DAVE DAVIES, HOST:
This is FRESH AIR. I'm Dave Davies. Do you remember how in the early months of the pandemic, you couldn't find toilet paper or cleaning products on store shelves? And then soon enough, all kinds of other products were hard to get, from building materials to exercise equipment to new cars because automakers couldn't get computer chips. Our guest today, New York Times correspondent Peter Goodman, has spent a lot of time rummaging through the wreckage of those disruptions in the supply chain, discovering things less well known, like the 1 billion pounds of harvested almonds that California growers couldn't get to foreign buyers because hard-pressed shippers were busy with more profitable traffic.
DAVIES: In his new book, Goodman explores the business decisions that left the economy vulnerable to a disruption like this and the erosion of government regulation over critical transport industries that left their capacity to move freight weak and brittle. All those issues, he says, were exacerbated by the corporate drive to maximize short-term profits. The ultimate threat to the supply chain, he writes, is unregulated greed. Peter Goodman is the global economics correspondent for the New York Times. His new book is "How The World Ran Out of Everything: Inside The Global Supply Chain."
DAVIES: Well, Peter Goodman, welcome to FRESH AIR.
PETER GOODMAN: Thanks so much for having me.
DAVIES: In April 2020, when all this - the pandemic really hit us, your wife was about to give birth to your third child, and she'd had a premature child in the second. So maybe a little more care and caution than a lot of parents would be expecting. And you write that she was unable to get some needed items, you know, rubbing alcohol, disinfectant wipes, backup baby formula. I mean, you were experiencing this as we all were. Just remind us of some of the dimensions of this breakdown in the supply chain, some of its really meaningful impact.
GOODMAN: Sure. I mean, it was cosmically bewildering. We were, you know, in London in lockdown, and my wife was pretty stoic about the fact that I couldn't be in the hospital for more than an hour. Her parents couldn't fly in from New York to look after the baby. But to then go online and look for hand sanitizer once we were home and discover there was nothing to be found. And then you couldn't even find the ingredients to make your own hand sanitizer, and, of course, this was true throughout much of the global economy, right? We didn't have personal protective gear for frontline medical workers who were dealing with COVID patients. We ran out of computer chips. We, of course, ran out of toilet paper. I'm sure everybody remembers that.
And there was just this sense that something kind of deep that we had all taken for granted, that we all agreed on, you know, that you could click on your button on Amazon or whatever e-commerce provider you liked and wait a few hours or a couple of days or whatever, and a truck would show up at your door. Well, now, even that had broken down in the middle of this public health catastrophe that was, of course, incredibly confusing. It was very disconcerting.
DAVIES: Right. Right. You know, there's a guy whose story runs through the book, a fellow from Mississippi named Hagan Walker, who had a startup company called Glo, and his efforts to produce and get a product that was really important to his business is kind of illustrative of some of what was going on in the supply chain. What did he make?
GOODMAN: So he made these novelty cubes that light up when they're dropped in water, and this started off as a thing you could sell to bars, the bartender could look down the bar and see who needed a refill because the light went off. And then he discovered that - he heard from somebody whose child was autistic and bath time had been really just a difficult time. And somebody dropped one of these cubes in the bath, discovered that the child was transfixed by this, and that generated this idea to make these bath toys.
And when I met Hagan Walker, he had recently gotten a deal with "Sesame Street." He was making these Elmo and Julia - that's another character - themed bath toys, using factories in China to make these cubes and shipping them in the first shipping container - it was the first time he'd ever had an order big enough to fill a whole 40-foot shipping container, these, you know, boxes that are like the workhorses of the global economy. And so I ended up tracking this one container from this factory in China to his warehouse in Mississippi, and it was a harrowing journey.
DAVIES: Right. This was a make-or-break thing for his, you know, emerging company. One of the things that's interesting is that when it was time to decide how he would find someone to manufacture these little figurines. He wanted to do it in the United States. He really wanted to have jobs here. He couldn't seem to manage that. Why?
