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Money Matters

Is the Supply Chain Crisis Our New Reality?

A crisis like this shouldn’t come as a surprise: Our economic system is working as intended.

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Sparse grocery shelves, long queues, and protracted deliveries have become American consumers’ new reality throughout the COVID-19 pandemic. And more recently, massive steel containers filled to the brim with essentials and nonessentials alike—everything from toilet paper to at-home fitness equipment—have lined ports across U.S. coasts, creating bottlenecks as ships wait their turn to be unloaded. Longshoremen, sailors, and truckers are working tirelessly but not nearly fast enough to match the seemingly insatiable American demand for goods. The pandemic—which has raged for almost two years and taken the lives of more than 5 million worldwide—has pushed an already inefficient and strained global supply chain to a breaking point.

While it’s easy to think of the supply chain as something stringent, in reality, it more resembles a living organism that responds to minute environmental changes. For a system as globally interconnected as ours, the joint effects of infection prevention measures, travel restrictions, workplace closures, layoffs, mass death, and vaccine mandates have meant serious operation fluctuations. In turn, scarcity has caused inflation to rise, driving prices to soar. Yet these disruptions are not a direct result of the pandemic, but its interaction with enduring policies that undervalue the labor force and prioritize mass-production of goods on a planet that wasn’t built to quench all of consumers’ desires. Over the last two decades, the federal government has incentivized offshoring, facilitated the rapid growth of multinational conglomerates, and created a severe dependency on imported goods. Coupled with a meager social safety net and crumbling infrastructure, these policies have created backlogs that experts estimate will last well into 2022 if not longer. As the pandemic is such a unique event and the supply chain crisis’s edges so ephemeral, the path forward is uncertain.

After dipping at the beginning of the pandemic, consumer spending has skyrocketed this year. The United States is importing more goods than ever before. Although the number of consumers returning to in-store shopping is slowly growing, e-commerce is dominating purchasing, with 30 percent higher engagement than pre-pandemic levels. In a world where convenience and speed are paramount, massive conglomerates like Amazon, Target, and Walmart—which have conditioned consumers to believe that one, two, and three-day delivery is sensible—are driving much of this explosive demand.

“It’s going to be a long-term problem,” said Arthur Wheaton, the director of Western NY Labor and Environmental Programs for the Worker Institute at Cornell University. “If I have the ability to sit here on my cell phone and order multiple Amazon packages, that creates a global problem for the supply chain.” In a typical year, consumer expenditures, which include both necessary spending (think: food, rent, and medicine) and discretionary spending (a new pair of running shoes or car), account for 70 percent of the economy according to the Bureau of Labor Statistics. The bottom 20 percent of people account for 9 percent of all spending, most of which goes to things like food and transportation. The most affluent 20 percent of people, however, whose spending is more often than not discretionary, account for nearly 40 percent of US spending. The rich are over-consuming, and they’re doing so in ways that are exacerbating the climate crisis, driving supply chain mechanisms that require valuable resources and energy to produce, transport, operate, and dispose of goods.

And as usual services like eating in a restaurant, traveling to a different country, and getting a manicure were less accessible due to pandemic restrictions, pent-up demand was instead redirected to buying more stuff to make staying at home more enjoyable. Higher-income earners were able to work from home, invest their savings in the stock market, and buy more. Lower-income earners, on the other hand, oftentimes had to make difficult decisions between working a public-facing job that exposes them to the virus, quitting to take care of a family member, or dipping into their savings to stay afloat financially. At the end of last year, the lowest-wage sectors had lost nearly 8 million jobs while the highest-wage sectors actually gained about 1 million jobs.

Robert Scott, senior economist at the Economic Policy Institute (EPI), said the effect has been described as a “K shaped recession and recovery”, where wealth continues to be accrued at the top and lost at the bottom. “The bottom 30 percent of the labor force have been devastated,” he said. “And the top 30 percent have largely been able to work from home. Many of them even got better jobs since there’s been a lot of turnover and salary increases.”

