By Gordon Hull
I know there’s a lot of ways to develop that thesis! Let me focus on one: the fetishization of “efficiency,” and its corollary, just-in-time supply chains. In a recent piece in The Atlantic, Helen Lewis argues that a lot of the disruption in consumer goods (toilet paper, etc.) is initially attributable not to hoarding, but tiny, unanticipated fluctuations in demand. Stores don’t carry extra product in the back any more; rather, they keep their shelves stocked by way of a very elaborate, data-intensive logistical operation that delivers enough product to keep items on the shelf, but no more. Hence the name “just-in-time” capitalism. Why would you prefer such a system? Excess stock is inefficient: it just sits there taking up space when it could be sold elsewhere, and you had to pay people to make it, even though you’re not getting paid for selling the product that’s sitting in the back of the store.
The innovations to supply-chain that enable just-in-time capitalism go well beyond the idea that stores should keep minimal stock, however. If neoliberal financialization has taken a lot of the theoretical attention since 2008, it’s important to remember that financialization hasn’t been the only point of late capitalism. For example, a pair of McKinsey reports in the early 2000s looked back on productivity growth in the late 1990s, widely attributed at the time to developments in IT. As one argues, IT was not the cause: within the sectors that grew, “the most important cause of the productivity acceleration after 1995 was fundamental changes in the way companies deliver products and services.” In “The Wal-Mart Effect,” McKinsey’s Bradford Johnson argues that:
“More than half of the productivity acceleration in the retailing of general merchandise can be explained by only two syllables: Wal-Mart. In 1987, Wal-Mart had a market share of just 9 percent but was 40 percent more productive than its competitors as measured by real sales per employee (the measure used for all company-level analyses in this study). A variety of Wal-Mart innovations, both large and small, are now industry standards. Wal-Mart created the large-scale, or “big-box,” format; “everyday low prices”; electronic data interchange (EDI) with suppliers; and the strategy of expanding around central distribution centers. These innovations allowed the company to pass its savings on to customers. By 1995, it commanded a market share of 27 percent and had widened its productivity edge to 48 percent” (McKinsey Quarterly 2002:1, p. 41).
In other words, our current retail scene – the one existing before Amazon – is attributable to Wal-Mart. The efficacy of this logistical innovation was evident in the immediate aftermath of Hurricane Katrina, in which Wal-Mart was able to deploy trucks of aid to the New Orleans area much faster the George W. Bush’s mismanaged FEMA. Amazon, in a sense, represents the intensification of this trend: maintaining brick-and-mortar stores is inefficient, if the logistical operation can be made sufficiently nimble and efficient.
As Lewis notes of empty shelves today, we all live in this just-in-time world: no one keeps stock of anything, because they assume that they can get it on very little notice. We never think about the incredibly sophisticated logistical operation behind that assumption. For that reason, “what happened at supermarkets is worth dwelling on, because it reveals a problem with one of the modern world’s most hallowed concepts: efficiency. As businesses and governments chase ever-tighter margins—ever-greater efficiency—they have created systems that are finely tuned, but also delicate.” Basically, efficient systems are prone to systemic shocks, where tiny disruptions cause the whole thing to fail. A few people buy more toilet paper, then the shelves are empty, and then people start panic-buying. This is not to say there was no panic-buying – but it is to say that you can’t explain the complete supply-chain meltdown without remembering that the supply-chain is fundamentally fragile, and fundamentally based on the ability to predict demand from one moment to the next. Throw in a pandemic, and that predictability is out the window. Lewis goes on to explain how efficiency has left British public services in relatively worse position to handle the epidemic: the NHS is chronically short-staffed, and even public housing made it impossible to have an extra room to quarantine somebody in.
Here, the problems with efficiency are evident in the looming catastrophe around ventilators and protective equipment (PPE). Most states are facing an immediate shortage, which will expose healthcare workers and patients to much higher risk of infection and death. Our Tinpot Dictator makes vague references to the national stockpile, but it turns out to be nearly exhausted already. In the meantime, a writer in Forbes offers a harrowing account of the functioning of the market in masks: following a broker, he notes that in one day, he watched 280 million overpriced N95 masks bought by savvy foreign buyers and earmarked to leave the U.S. That’s one day. Who gets the masks? The fastest buyers – the one who can prove their ability to pay the fastest, and who are willing to absorb higher prices. It’s the efficient market at work!