GOODMAN: So much of the productive capacity had shifted overseas and specifically to China. So, you know, Hagan Walker's in his college town, Starkville, Miss., where he got a degree in engineering, and he likes the idea of keeping the business in the country. But as he calls around, he discovers, one place can make these steel plates he needs, the kind of molds for his product. But it's 12 times the cost of China. Another place has a slightly lower cost, but it turns out they're just farming the work to China and capturing a cut for themselves. Then at one point, he wants to make this kind of - imagine a children's pop-up book, like that kind of packaging for his product, and he has a meeting with somebody in the States who says, this is just so complicated. You know, you just have to have this made in China.
DAVIES: This is illustrative of what's happened in recent decades where China has emerged as this huge manufacturing power. The numbers are really striking. Chinese companies were making 80% of the world's air conditioners, 70% of the mobile phones. And this drew a lot of criticism from Donald Trump and others, you know, the Chinese are eating our lunch. The balance of trade is terrible. You say if this was a crime, what was happening with the trade imbalance, it was an inside job, right? Meaning what?
GOODMAN: That the reason why so much productive capacity is shifted to China, why so many factory jobs end up in China, is because of what American and other Western corporate executives decided was in their best interest. I mean, they had been perpetually on the prow for ways to cut costs. They liked the idea of getting out from under labor unions. Unions were effectively banned in China. They like the idea that you could make your own rules. You didn't like an environmental regulation, you needed a big piece of land, as long as you cut in a local communist party official, you could do your deal. And ironically, as I argue in the book, maybe one of the greatest joint ventures in the history of global capitalism is that between Walmart, the world's largest retailer, and the People's Republic of China, this entity that comes out of a peasant-led rebellion in the name of Marxism. And this becomes really the center of the global economy for a time, making goods at an enormous scale.
So what we failed to do in the States was apportion the bounty of trade, and that's why we've had this backlash. I mean, we have had a consumer bonanza from this trade. Prices have gone down. We've got consumer choice. It's been very good for the investor class. It hasn't been good for a couple million workers who lost their jobs and who've largely been abandoned. But yes, that part is an inside job.
DAVIES: And you have a moment where you describe visiting a global procurement center for Walmart in the Chinese city of Shenzhen. Describe what you saw and what it tells us?
GOODMAN: Yeah, this was 20 years ago. What I saw was this waiting room full of the kinds of uncomfortable chairs that you'd see in an elementary school, you know, this sort of all-in-one desk chairs. People drinking tepid cups of tea out of these little plastic cups, sitting for hours and hours for their chance to go pitch a Walmart buyer on their products. And Walmart engineered this so that, you know, you would get your turn. Oh, you make Christmas trees, you make microwave ovens...
DAVIES: And these are Chinese manufacturers saying, hey, we want your business.
GOODMAN: These are Chinese - that's right. These are Chinese manufacturers saying, we can satisfy your demand for cheap goods. And Walmart would say, well, OK, here's the price we're willing to pay, and the Chinese factory reps would know full and well if they don't meet that price, even if that's a price that's so low, that they're going to have to squeeze labor, they're going to have to take shortcuts on workplace and environmental standards. They're going to have to get some credit to go get the materials. Well, they know that out there in the waiting room are representatives for all of their competitors, and somebody out there is going to be desperate enough for cash right now, and they'll take the terms of the deal.
DAVIES: Wow. So we have this situation where these hundreds and hundreds of, you know - thousands of factories all over China are making this stuff, and American investors and other investors are making a lot of money from it, and American consumers are getting really cheap goods. And one of the things, of course, that makes it work is cheap transport. These container ships, these 40-foot containers and these - I mean, the vessels that do these, some of them are as long as the Empire State Building is high. They can...
GOODMAN: Right.
DAVIES: ...Take - what? - tens of thousands of containers at a time, right? How cheap does it get to be to ship your stuff?
GOODMAN: Well, it gets to the point where, you know, as the CEO of Columbia Sportswear put it to me at one point, it feels like it's free. Like, you don't even have to think about it. I mean, the container standardizes shipping.
So, you know, before the shipping container comes along in the 1950s, loading and unloading any kind of cargo vessel is this excruciating, dangerous, grueling process. You know, we're going to put the barrel of chemicals over there. We got to figure out how to fit in the big side of beef over here, and it's very much a jigsaw puzzle.
