written 17 Oct 2021
published 24 Oct 2021
Our society suffers from the fundamental flaw of perceiving the world as separate parts, and the economic limitations of capitalism are symptomatic of that error. These express as: degrading every value other than fiscal, social disruption from extremes of exclusive gain, destruction of natural resources, and increased economic risks from chasing short term profits. The rise of "just-in-time" supply system, which arose in Japan in the 70's, is an example of the last.
Previously, businesses needed to have adequate in-house supply of parts and materials to ensure their own production flowed smoothly. This inventory, and the required warehouses for storage, tied up funds. Toyota began reducing this expense by coordinated production throughout their supply chain, so parts were produced and delivered as they were needed: just in time. The savings were significant enough that the practice eventually expanded globally. This approach depends on good estimates of product flow, a reliable global delivery structure, and a stable economic environment, but reduces resiliency to unexpected changes: short term gain with increased long-term risk.
As "just-in-time" was expanding, the manufacturing world was concentrating into fewer and fewer companies and facilities. In some cases, a single plant would be producing an item critical for a host of industries around the world, increasing the vulnerability to unexpected events. In 2011, an earthquake in Japan caused a fire in a plant that produced a majority of the global supply of an epoxy critical to the manufacture of semiconductors. This caused widespread disruption and price hikes while other companies scrambled to ramp up production.
The COVID pandemic affected the entire global economy, with business closures and social lockdown occurring everywhere at the same time, with little warning. All levels of businesses were hit by a simultaneous loss of workers and loss of customers. The resumption of business, as the surges passed and the vaccine arrived, has been spotty at best. Just being open for business doesn't mean customers show up, and not all businesses resumed production at the same pace. The smooth functioning of the just-in-time system has yet to return.
One example is the backlog of ships waiting to unload at west coast ports. Before COVID, LA would have one or two ships anchored offshore waiting for one of the 60 berths. Now there are over 80, with little developed infrastructure for such magnitude. The recent southern California oil spill was caused by an anchor snagging a buried oil pipeline, causing it to rupture.
Odd shortages are now normal. A friend on the coast, working on a plumbing project, said he couldn't find PVC elbows anywhere. Glass is in short supply, and lack of bottles has affected many businesses, from small vendors to big ones, like McCormick spices, which has slowed production due to lack of the glass jars they need.
One of the largest disruptions is in the automotive industry. When travel shut down, the rental car industry sold off their inventory, to save money. Now that people are beginning to travel again, demand has increased. However, the automotive industry hasn't been able to ramp up production fast enough, so there is a shortage of rental cars, and used car prices have leaped. One of the limiting issues is a shortage of the semiconductors needed for these modern vehicles.
The most powerful computer chips are only manufactured in Taiwan, even though the technology was developed in the US. It takes about 9 months, from beginning to end, for one of these chips to be created. When the economy shut down, so did the chip manufacture. When the economy began to recover, the demand was greater than their ability to respond. In addition, Taiwan is suffering a climate change induced drought, creating serious water shortages. The semiconductor industry requires massive amounts of very clean water, further slowing production increase.
Our previous economy was based on a stability that is no longer. Increasing resource depletion, accelerating climate change, and ongoing geopolitical upheaval threaten to continue and enhance the disruptions we are now experiencing. We will have to re-localize our essential systems, produce more of our critical needs within the US, and within our county. We have to economically reward people who are doing "essential" services, rather than exporting the labor overseas, and curtail the economic excesses of exclusive gain, which bankrupt the country and create social unrest.