What about ventilators? The New York Times relates the history of a failed effort to improve the national stock of ventilators: a task trusted to the private market that ran around when a larger company bought the smaller one with the contract to build the ventilators, possibly with an eye to preventing competition from the upstart.
Know what else is efficient? Mergers! According to orthodox neoclassical antitrust theory as developed by Robert Bork, vertical integration is just fine, because it is sometimes beneficial to consumer welfare to have production centralized in a few sources. Here is Bork:
“The primary characteristics of the Chicago School of antitrust are two. The first is the insistence that the exclusive goal of antitrust adjudication, the sole consideration the judge must bear in mind, is the maximization of consumer welfare. The judge must not weigh against consumer welfare any other goal, such as the supposed social benefits of preserving small businesses against superior efficiency. Second, the Chicagoans applied economic analysis more rigorously than was common at the time to test the propositions of the law and to understand the impact of business behavior on consumer welfare” (The Antitrust Paradox, 1993 ed., p. xi, emphasis mine).
Whatever consumer welfare gains the ventilator market consolidation might have generated are now swamped by the loss in social welfare of not having an adequate stock of ventilators, or a ready way to get more of them. The larger company can make ventilators efficiently, and the market doesn’t demand more of them under normal conditions, so the government procurement program got wound down and lost in that and a subsequent merger. Now that there's a sudden demand, the product cannot be delivered in time.
Even if there were enough ventilators, there’s impending supply shortages of the medicines needed to operate them:
““This is a huge problem. Many of these drugs were already in shortage before Covid. The drug supply chain is one of just-in-time production and supplies. Nobody has two times, five times, or even 10 times the amount of drugs on hand that are going to be needed for this surge,” said Erin Fox, who tracks shortages and directs the drug-information service at University of Utah Health Care, which has four hospitals.”
In short, a market-based healthcare system organized around efficiency is about the worst thing you can go into a pandemic with. In guarantees that disruptions to supply resonate across the system, creating cascading failures that could have been a lot less bad if there had been some inefficient redundancy built into the system. When you have a President who refuses to fully utilize the Defense Production Act – designed to allow national emergencies to override market logic – you take the emergency brake off the terrible system.
Efficiency is also destroying the resiliency of people. It turns out that full-time workers with benefits aren’t efficient, and so corporations increasingly use either temporary, part-time or seasonal workers, on the one hand, or simply “contract” with gig workers. This much, at least, was seen clearly enough by Marx. As Marx reminds us, “Modern industry’s whole form of motion therefore depends on the constant transformation of a part of the working population into unemployed or semi-employed ‘hands.’” (Capital I, Penguin ed., p. 786). Capital accordingly creates a “disposable industrial reserve army” (784) of people who live on the periphery of the system and who are available for sudden demands of labor, and just as easily put back into the periphery. Those people are the ones who are most vulnerable to COVID infection. Some of them are physically vulnerable because they work the jobs that are “essential,” or are that are hiring now: Amazon is hiring 150,000 people and Wal Mart 100,000. They make it possible for the rest of us to stay at home. Others are economically vulnerable because they are disposable, people like restaurant servers, who can be dumped into the fringes of the reserve army until business picks back up. If they lose their jobs they have very little safety net, and their wages were never secure to begin with. Amazon is obviously not going to keep those 150,000 workers after pandemic-buying slows down.
These people also have the least access to adequate healthcare; even the modest benefits of Obamacare are closed to many of them, and Tinpot is currently refusing to re-open enrollment. Of course, COVID doesn’t care who it infects, and so the dependence of the system on a disposable industrial reserve army, and its vulnerability to infection, becomes a vulnerability for everyone. Even more vulnerable, of course, are the incarcerated and the homeless, and many, many incarcerated and homeless persons are about to get sick. Many of them will die. Coronavirus understands its Lenin, and is going for the weakest links in our social networks, links that we as a society not only have done very little to protect, but whose weakness gets celebrated in the name of efficiency.
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