And once the shipping container comes along, you can load factory goods or really anything into this standard-size box. That box can be lifted up by crane. It can be put on the back of a truck. It can be hoisted onto rail. It can be lifted onto the ship.
So that makes everything cheaper and quicker, and it invites these CEOs of publicly traded companies who are scouring the globe for the cheapest possible place to treat factories in China as if they might as well be in Ohio or Dusseldorf or wherever. You know, as long as a ship comes calling somewhere, and you got road and rail connections, it's all just one big grid, and it largely works that way, except when there are shocks.
DAVIES: Right. The other element of this, which sets up the disaster we experienced in the pandemic, is a change in management practices that dealt with how companies, both manufacturers and retailers, handle the inventory, how many goods they have on hand. You want to explain this?
GOODMAN: Yeah, sure. So Toyota, at the end of the second world war, pioneers this notion that's come to be known as just-in-time manufacturing or lean manufacturing, and the idea is fairly simple and sensible. It's the end of the second world war. Capital is very limited. Japan's dealing with the devastation of the war. They don't have that much developable land.
So Toyota says, well, instead of running our operations the way Ford did in the heyday of mass assembly in the States - just making as much stuff as you possibly can and letting salespeople figure out how to sell it - let's just make as many cars as we need to replenish those that are being sold. Let's get our suppliers to give us the parts and the materials we need right when we need them on the assembly line.
And this is very effective. It's very useful. And then along comes financialization, you know, the paramountcy of the shareholder interest and consultancies like McKinsey, who essentially say to the corporate executive ranks, lean manufacturing, just-in-time manufacturing - this is a way for you to just slash your inventory. Take the savings. Instead of sticking all these parts and extra products in warehouses as a hedge against troubles that aren't going to happen, you know, right now, probably, give the money to yourselves through executive compensation, you know, as a reward for being brilliant enough to hire McKinsey. Give it to shareholders in the form of dividends and share buybacks. That makes share prices go up, and everybody's happy.
And when one day, there is a shock and you run short of inventory, well, that'll be somebody else's problem. But by then, you know, you'll be presumably sleeping in a hammock on some beach hoisting a cocktail.
DAVIES: So we have this system that works. I mean, Chinese manufacturers will make anything. They'll make it cheap. You can ship it cheap, and it will get there quickly unless something goes wrong. And it works for a lot of companies.
Let's take a break here. We're going to need to take a break. Let me reintroduce you. We are speaking with Peter Goodman. He's the New York Times global economics correspondent. His new book is "How The World Ran Out Of Everything: Inside The Global Supply Chain." We'll continue our conversation in just a moment. This is FRESH AIR.
(SOUNDBITE OF STEFANO BOLLANI'S "ALOBAR E KUDRA")
DAVIES: This is FRESH AIR, and we're speaking with Peter Goodman, the New York Times Global economics correspondent. He has a new book analyzing the disruptions in the supply chain that came with the pandemic. It's called "How The World Ran Out Of Everything."
So we have this system where the Chinese are manufacturing all this stuff, and American buyers get it, and they get it quickly because there's all this terrific shipping across the Pacific on these container vessels. And then COVID hits, and Americans are trapped at home, and they - but they still want stuff, right? They're not going to restaurants or taking vacations, so they want exercise bikes and materials to outfit their home offices.
But pretty much every commercial enterprise, including Chinese factories, are shut down or impaired by the pandemic because workers can't get there. So this finely tuned system where goods are ordered at the last minute and come over quickly and cheaply is disrupted. Tell us about the container shipping leg of this chain and what happened.
GOODMAN: Sure, so containers got sent out to places where they don't normally go in volume because China is an enormous source of basic building blocks for pharmaceuticals and most directly for things like, you know, face masks, medical gowns. So they were unloading this stuff in places like West Africa, parts of Latin America, parts of India. And then normally, a container gets loaded up with goods that are going somewhere else. But a lot of these places that had this dire need for PPE didn't have that much to send out.
