Leftist policies are wrecking global supply chains and triggering shortages and looming hyperinflation. Stand by for capitalism to be blamed
We already see soaring prices, empty store shelves, shortages of critical products, factories shut down, workers unemployed, and people freezing in their homes. Soon, progressives will be blaming capitalism itself and demanding more government controls if not the outright seizure of the means of production. But in fact, these disruptions to what had been a smoothly operating integrated global economy that had raised hundreds of millions of people out of poverty in the last three decades are all due to progressive policies being enforced by those very governments that stand ready to seize even more power over our lives.
There are multiple sources of the troubles bedeviling the international division of labor, but they all have one thing in common: bad government policies pushed by progressives.
Start with COVID, a highly communicable virus that can be lethal if left untreated, especially in people with comorbidities including obesity and diabetes. Governments around the world for the first time in human history decided to quarantine the healthy, not the sick, and went into "lockdowns" for a disease that has a 99.5% recovery rate is most dangerous to an identifiable subset of their populations: the elderly, the obese, and the already ill.
Those lockdowns constricted production, and the resulting unemployment temporarily deferred demand for many goods, including durables like cars and home appliances. In the United States, tax-free payments were offered to unemployed people that were more lucrative than the taxable wages they might receive if they returned to work, resulting in a predictable artificial labor shortage, further crimping the manufacture and distribution of many goods.
Many of the same factors were at work internationally. Jack Phillips of the Epoch Times explains:
The International Chamber of Shipping, a coalition of truck drivers, seafarers, and airline workers, has warned in a letter to heads of state attending the United Nations General Assembly that governments need to restore freedom of movement to transportation workers amid persistent COVID-19 restrictions and quarantines.
If nothing is done, they warned of a "global transport system collapse" and suggested that "global supply chains are beginning to buckle as two years' worth of strain on transport workers take their toll," according to the letter. It was signed by the International Air Transport Association (IATA), the International Road Transport Union (IRU), and the International Transport Workers' Federation (ITF), which represent some 65 million transport workers around the world.
"All transport sectors are also seeing a shortage of workers, and expect more to leave as a result of the poor treatment millions have faced during the pandemic, putting the supply chain under greater threat," the letter said. "We also ask that WHO and the ILO raise this at the U.N. General Assembly and call on heads of government to take meaningful and swift action to resolve this crisis now," they wrote.
With demand surging for goods that consumers deferred purchasing, and with worker shortages hindering resupply, choke points are developing all over the world.
Gene Seroka, executive director of the Port of Los Angeles, attempted to shed some light on the problem during a recent ABC News interview, noting that there's a significant backup of container ships off the coast of major ports of entry.
"We're witnessing a pandemic-induced buying surge by the American consumer, the likes of which we've never seen," he told the network on Sept. 29.
It's gotten to the point where at least one major retailer is attempting to bypass normal transport systems:
Costco said it's chartering its own container ships between Asia and North America amid supply chain issues worldwide, Chief Financial Officer Richard Galanti said in a recent conference call.
Costco, he said, is dealing with "port delays, container shortages, COVID disruptions, shortages on various components, raw materials and ingredients, labor cost pressures" along with "trucks and driver shortages," Fox News reported.
These COVID-induced shortages are stoking inflation.
In remarks on Sept. 29, [Federal Reserve chairman] Powell said that the current spike in inflation is a "consequence of supply constraints meeting very strong demand," saying it's "associated with the reopening of the economy, which is a process that will have a beginning, middle and an end."
The other progressive policy initiative wreaking havoc is green energy mandates. European countries have chosen to forsake existing reliable and abundant energy sources like coal for unreliable wind and solar, and now they are seeing soaring energy prices because the wind hasn't been blowing as much as usual lately. Greg Miller of Freightways, a transportation industry publication, writes:
There's panic-buying of gasoline in the U.K. Natural gas prices in Europe and Asia are skyrocketing. Protests are breaking out across Europe due to spiking electricity bills. India and China are short of coal for utilities. Power is being rationed to factories in multiple Chinese provinces — and winter is coming.
First came the COVID-induced global supply chain crisis for container shipping. Now comes a power crunch across Asia and Europe. Energy commodity stockpiles — just like U.S. retail inventories — did not build back up fast enough to contend with post-lockdown demand.