Inversely, many of those deemed “essential” worked to keep the supply chain moving, oftentimes without fair compensation and much of a safety net to fall back on while enduring workplace pressure and harassment from both employers and customers. The blame for continued burgeoning inequality cannot lie with individuals or seen as personal failure. The economic structures that govern daily interactions and spending habits are a result of decades of trade, currency, tax, and labor policies that continue to make the rich richer at the expense of everyone else.

“The so-called ‘supply chain crisis’ is a consequence of how the structure of the economy has evolved,” said Scott.

While it would be impossible to trace current issues to a few policy decisions, trends in the past few decades have been primarily driven by austerity. According to research from EPI, policymakers have guarded excessively against inflation and cut recovery short before they’ve reached low and middle-wage workers. (One example of this is the short-lived federal aid given to local and state governments after the 2008 recession.) Additionally, tax policies have incentivized the offshoring of manufacturing to countries in Asia and Latin America in order to keep prices of goods low, which has, in turn, made American goods less competitive. Not only do emissions from transporting these goods across continents warm our planet, but they also discredit local production and drive good paying jobs abroad. According to Scott, this has made the country heavily reliant on imported goods and prone to crises like the current one. Furthermore, the National Labor Relations Act has failed to safeguard workers’ rights and punish exploitative union-busting employers at home. Corporations have taken advantage of this and created structures that make it difficult for workers to hold their employers responsible for labor law violations or to collectively bargain over wages and working conditions. On top of all this, policymakers have refused to raise the federal minimum wage, given massive tax breaks to multinational conglomerates, and allowed the benefits of an increasingly productive economy line the pockets of business executives, investors, and shareholders. All of this has given enormous bargaining power to corporations: Not only do they have the power to threaten workers if they don’t agree to reduced hours and benefits but they also have the money and influence to sway policy decisions in their favor. Combined with a lack of sufficient investments in the country’s physical and health infrastructure, these policies haven’t just contributed to growing inequality, but a miserable population, too.

“We have infrastructure that is inadequate to meet our own domestic needs,” said Scott. “We don’t necessarily need more ports if we stopped importing all this junk. But we need better roads and bridges in this country so we can operate efficiently as an industrial state.”

In the same vein, Scott characterized the American social state, one that doesn’t yet offer universal parental leave and health care, as the worst of any leading developed countries. Ken Jacobs, head of the University of California, Berkeley Center for Labor Research and Education, echoes this sentiment. “Both child and elder care [are] essential if we want to have any kind of stability in the workforce given demand,” he said. “It’s going to be very important in order to enable large numbers of particularly women to come back and participate in the workforce.”

The ultimate concern for Scott is growing public discontent and political divisions which he said stem from the inability to deal with these issues. “Either we let it continue to happen and we subsidize it by investing more infrastructure in order to fix all the supply chain bottlenecks so everybody can get all their computer chips, their cars, and their teapots from Amazon, or we restructure things to make more good jobs at home for working Americans,” he said. “Those are the choices.”

The pandemic has illuminated exactly how the current economic structure benefits some and disadvantages others, and as a result, the country is witnessing a wave of resignations across sectors and a renewed interest in unions. Searches for “how to send a resignation email” have risen 3,450 percent in the past three months, approval of labor unions is at its highest point since 1965, and there are currently 295 active strikes across the United States. As Kaitlin Byrd put it for DAME earlier this month, the American workforce has had it. Many people seem eager to recalibrate how current global supply chain mechanisms and national economic policy perpetuate ever-growing inequality and accelerate the quickening pace of climate change.

On an individual level, Wheaton suggests that shopping locally supports communities and businesses at home. For Scott and Jacobs, there needs to be serious and comprehensive federal action if there is any hope of lasting change. The Biden administration’s Build Back Better plan would certainly be a start.

“To me, the real question is how much these changes get institutionalized,” said Jacobs. “How do you turn this upsurge into changes [to the] law, changes at how we’re operating at our ports, changes in our system around the availability of care, both childcare and eldercare, that allows people to engage in the workforce. There’s a whole range of systemic questions that if we solve [at] this moment can have a big positive long term effect on our economy and on and on workers. If we fail to solve it at this moment, we’re going to have a very different effect.”

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