So they're getting stacked up, and as China turns itself back on after the first wave of the pandemic, migrant workers start coming back from rural areas, and factories are moving again. A lot of products being made because - as you say, while business assumes that there's going to be this enormous drop in demand because the pandemic is an economic downturn, so they slash orders for lots of stuff, this is a terrible miscalculation. And while we're not going to the gym, we're now putting Pelatons in our basements, turning our homes into gyms. We're not going to the office, but now we've got the need for computer monitors inside our bedrooms. Our kids aren't going to school. We got to entertain them. We're buying, you know, trampolines. We're buying barbecues because we can't go to restaurants. And so all of this surge of factory goods, much of it from Asia, needs to be put into these containers, and the containers are not where they're supposed to be.
So the result is that shipping prices go up dramatically. I mean, before the pandemic, it costs somewhere below $2,000, typically, to move a container from a port like Shanghai to Los Angeles or Long Beach. These two ports are the gateway to 40% of all imports reaching the United States by container. And suddenly, the price is 20,000 - 25,000 when you throw in the extra handling charges, and even companies that are willing to pay whatever it costs are discovering they simply can't get space on the ships because the largest companies - Walmart, Target, Amazon - they're chartering their own ships, they're paying whatever it costs to keep their cargo moving.
DAVIES: Right. So costs rose dramatically. And, you know, it's interesting because you mentioned that McKinsey & Company, the management consulting firm, had advised all of these American companies, you know, keep your inventory lean. You can load up when you need it in a hurry. And you talked to one of their consultants who was kind of the great apostle of this, Knut Alicke. And you actually asked him in 2021, was this a good idea? What did he say?
GOODMAN: Yeah, he said, oh, we overdid it. We went a little too far with just-in-time. Now it's about just-in-case. We need to build back more inventory. You know, he changed the talking points.
DAVIES: There was this phenomenon which people wrote about at the time of scores of ships anchoring off the shores of Southern California because these ports simply could not get them in to unload their stuff. And this was a huge bottleneck. It caught a lot of attention. In October of 2021 - and this is pretty well along to the pandemic - President Biden says he is going to order the ports to start operating 24 hours a day to eliminate this bottleneck and get the supply chain moving again. You write that the people who had power over the ports were actually benefiting from this continued chaos. Explain - who is this? Why?
GOODMAN: Well, the shipping carriers are essentially an unregulated or lightly regulated international cartel. There's - you know, there are scores of international carriers, but they're organized into three alliances. Think like, you know, your airline alliance. And three alliances dominate upwards of 95% of the trade across the Pacific. And these shipping carriers, by the way, operate the terminals at the major port. So in LA and Long Beach, these giant carriers like Maersk, MSC -they actually control these terminals. So they have an interest in cargo continuing to move, but they also benefit from the fear for importers that, I don't know if this stuff is going to be able to come in. I see these floating traffic jams - you know, 50, 60 ships just bobbing off the coast of Southern California, like involuntary warehouses at sea.
So I'm willing to pay whatever it costs. I will pay whatever handling charges are being demanded to get my stuff on a ship, so I make it to the holiday season. You know, imagine if your airline could charge you ten times as much for a ticket to wherever you happen to be going when it snows, and, by the way, your airline also decides when and how to plow the tarmac. Well, if there are takers for those terms at 10 times the price, how much incentive would they have really to plow quickly?
DAVIES: Right. So in effect, managed scarcity works for them.
GOODMAN: I mean, a lot of this story is engineered scarcity through monopoly power.
DAVIES: You know, there was this guy that you write about throughout the book from Mississippi, Hagan Walker, who had this little company, and it was a huge moment that he finally had an order for enough of these little dolls he was going to make for Sesame Street characters to fill a container. And he was caught in the middle of this. And so he would call these brokers or whoever kind of manages all this. And it was like a nightmare. What was his experience trying to get a container to bring his stuff from China to the United States?