China, which has become "the workshop of the world" as a low-cost exporter of manufactured goods, is facing serious electricity shortages.
According to Bloomberg, power use is now being curbed by tight supply and emissions restrictions in the Chinese provinces of Jiangsu, Zhejiang, and Guangdong.
Bloomberg quoted Nomura analyst Ting Lu as stating, "The power curbs will ripple through and impact global markets. Very soon the global markets will feel the pinch of a shortage of supply from textiles and toys to machine parts."
Nikkei reported that an affiliate of Foxconn, the world's biggest iPhone assembler and a key supplier of Apple and Tesla, halted production at its facility in Kunshan in Jiangsu Province on Sunday due to lack of electricity supply. Another Apple supplier, Unimicron Technologies, also halted production in Kunshan on Sunday, said Nikkei, citing regulatory filings.
The New York Times reported on power outages in the heart of China's southern manufacturing belt, in Guandong. Factories in the city of Dongguan have not had electricity since last Wednesday. The Times interviewed a general manager of a Dongguan factory that produces leather shoes for the U.S. market who has kept his operation running with a diesel generator and who said that power outages began this summer.
Stoppages of Chinese factories would further delay deliveries of U.S. imports, which have already been waylaid by extreme congestion at ports in Southern California and, more recently, ports in China.
You can blame the electricity shortages on the greenies:
In particular, thermal coal — coal used for power generation — faces steep restrictions in access to capital for environmental reasons.
"So if somebody wants to build a coal-powered plant, they can; it's just that it will bankrupt them, because they're going to be charged a huge sum for all that greenhouse gas that's being emitted," Obama said during a 2008 interview with the San Francisco Chronicle's editorial board. Democratic Presidential nominee Hillary Clinton also pledged that "We're going to put a lot of coal miners and coal companies out of business."
It's worked, and not just in the United States. Western European nations, led by Germany, have shut down coal mines and thermal power stations in favor of wind and solar and other unreliable power sources that are called "renewable" — all based on computer models that predict rising global temperatures, though none of their past predictions has come true.
In China's case, COVID plays an indirect role in the electricity shortage. When Australia demanded an investigation into the creation and release of the COVID virus in China, that nation responded with an economic boycott of Aussie coal, wines, and a few other commodities. That Aussie coal has proven difficult to replace at anything close to a reasonable price.
Energy markets respond quickly to shortages, and other fuels are also jumping in price, particularly in Asia and Europe:
The shortfall of natural gas in Europe and Asia is clearly evident in historically high natural gas spot prices.
The Asia benchmark, the Japan-Korea Marker (JKM), had risen to $27.50 per million British Thermal Units (MMBtu) on Friday, nearly double the August price. The two European benchmarks, TTF Netherlands and the National Balancing Point (NBP), have risen in lockstep with the JKM, to $26.51 and $26.23 per MMBtu, respectively. TTF and NBP are at all-time highs. The U.S. Henry Hub price has risen, but to far below these levels, at $5.51.
Globalism, a transformation of the location of economic activity based on open markets and low shipping costs, is starting to fall apart under these pressures. It has savaged manufacturing in the United States in particular, while enriching the corporate and financial elites. Ironically, these elites have heavily backed progressive political factions and their policies, which are now placing pressure on globalism's ability to withstand disruption. A further irony is China's dictator, Xi Jinping, who unleashed COVID on the world by allowing international but not domestic flights from Wuhan, the epicenter of the outbreak, is now stuck in a corner he has painted himself into. The coal shortage engineered by his bullying of Australia is forcing him to choose between running factories and keeping households supplied with electricity and heating the coming winter, which can be brutal in northern China in particular. The Communist Party's legitimacy has come to depend heavily on providing a rising standard of living. That will be difficult to maintain, even before any consideration of the looming financial troubles of heavily leveraged property developers, whose insolvency could have ripple effects on the entire Chinese economy.
But one thing is true in China, Western Europe, and North America. Progressives always blame someone else, usually capitalists, and they have the support of the major media organs. So the probability of progressives taking a hit for their mischief is not too high.
To comment, you can find the MeWe post for this article here.