Los Angeles ports have a huge queue of container ships that are waiting to dock and unload. The shortage of semiconductors is causing a backlog in worldwide orders for computers and other electronic devices. A huge container ship is stuck in the Suez Canal, clogging up merchant sea traffic. Rising energy costs due to delays in delivery of oil and natural gas. Stock shortages in food and consumer products. The global economy’s transportation and logistical infrastructure appears to have broken down in recent months, threatening global commerce at the moment when the world economy is trying to recover from the coronavirus pandemic.
More than 100 container ships waited in the United States to unload tens to thousands of containers at Los Angeles and Long Beach ports in October. These ports account for 40% of all shipping containers entering the United States. President Joe Biden was able to take advantage of this situation by naming them the “America’s Container Shippers”. order that the Long Beach portOperate around the clock. Similar trade bottlenecks have also affected other countries around the globe. For example, earlier this year, Chinese marketsPorts reported significant backlogs in outbound shipping to foreign markets. Food shortages also hit October. United KingdomPort congestion
The immediate cause of the collapse in trade and supply networks was the COVID-19 virus, which caused a global economic meltdown in 2020. The extent of the crisis was catastrophic. More than 90 percent of the world’s countries fell into deep recession, compared to only 60 percent in the 2008 Great Recession, making it a truly global crisis, and the worst since the Great Depression of the 1930s. The global economic recovery was chaotic and ongoing, with a sudden surge of demand that quickly exceeded supply.
However, the larger story behind this disruption to the global supply chain is one of capitalist globalization. This has seen every country inserted into a new, globally integrated production, finance, and services system in recent years. This system is characterised by the fragmentation of industrial production and distribution into many intermediate phases that are geographically dispersed around the globe.
By breaking down production into these fragmented global production chains, the emergent transnational capitalist class (made up of the owners and managers of the transnational corporate conglomerates that drive the global economy) is able to locate these phases in countries that offer the best “factor cost” considerations for maximizing profit and minimizing workers’ power, such as a ready supply of cheap labor in one locale, low taxes and a lax regulatory environment in another, and proximity to raw materials supplies or to final consumer markets in a third locale.
Millions of dollars worth of raw materials, intermediate goods, and finished products flow every day through the open veins in a vast network of logistics and transportation that spans the globe. This keeps the global economy humming. More than 50,000 merchant shipsThe oceans are the most dangerous, with the largest vessels carrying up to 24,000 containers. Intermodal transportation was introduced in the latter 20th century to standardize the size and design these containers, as well the ships, trains, and planes that transport them all around the globe.
The collapse of global trade and supply chains, emblematic for capitalist globalization, has shown just how dependent every nation has become on this globally integrated system. It also highlights key fragilities within the global economy. Trade in intermediate goods like semiconductors and other industrial products now accounts for a large portion of the global economy. 56 percent of all tradeThe Organization of Economic Cooperation and Development is home to the richest countries in the global trade system. This means that if global shipping is disrupted (in this case because of the pandemic shut down), so is industrial production and distribution in each country. Each country is highly dependent on imports of raw materials and inputs as well as finished goods from the global marketplace.
Globalization: More or Less?
Academics and pundits believed that the world was entering a crisis because of the disruption to trade during the heights of the pandemic. period of “deglobalization”The reshoring of production previously outsourced. The report by the The reveals that the global trade in goods contracted less than it did in the past as economies recovered from the pandemic-induced implosion in trade. United Nations Conference on Trade and Development. As trade recovered, the global transport and logistics network was simply not able to keep up with sudden surges in consumer and producer goods demand.
Transnational capitalists are too dependent on a global economy that is open and integrated for continued capital and power accumulation on a global scale. They cannot withdraw from the confines of national economies. Globalization is not something that corporate managers will abandon. They will continue to diversify their supply chains and seek out near-shoring of production sequences that were previously offshored. The transnational capitalist class as well as governments will set up new nodes within worldwide distribution networks to reduce dependence and decrease supply chain volatility. This will result in denser webs that are more dense and new patterns of cross border integration. Corporations have already begun to nearshore,That is, to move production and distribution closer to the global markets they service. According to one industry report titled “The State of The Freight 2021,” almost 90 percent of shippers have set about to diversify their suppliers.
As global consumption patterns normalize, and national economies reactivate, the supply and trade bottlenecks that have been affecting global trade and supply chains will likely be resolved in the coming months. However, the global supply chain collapse is accelerating the digitally driven global economic restructuring that began before the coronavirus epidemic.
The 1980s saw the introduction of computer and information technology. This was the beginning of globalization. It enabled the transnational capitalist class of to coordinate and synchronize global production sequences. This allowed them to create the globally integrated production, financial, and service system.
