Inflation is on the rise. The right wing media is super excited about it. The left wing media is wringing their hands and sweating bullets over it. The base of each party is parroting talking points. But, what is the reality? Don’t tell me you thought those pundits were giving you the full story! Not a chance. Let’s take a look at yet another topic which has been oversimplified for political point scoring, and, see if we can sort out some of the causes of the increase in inflation.
I know human beings tend to like simple answers, but, simple answers are usually wildly misleading. Like most things, this is like a knotted, tangled, ball of yarn. The first step in figuring out the causes is to ignore what the political wing nuts in the media have to say. Step two – pay attention to everything that is happening around you. Prices are impacted by market forces known as “supply and demand.” This is very basic. The things which can cause supply to shrink, or demand to increase, are not so very basic.
First, there is an inherent goal, imbedded in capitalism, which is to maximize profits. This seems obvious, but, in trying to make the most money, short term returns are often prioritized over long term considerations. Such is the case with the supply chain. Every part of the corporate process has been streamlined, to create the most productive, cost effective, outcome. In the short term, this makes sense. The fewest number of employees who can get the job done means not having to pay extra wages – more profits. The least amount of storage space required for inventory adds even more to the bottom line. Unfortunately, we are getting to see the long term consequences of such thinking. On demand shipping, where you click “buy,” in your Amazon cart, and, the product gets tossed on a cargo ship in China the same day, seemed like a great idea for the bottom line. And, speaking of bottoms, it’s not too hard to imagine that you’ll be able to find the desperate laborers to work under dire conditions to make this kind of pressure cooker productivity possible, when you’ve already managed to convince adult men and women to wear diapers, so that they can simply wet themselves, instead of failing to make the required delivery times thanks to a bathroom stop. There is a massive hole in this corporate logic, though: anything, anything at all, which interrupts the process will have immediate consequences in the form of supply chain disruptions. Something like, a ship getting stuck in the Suez Canal for six days has near immediate consequences. But, that’s not all. How about the fact that there used to be one ship waiting to be unloaded at the Los Angelos Port, through which nearly half of all goods entering the country flow. Now, there are over 100 cargo ships, stretching miles into the Pacific Ocean. Meanwhile, there are truckers lined up waiting for their cargo… no need to keep the engine running. Major retailers, like Home Depot, have taken to chartering their own cargo ships, which are much smaller, and can therefore circumvent the clogged main ports. These chartered ships generally carry between one thousand and three thousand containers, as opposed to the ones in line at the port – which carry twenty two thousand containers. Guess what else is different about these smaller ships? They cost four to five times as much money.
Second, we are running short on more than just the end user consumer goods. You’ll recall that there is something of a worker shortage in America right now. All those juicy Federal Benefits have ended, but, no one is lining up for terrible wages to work a terrible job at the moment. I suppose everyone who was in a bind just moved in with someone else, and, so they aren’t as desperate as they used to be? I don’t know… I’m just spit balling on that one, like everyone else. However, there are some real simple explanations that underlie the worker shortages and the ways in which they are affecting prices and supply. There is a jarringly high turnover rate for long haul truckers – 90% per year during normal times, thanks to the stress of the job, coupled with the isolation of the cab, and, the lost family time. Typically, that turnover rate is replenished with fresh faced new drivers. During the first year of the pandemic, demand fell off the face of the earth. So, the natural attrition of truckers didn’t need to be replaced, which was a good thing, because, there was no way to safely train drivers. Now, demand has rocketed back, but, there is more than an entire year of lost rookie truck drivers, with two years of attrition from the existing pool of drivers. The toughest truckers to keep are the ones who are tasked with towing around thousands of gallons of sloshing liquid danger, in the form of fuel and oil. This trucker shortage has also resulted in a dearth of liquid oxygen for use in hospitals. Good thing we don’t need oxygen to give to people in hospitals right now, right? The industry has increased wages, but, no one seems to be biting. Instead, career drivers are just bouncing around to get the best rate (and, seriously – good for them!). In the latest genius move of the free markets, high schools are training teenagers to become truckers, so that they can fill the gaps of this miserable profession, right out of high school. In the meantime, this is reducing the supply of gas, liquid oxygen, and, all sorts of goods, further driving up costs.
Third, we have outsourcing to thank. It takes between four and five years to move a supply chain from one country to another. Most of the microchips used by the entire world are made by a single company, and, that company isn’t based in the US. Most of our medicines and textiles come from China. The supply of microchips has so badly dried up, thanks to all of the aforementioned global supply chain issues, that US Automakers have had to shut down entire plants, because they simply didn’t have the necessary microchips to continue to produce vehicles. China and the US are on the verge of an actual war, over the Taiwan Issue, so, I doubt that China is really too anxious to resolve supply chain issues related to US bound exports. We can no longer provide for ourselves. We surrendered that ability, in exchange for cheaper trinkets. Oh! I almost forgot to mention… remember that microchip manufacturer that the entire world relies on? Yeah, they’re in Taiwan.
Finally, there are the media pundits who say that inflation has gone up because of government spending, and that the blame rests solely at the feet of the Democrats and Joe Biden. These people are accidentally telling you something about themselves. If government spending, in the form of giving struggling people cash assistance has caused inflation to increase, that is because there is more competition for goods. Why is there more competition for goods? Because the number of people who have money to make purchases has increased. Who doesn’t want more people to be able to have access to enough funds to purchase the things that they want or need? The people who already had enough money to buy what they wanted and needed. Those folks don’t want more people to be able to purchase goods, if it means that those who already had enough money to afford to purchase what they desired will have to pay a dime more than they already pay. This is particularly true when you consider the breadth of the Federal Government’s stimulus payments. The vast majority of Americans received the aid. Those that didn’t receive aid are at the relative top end of the socioeconomic ladder in this country. No one wants to pay more for goods or services, but, if it means that we collectively have to pay more, until the market can correct and add to the available supply, so that fewer Americans have to worry about where their next meal is coming from, that seems like a pretty good tradeoff from where I’m standing.
PS – Don’t forget to tip your waitresses, or else, they’ll get fed up and quit, too!
Sources:
https://news.yahoo.com/im-california-dock-worker-facing-132925803.html; https://www.theguardian.com/commentisfree/2021/oct/11/just-in-time-supply-chains-logistical-capitalism; https://www.yahoo.com/news/home-depot-executive-says-chartering-170329115.html; https://www.cnn.com/2021/05/29/economy/truck-driver-shortage-pay-hikes/index.html; https://www.ccjdigital.com/economic-trends/article/15064753/driver-turnover-rate-holding-steady; https://www.wsj.com/articles/the-world-relies-on-one-chip-maker-in-taiwan-leaving-everyone-vulnerable-11624075400
thereluctantcommentator 