Why Shortages Are Permanent: Global Supply Shortages Make Fantastic Financial Sense (for Business Cartels)
Posted by freedomforall 3 years, 2 months ago to Business
Excerpt:
"he era of abundance was only a short-lived artifact of the initial boost phase of globalization and financialization.
Global corporations didn't go to all the effort to establish quasi-monopolies and cartels for our convenience--they did it to ensure reliably large profits from control and scarcity. Not all scarcities are artificial, i.e. the result of cartels limiting supply to keep prices high; many scarcities are real, and many of these scarcities can be traced back to the stripping out of redundancy / multiple suppliers of industrial essentials to streamline efficiency and eliminate competition.
Recall that competition and abundance are anathema to profits. Wide open competition and structural abundance are the least conducive setting for generating reliably ample profits, while quasi-monopolies and cartels that control scarce supplies are the ideal profit-generating machines.
...
Back in the good old days before globalization and financialization conquered the world, corporations lined up three reliable suppliers for every critical component, as this redundancy alleviated supply chain chokeholds. But to keep those three suppliers in business, you need to spread the order book among all three. Nobody will keep a facility open if it's only used occasionally when the primary supplier runs into a spot of bother.
And so now we're all seated at the banquet of consequences flowing from stripping out redundancy and competition, and ceding control of supply chains to quasi-monopolies and cartels. Scarcities are their source of profits, and since it makes zero financial sense to spend a fortune building a plant to make solvents, lubricants, alloys, etc. in limited quantities in markets dominated by quasi-monopolies and cartels, shortages are a permanent feature of the 21st century global economy."
"he era of abundance was only a short-lived artifact of the initial boost phase of globalization and financialization.
Global corporations didn't go to all the effort to establish quasi-monopolies and cartels for our convenience--they did it to ensure reliably large profits from control and scarcity. Not all scarcities are artificial, i.e. the result of cartels limiting supply to keep prices high; many scarcities are real, and many of these scarcities can be traced back to the stripping out of redundancy / multiple suppliers of industrial essentials to streamline efficiency and eliminate competition.
Recall that competition and abundance are anathema to profits. Wide open competition and structural abundance are the least conducive setting for generating reliably ample profits, while quasi-monopolies and cartels that control scarce supplies are the ideal profit-generating machines.
...
Back in the good old days before globalization and financialization conquered the world, corporations lined up three reliable suppliers for every critical component, as this redundancy alleviated supply chain chokeholds. But to keep those three suppliers in business, you need to spread the order book among all three. Nobody will keep a facility open if it's only used occasionally when the primary supplier runs into a spot of bother.
And so now we're all seated at the banquet of consequences flowing from stripping out redundancy and competition, and ceding control of supply chains to quasi-monopolies and cartels. Scarcities are their source of profits, and since it makes zero financial sense to spend a fortune building a plant to make solvents, lubricants, alloys, etc. in limited quantities in markets dominated by quasi-monopolies and cartels, shortages are a permanent feature of the 21st century global economy."
Whenever there is some service or utility or product owned or controlled by governments this happens.
First, the idealists take over, then the incompetents, then capital is rationed, prices go up as production goes down, competition has long been squelched. Government likes the secure ever increasing income, leaders of big unions get big pay increases- no competition, rake-offs to politicians.
The public gets acclimatized to prices from these industries always going up faster than general inflation, there are constraints on demand, and rationing to ensure 'fairness'.
There have been some sell downs / privatizations. The government business entity is a good takeover target with built-in high prices and vast scope for cost cutting. Another source of money for government tho' big unions complain. Across the economy this has little effect, as stultification marches on a broad front, see below.
But now, there is a new development- the old communist slogans have long gone having merged into socialism then to woozy communitarianism. We are entering a new fascism, a merger of the pinnacles of our society into one voice- government, big business, media, tech, education, religion, banking, into one soggy sponge well described as DeepState. This is a regression of centuries into feudalism.
Back to goods and services- competition from small players who were the usual challenge to the big monopolies, is made harder as government changes the rules by imposing regulations on everything to make small business nigh impossible. Only employment with the big corps and government is possible.
[Reminder, that story of Despina, the Greek woman who wanted to set up a bakery, posted here about 5 years ago].
Regulations cover employment, health, environment, safety, packaging, advertising,. .the whole range of everything a business does, so much of it, so complex that only the big organizations with departments of specialists can handle all that.
Charles Hugh Smith uses the terms globalization and financialization, these terms describe very well what is happening.