GOODMAN: Yeah. It was a nightmare. This is the biggest order in the history of his company. He's got this breakthrough deal with "Sesame Street." He's got to get this stuff to Mississippi in time for the holiday season of 2021, and he has a hard enough time just getting the stuff made in China because of shortages of raw materials and quarantines and a shortage of workers. Eventually, he gets his order made, and then he discovers that the price has skyrocketed from 2,000, 2,500 bucks, maybe, to north of 20,000, and when he agrees to pay - he's constantly told by these brokers. He's talking to brokers in the states, brokers in Hong Kong, brokers in China, and they're telling him, yeah, unfortunately, there's just no space on the ship, and one booking he gets, he's told you have to settle terms within 24 hours. You have to pay upfront in 24 hours or we'll give this to somebody else, which is a sign of how quickly the price is going up. He agrees. He's told there's still no room on the ship. It takes him months to eventually get this single 40-foot container onto the deck of a ship that's headed for the port of Long Beach.
DAVIES: All right. Well, his problems weren't over, but we'll get back to that. Let's take another break here. We are speaking with Peter Goodman. He's the New York Times global economics correspondent. His new book is "How The World Ran Out Of Everything: Inside The Global Supply Chain." He'll be back to talk more after this short break. I'm Dave Davies, and this is FRESH AIR.
(SOUNDBITE OF JOHN BUNCH JOHN AND PHIL FLANIGAN'S "ON A SLOW BOAT TO CHINA")
DAVIES: This is FRESH AIR. I'm Dave Davies. We're speaking with Peter Goodman, global economics correspondent for The New York Times. He has a new book which examines the supply chain breakdowns that rippled through the world's economies during the COVID pandemic. He finds that decisions made in recent decades by corporate managers seeking to maximize profits, and politicians determined to deregulate critical industries, left the economy vulnerable to the disruptions that made everything from toilet paper to computer chips hard to come by for more than a year. Goodman's new book is "How The World Ran Out Of Everything."
There were problems getting container ships from China to the United States and then problems, you know, getting them unloaded, particularly at these two ports in Southern California, which is where something like 40% of the nation's container cargo comes. And one of the issues is that people who move the cargo once the containers are unloaded from the ships, those are truckers. There's a category of truckers who are short-term drivers who drive around the port and take the containers to warehouses, where they can then be sent on longer-distance runs. Why was there a bottleneck here?
GOODMAN: Well, there was a bottleneck because the whole system got overwhelmed at once. But for the so-called dray operators, these short-haul truck drivers, it was very difficult to get appointments to get into the port to pick up containers because the ports were, you know, just loaded up with these huge stacks of goods. I mean, dockworkers were sick. You didn't have as many dockworkers working at some points. You have this incredible volume of stuff coming into the ports. It was particularly bad in Southern California, but it was bad, really, everywhere - Savannah, Newark, ports off of China. I mean, at one point you have something like 13% of the global container shipping fleet just floating around, waiting to load and unload.
So these dray operators are finding it very difficult to get access to the ports. Then once they get there, they often can't get a chassis. This is the thing that holds the container behind the truck. There's a pool of chassis controlled by Amazon. The Amazon drivers are able to get their stuff out of there very quickly. Everybody else has got to wait, and there was just such a crush. And at the same time, you know, rail is breaking down. So if you're bringing a container to a railyard, sometimes the railyards are not even allowing you to drop it off. And if you can't drop off your container then you have no room to pick up the next one. The warehouses inland, where the dray operators are going, they're dealing with shortages of workers there and inventory that's just piled to the rafters. So everything just sort of gets stuck and a blockage in one place tends to create a blockage in other places.
DAVIES: Right. And a problem both with these short-term truck drivers as well as the long-haul drivers is that there's just aren't enough of them. I mean, you know, when they're stuck waiting to get into a warehouse or get into a port, that's unpaid time. It makes it a pretty unappealing job. In fact, the shortage of truck drivers has been a problem that's been building for years. Maybe explain how it got that way.
GOODMAN: Yeah. I put shortage in air quotes, because if something is short for more than a decade, and the industry is complaining about it while demanding that the federal government subsidize the pipeline of people willing to be trained to become truck drivers, you got to say there's a structural problem here.
