

Our system of taxation, focused on income and revenues vs wealth and value, has only exacerbated income inequality, made even more dire with the level of political polarization that seems to infect every corner of our economy. There are many recent changes that have a measurable direct impact on these supply chain issues. But as the Guardian UK (October 1st) points out, policy decisions for where we are now were sown decades ago: “[W]hat we’re experiencing is also the net result of decades of policy choices starting in the 1970s that emphasized consumer sovereignty over citizenship. The consolidation of power into the hands of private equity financiers and monopolists over the last four decades has left us uniquely unprepared to manage a supply shock. Our hyper-efficient globalized supply chain, once romanticized by men like Tom Friedman in The World Is Flat, is the problem. Like the financial system before the 2008 crash, this kind of economic order hides its fragility. It seems to work quite well, until it doesn’t.

“The specific policies that led to our supply constrained world are lax antitrust, deregulation of basic infrastructure industries like shipping, railroads and trucking, disinvestment in domestic production, and trade policy emphasizing finance over manufacturing.” The backup in our nation’s biggest harbors is an acute visualization of the problem. And nowhere is the backup worse than the Port of Los Angeles, pictured above. So bad that on October 13th, President Biden announced “that the Port of Los Angeles would operate around the clock to alleviate a logistical bottleneck that has left dozens of container ships idling off the California coast and Americans waiting longer to get products manufactured overseas.

“Longshoremen will work through the night and major retailers and shipping companies have pledged to clear cargo off the docks faster than before, changes that are intended to speed the flow of toys, electronics and other gifts to American doorsteps during the holiday season… ‘Today’s announcement has the potential to be a game changer,’ Biden said as he acknowledged that people are worrying about whether everything from ‘toasters to sneakers to bicycles to bedroom furniture’ was going to be available.

“However, the plan addresses only one link in a global supply chain largely outside of Biden’s control, meaning he faces potential blame from unhappy shoppers while also lacking the power to fix the mess… Biden can’t force overseas factories to keep churning out products. He can’t hire more truck drivers to pick up cargo when it arrives. And he can’t stop the pandemic that continues to disrupt operations all over the world… The bottom line: Americans want their stuff, and there’s very little that Biden can do to get it to them… 

“One of the biggest economic threats is that supply chain bottlenecks and various shortages are sparking higher inflation. The government said Wednesday that inflation rose last month, with consumers paying 5.4% more for goods and services compared with a year ago, the highest rate in more than a decade.” Just try and buy a new or used car to see this reality more clearly. Most experts see these issues continuing well into 2022, perhaps even beyond. Biden has used these backups to push for his infrastructure initiatives, where there is money to upgrade ports and airports. Even the White House has admonished consumers to shop early for Christmas, as Postmaster General Louis DeJoy, Trump crony holdover, has intentionally pulled resources from the postal system, increased costs and slowed the delivery process. In short, things are unlikely to improve anytime soon, and some of these higher prices will simply endure. Our continued governmental policies might even make “bad” worse.

Our foreign policy has been predicated on using punitive financial measures – sanctions and tariffs – that have dramatically failed to produce the intended political objectives while negatively impacting our own economy, often on a long-term basis. We have repeatedly decimated our nose to spite our face! Our domestic policies have failed to protect consumers, led to an increase in environmental disasters costing every facet of our economy billions and billions of dollars and allowed a largely deregulated coterie of mega-huge corporations to operate with virtual impunity. When the pandemic hit, the negative impact of each and every one of these missteps accelerated and slammed us hard. In short, there are no easy or quick fixes to make sense of our economic future. The piper has come to collect. 

I’m Peter Dekom, and while many of these anomalies will dissipate with time, there are so many underlying mistaken policy decisions that are not changing, such that we just might be looking at a very, very expensive new normal.