How American Could Collapse

[tpsbmam]

The article makes excellent points about the fragility of our global trade system and the degree to which one factory in Japan, for example, getting hit by the earthquake & tsunami can cripple critical supplies of everything from medications to computer chips. Remember when the US ran out of flu vaccine in 2004? That happened because half of our flu vaccine was made in one British factory, which the FDA closed because of quality control problems. (Imagine what QC is like in China!)

The markets get cornered in various places. The example they used is ascorbic acid -- 100% of the US supply comes from one factory in China. So, something happens to the factory, that's our entire supply.

(Lynn is Barry Lynn, the New America Foundation -- he has studied "industrial supply shocks" for over a decade.)

Lynn has continued to study industrial supply shocks and says, “What I have found most interesting recently is the apparent role supply chain shocks played in triggering a synchronized slowdown of industrial economies in April—production down (in USA, China, Europe, Southeast Asia), jobs down, demand down, GDP numbers down—due almost entirely to the loss of a single factory that makes microcontroller chips for cars.”

Today, the problem manifests as shortages of videotape or auto parts, but the global supply chain is so tangled and fragile that next time it could be electronics, weaponry, or even food or medicine. As Lynn noted in an interview with Dylan Ratigan, China controls 100 percent of the national supply of ascorbic acid, which is a basic food preservative. Leading oncologists are already warning that we are experiencing severe shortages of generic yet pivotal cancer drugs, because there’s no incentive for corporations to make them.

It was in the 1990s that American multinationals, spurred by government policy, began outsourcing operations to China. At the same time, the Clinton administration steadily relaxed antitrust enforcement, leading to massive corporate consolidation and the creation of the virtual firm. By the early parts of the last decade, the ideal American multinational made its profits by using its market power to gut labor and supply prices and by using its political power to eliminate taxation. All of this turned giant American institutions against making things. This is why we rely on a British factory to make our flu vaccine, why global videotape production was knocked offline by a tsunami and why that same event slowed the gigantic auto industry. US corporate leaders now see the idea of making things as a cost of doing business, one best left to others. What has happened as a result is that much of the production for critical products and services that make our economy run is constructed by a patchwork global network of suppliers all over the world in unstable regions, over which we have very little control. An accident or political problem in any number of countries may deny us not just iPhones but food, medicine or critical machinery.

Andy Grove, co-founder of Intel, has made the case that America needs to be building things here, investing here and manufacturing here. We need the know-how and the ecosystem of innovation. The more corporate America seeks to push production risk off the balance sheet onto an increasingly fragile global supply chain, the more it seeks to wound the state so there is no body that can constrain its worst impulses, the more likely we will see a truly devastating Lehman-style industrial supply shock.

Much more at The Nation.

Yet another way that we've been set up to crash and burn. I can see us having all kinds of problems if they fail to raise the debt ceiling. And Obama is trying to make similar "free trade" deals with 7 or 8 more countries! Clinton on steroids!

Aside:

I personally think the issue of chemo drug shortage is a separate and critical issue. THIS is what happens when you turn everything over to private corporations! If they're bloody well going to do business in the US, they should be mandated to make the cheaper generics. They make plenty of money on their higher priced drugs. Instead, people with cancer can't get the drugs they need because the whiny-ass, profit-guided corporations don't bother to make it because it's not profitable enough!

[napoleon_in_rags]

1. That's Taylorism.

From Fred Taylor, the pioneer of Scientific Management way back in the day. Specialization increases productivity he says and he's right, but what he misses is that it decreases robustness and resiliency, it makes systems fragile and weak. That's why nature has both specialization but it also has a lot of redundancy.

IMHO Its high time for a guerrilla manufacturing revolution in the US. We the people need to stop hoping these companies will bring the jobs back, and start seeing what we can manufacture ourselves. When manufacturing goods becomes as accessible as manufacturing web pages, the economy will be fixed.

[tpsbmam]

4. Thanks for the education!

Excellent points, especially looking to nature to teach us those lessons.

I wonder if they're starting to see an unintentional mini-revolution. They've starved the beast to such an extent, people aren't buying the crap all of these corporations are manufacturing overseas and we're seeing it reflected in the economy. They've shown themselves to be blinded to the US population. Yes, corporations are showing massive profits, but in some sectors that's really slowing -- I'm delighted to say it's seen most obviously in Walmart, where sales are slumping.

I'd like to think the slump is a combination of (mostly) the economy with, secondarily, people starting to wake up a little and getting pissed off at the degree to which almost everything they can buy in the US was manufactured somewhere else. And the vast majority of it is total crap.

[napoleon_in_rags]

5. I agree. The main thing is that the cultural thirst is there.

People are watching these shows like American Chopper, where Americans build something totally above and beyond the garbage everybody can get at these Chinese superstores, and wanting a piece of it. What's slowly being established is two ideals of value: One is an old fashioned short term utility ideal which Wal-Mart speaks to, the second is a broader cultural view, where Americans have a deep understanding of the product: Not only what it is, but what kind of scene it comes from, what kind of quality goes into it. I think Americans have put 2 and 2 together as far as where the jobs went, and I think the American response is going to come from what I call "club consumerism" economic purchasing groups where membership has its benefits, and membership has its requirements. ('If you don't ride a Harley, you're not in the club' in keeping with the bike theme) The reason why I see this happening is because such groups, once they reach a certain size, can circulate currency and endlessly sustain, even in economic tough times, so the fundamental economics are sound. Added to that, in other groups you have smart phones becoming wallets, and that allows for some games with sharing purchase info for special deals, that could create some very strong clubs in short time.

[ixion]

2. I agree: We need to make things here again.

[jwirr]

3. I think that this is extremely evident when it comes to medications.

A shortage of medication for any reason could trigger deaths all across the country within days. I have long felt that this is an issue of national security and should be treated as such. While we are building our alternative energy and other vital economy up we should be requiring the big pharmas to at the very least store their medicines inside our borders.

Besides that each state should do an inventory of medications on hand so that we get a look at what the danger really is.