And the structural problem is that we have downgraded truck driving to such an extent over decades that it's a job that, you know, once there's an alternative way to make a living, or once you wake up and discover that you've been had by a predatory leasing scheme to buy your vehicle - or you've agreed to drive for a company that's not treating you well for months or years as a way to pay back the inflated training program that they fed you into, often with federal or state subsidies - you know, more and more people say, well, I don't think so. And the minute unemployment drops and there are other alternatives - and of course, the pandemic itself was such a shock that people were afraid to venture out - people go find other ways to make a living and they don't go back.
DAVIES: Trucking used to be an avenue to a middle-class lifestyle. I mean, there was a very powerful union, the Teamsters - some would say too powerful, too corrupt. But certainly, they had contracts so that you could drive a truck. And it wasn't the easiest job, but you could have a middle-class life. What happened over time to the leverage that drivers had so that they're now in the point where it's really not that appealing or that beneficial?
GOODMAN: Yeah, so truck driving has always been hard. It's always involved, you know, sitting behind the wheel for long hours and trying not to fall asleep and being away from your family. And that's been challenging. But back when the Teamsters were in charge and there was regulation - the Teamsters are, of course, a highly controversial union, but they demonstrate the power of having a union. Wages were quite high, and people could earn, you know, very comfortable wages and support their families.
And then when trucking got deregulated in the Carter administration, we had this influx of cheap, quick competitors. And perversely, we sort of got too much competition with no regulation over the working conditions and the prices. The union got decimated, wages got pushed through the floor. And then came this host of predatory schemes by the trucking industry to keep the pipeline going for new recruits. You know, a lot of advertising about the glories of the open road and the freedom to work for yourself, when in reality, a lot of people signed off on these leasing arrangements where they were stuck without any other options.
DAVIES: What's the turnover rate in trucking?
GOODMAN: The turnover rate is above 100%. I mean, the company that I was dealing with was proud of their turnover rate, which was, you know, right around 100%, meaning in the course of a year they have to go find - replace, you know, virtually all of their drivers. That's how frequently people leave this profession. And, you know, the trucking industry will say, yes, but generally, they go to other companies, so that's somewhat misleading. That's true. But, you know, if people are leaving that frequently, that's a pretty good clue that they're not all that happy about their working conditions.
DAVIES: How did all this figure into the disruptions in the supply chain when it happened during the pandemic?
GOODMAN: Because as we get this crush of factory goods coming into ports - and it's got to be moved around the country to warehouses and then on to people's homes and businesses through e-commerce, or to distribution centers or store shelves - we're told again and again, well, there aren't enough truck drivers to do the job. Never mind the fact we've got roughly 10 million people with commercial driver's licenses in the United States. That's roughly three times as many as we need. I mean, that tells you right there we've got the people. What we've run out of is people willing to sign off on the miserable deal that is driving a truck in America.
DAVIES: So the guy that you follow in the book, who was from Mississippi, who had this order of tens of thousands of Elmo figurines that he needed to get for the Christmas shopping season, he manages to get them from China. He's got to find a trucking operation that will get them from the West Coast to Mississippi. How did that go for him?
GOODMAN: That's tough, and he's really sweating it out, and then he finds a guy in Queens who knows somebody who manages to locate a long-haul driver. And miraculously, he is able to get these Elmo dolls to his warehouse in Mississippi in time for the holiday season. But he was sweating it out right till the end.
DAVIES: Have you stayed in touch with him? Did it sell gangbusters? Is he doing well?
GOODMAN: Oh, yeah. Hagan's doing very well. It's a growth business. I mean, he's thinking seriously about how to move production out of China, but he's discovering that China has got this unbeatable combination. So every time he looks around - he thinks about Vietnam, he thinks about Cambodia - he ends up staying in China because the efficiency there is just unbeatable.
DAVIES: You know, it's a theme of a lot of the industries you look at that there's been this concentration of power and monopolization, which allows them to control markets and raise prices during the pandemic. You write that the shortages were not an accident, but rather the outgrowth of concerted strategy. For decades, some of the largest businesses had amassed chokeholds on their markets while limiting the supply of their products as a way to charge higher prices. The thing that puzzled me as I thought this through about how they in effect managed scarcity to raise prices...
GOODMAN: Yeah.
DAVIES: ...During the pandemic was that, I always thought it's axiomatic that any business will set prices to maximize revenue. And if, in fact, they could have raised prices by, shortening the supply of what they're selling, why wait for the pandemic? Why not do that in 2012, 2015?
GOODMAN: Well, the thing about the pandemic and the anxiety that it's provoked, you know, not just for ordinary people, but of course, for businesses too, who have to pay the cost to get their goods onto ships, onto rail, wherever, is that nobody really knows how much of the increased price is legitimate recouping of extra costs, and how much of it is some form of profiteering. And the deregulation has really been about optimizing the supply chain for the interests of the biggest players so that they get their sweet deals, and the rest of us get whatever we get. So when the pandemic comes along and generates all this anxiety, it's a tremendous opportunity, especially if you're in an industry that has minimal competition, to lift the prices way beyond whatever your own additional costs are.
DAVIES: Let's take a break here and then we'll talk some more. We are speaking with Peter Goodman. He's the New York Times' global economics correspondent. His new book is "How The World Ran Out Of Everything: Inside The Global Supply Chain." We'll talk more after this break. This is FRESH AIR.
(SOUNDBITE OF SLOWBERN'S "WHEN WAR WAS KING")
DAVIES: This is FRESH AIR. We're speaking with Peter Goodman, the New York Times' global economics correspondent. His new book about disruptions in the supply chain during the pandemic is "How The World Ran Out Of Everything."
All right. So let me ask you a really loaded question. I mean, between now and November, we're going to hear Republicans attack Democrats and President Biden specifically on the issue of inflation. You know, inflation actually has gone down quite a bit, but prices have not returned to where they were before, you know, the surges that we had, and it's a generation that hasn't seen this kind of inflation, like, like I did back in the '70s. Who's really to blame for this? I mean, you know, the disruptions of the supply chain had an effect. Did the legislation, which Congress and President Biden signed, passed, which, pumped money into the economy in a desperate time - how much of an impact was that? Who's to blame for the inflation, if you're fair about it?
GOODMAN: The supply chain certainly deserves a lot of the blame for the inflation, and a lot of the supply chain problems reflect decisions that go back again, to Carter. Then, of course, Reagan aggressively deregulates, and Reagan brings the era of no antitrust enforcement, which has continued, you know, straight on through every administration until the turn that we've seen under Biden. Additional spending, pandemic spending, certainly boosted demand, and that's part of why we've seen inflation. But you have to ask yourself, why is this supply chain so prone to increase costs when there are shocks. Why is there scarcity? And that's very hard to pin on any individual presidential administration. That reflects a series of policy decisions made, you know, over decades that have put us in a position where every time there is a shock, a whole bunch of large industries celebrate record profits.
DAVIES: Well, you know, after the painful disruptions of the pandemic and increasingly tense relations between the United States and China, which has led to more tariffs on Chinese goods, there's been something of a reevaluation of manufacturing businesses about where they're going to get their goods made - maybe a movement away from China. So a lot of manufacturing is going to Mexico, some of it to Vietnam, though, as you say, that's dependent on China's supply chain to some extent. There also is a movement to bring jobs back to the United States - reshoring is the term, I guess - the opposite of offshoring. Are there a lot of manufacturers who are really making stuff in the United States that they wouldn't have five, 10 years ago?
GOODMAN: There are some. I mean, I think some of this is overblown. I mean, you've got the big strategic industries where national security is invoked - like computer chips, right? So the Biden administration has concluded that it's not such a great idea to depend upon an island, Taiwan, that happens to be 90 miles off the coast of China, a country that happens to claim that island for its own, and that we not incidentally are having a trade war with, to produce the brains of modern industry, the computer chip. So Biden administration has distributed tens of billions of dollars in subsidies to try to get computer chip plants going in the states. More recently, we've got tariffs to go along with subsidies to generate electric vehicles.
I mean, that's a key emerging industry that the Biden administration has decided is supposed to be here strong in the United States. That sort of stuff will happen because the money that's being handed out by the federal government is really significant. Now, I tell the story in the book of a guy named Taylor Shupe who was one of the founders of Stance, the sock brand that Jay-Z's got a song about NBA players wear these socks. Taylor Shupe is a guy who spent much of his adult life in China figuring out how to make stuff for Americans. He's now got a new factory in Oceanside, Calif., where he's making socks for the American market using entirely American labor. And he's a guy who's very social-media-focused, very fashion-sensitive. And he's concluded that made in China is now a branding liability, whereas made in the USA is a branding benefit. That's happening to some degree, but a lot of the details, when you dig in, are less than overwhelming.
DAVIES: You know, a major point in the book is that the supply chain really had come to depend on routine forms of labor exploitation. I mean, truckers who get paid a little and have a lot of unpaid time and other people who just have been exploited in a way. Has the trauma of the supply chain disruption changed the thinking of employers in any way about how to treat employees, how to compensate them to have a reliable workforce?
GOODMAN: Well, I think in some ways, it's the reverse. You know, I mean, there's this huge push to embrace automation, robotics as a way to get out from under having to deal with people together. Robots don't get sick in a pandemic. They don't have to stay home and take care of children who are cooped up with distance learning. There's nothing wrong with automation and robotics, as long as we're doing it in a context where workers have some say over what happens to them and where there are other opportunities for people who are displaced. But think, especially in the States, American labor is not wrong to say, if we lose our jobs, it's a steep way down. We don't have national healthcare. We don't have programs to help people with housing. We've got things like trade adjustment assistance that you know, seriously underfunded. So when you do lose your paycheck, it's a pretty lonely existence.
On the other hand, we've seen labor mobilization come out of the pandemic, and that's something that should give us some hope that we'll have a more reliable supply chain. I mean, I tell the story of Henry Ford in the book, who's a problematic character for all sorts of reasons, but he did know a thing or two about the supply chain. And he famously, back in 1914, doubled wages for workers at his factories. He was called a communist by some people in American business. He said, I'm not a communist. I'm a capitalist, and I want to make my products reliably, and I've figured out that any business that rests on low-wage labor is inherently unreliable. And that is - that's a realization that I think those of us thinking about the supply chain have come to. But the same pressures on corporate executives to slash costs and think about the next quarter are still with us, which should sort of make us cautious about any pronouncements about where we are now.
DAVIES: You know, as I read the book, I mean, it struck me that a lot of what you're writing about that led to these terrible disruptions for the supply chainer in the pandemic, are in some ways a reflection of something that we've seen for decades now, which is the great increases in inequality and wealth and income and economic concentration in the economy. And when you pair that with a political system in which court decisions have essentially opened the gate, floodgates to unlimited campaign contributions, it's kind of hard to see how you get out of it. What do you think?
GOODMAN: Yeah, I mean, this verges into my last book, "Davos Man: How The Billionaires Devoured The World." There's no question that people running our publicly traded companies have done a very good jobC funneling most of the gains to themselves and to the investor class and then using their wealth to amass political power that they've used to tilt the conditions further in their favor. And that does make all of our systems very difficult to reform. I mean, in case of the supply chain, you got to remember, this is not some system that, like, a bunch of wizards, you know, contemplated while they were sitting on top of a mountain, thinking about the most efficient way to move things around. This is a series of systems that have built up in a very ad hoc, improvised fashion with a lot of kind of cultish reverence for deregulation along the way. So it's so complicated that it's somewhat similar to finance after the great financial crisis. The complexities are so great that even the insiders don't really know where all the risks are, and you combine that with the point you're making about campaign finance, and inequality, and there is a powerful reinforcement of the status quo time and again.
DAVIES: Well, we'll see where it takes us. I'm sure you'll keep reporting on all this stuff.
GOODMAN: For sure.
DAVIES: Peter Goodman, thank you so much for speaking with us.
GOODMAN: Thank you, Dave.
DAVIES: Peter Goodman is the New York Times' global economics correspondent. His new book is "How The World Ran Out Of Everything: Inside The Global Supply Chain." Coming up, TV critic David Bianculli reviews the sequel to the science fiction series "Orphan Black," titled "Orphan Black: Echoes." This is FRESH AIR.
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