Now, so-called fourth industrial revolution technologies — including artificial intelligence; big data; machine learning; and autonomously piloted land, air and sea vehicles — are driving a new round of world capitalist restructuring. According to “The State of The Freight 2021” report, this restructuring will include the digitalization of supply and logistics networks. These new digital technologies can be used to build a people-centered, global economy. This will require a completely different economic and political system than the current global capitalism. The transnational capitalist class, however, controls the production and distribution of the new digital technology and is using it to further concentrate power.
The Structural Crisis of Global Capitalism
The global economy may be recovering from the pandemic-induced implosion. There are no fears about what the future holds, The Economist called “the shortage economy,” and barring unforeseen circumstances, global supply will likely catch up to and again overtake global demand. Global economic turmoil is likely to continue due to the structural crisis of global capitalism. The pandemic was approaching, and growth in the European Union countries had already fallen to zero. Sub-Sahara Africa and Latin America were in recession; Asia’s growth rates were steadily declining and North America was facing a slowdown.
Mainstream economists claim that crisis is an endemic problem in capitalism and that instability is more common than equilibrium. There have been two types of crises in the history and development of capitalism. One is cyclical, also known as the business cycle and manifests itself in recessions. They usually occur every ten years. There were three types of recessions: the early 1980s, early 1990s, early 2000s. The second is a more severe structural crisis. Cyclical crises might only affect certain regions or countries, while structural crises can affect the entire world economy.
In the course of the 20th century the system experienced two great structural crises, the Great Depression of the 1930s and the crisis of stagnation and inflation (known as “stagflation”) of the 1970s. Both crises resulted from what political economists call “overaccumulation”. This refers to a situation where huge amounts of capital (profits), are built up but this capital cannot find productive outlets to reinvest. Capital becomes stagnant when capitalists keep their accumulated profits instead of reinvesting them. This causes the system to spiral into crisis. The 2008 global financial crisis was the beginning of a new structural crisis for world capitalism.
Global social polarization had already reached unprecedented levels, and inequality was at an all-time high before the pandemic. controlling over half the world’s wealthThe top 20 percent controlled 94.5 percent while the rest of the population had to live with just 5.5 percent. Nearly every country has seen an increase in inequalityDuring the pandemic. The new digital technologies are at the core of the global economy and have significantly increased productivity and corporate profits. This has led to a worldwide increase in the number of the under-employed, precariously employed, marginalized, and surplus humanity. Due to extreme inequality, the global market cannot absorb the global economy’s output, which can lead to chronic stagnation and structural crises.
Recent years have seen accumulation slow down in ebbs, flows, as the transnational capitalist classes has sought out outlets to unload their growing surplus of uninvested capital. In the first 20 years of the 21st Century, wild financial speculation and increasing government, corporate, and consumer debt drove growth. However, these are temporary and unsustainable solutions for long-term stagnation. In the wake of the 2008 financial collapse, the U.S. and other Western governments turned to policies known as “quantitative easing,” which essentially means that government treasuries print money and inject it into the banking system as cheap credit — even involving negative interest rates. Quantitative ease creates mountains of fiat money, which is government-issued currency not backed with a commodity. This increases the gap between the productive economy and fictitious capital.
Fictitious Capital is money that is not based in commodities or production. Fiat money exists only on paper and does not reflect real wealth. This fictitious capital does not create new value. Instead, it is a mirage of a bustling economic system that sees stock markets rise, asset values increase, and credit expand. In the absence of a comprehensive restructuring of the system, which involves an expansion in global demand through state regulation and redistribution down of wealth, it will all eventually come to an end.
Aside from the potential for collapse, the out-of control printing of money could, in the long-term, trigger uncontrolled inflation which would further destabilize global economies. The majority of the $10 trillion in global stimulus funds during the pandemic went towards corporate bailouts, and to liquidity injections into banks. Although the stimulus helped to spur recovery, it also flooded the global economy in excess liquidity, causing fears of an inflationary spiral.
Inflation can harm working people over the long-term by reducing their purchasing power. It also affects finance capital because loan and credit portfolios lose their value. An inflationary spiral would cause financial instability and exacerbate existing crises, given the dominance of finance capital over the global economy.
Economists warn of stagflationThe combination of stagnation, inflation, and supply bottlenecks, short-term surges in demand, and excess liquidity in circulation, fuels inflation even though long-term global aggregate demand remains stagnant. Stagflation was created in the 1970s by Keynesian polices that tried to increase demand in the face stagnation tendencies. The emerging transnational capitalist class pushed for Keynesianism to be replaced by neoliberal polices, and then imposed these polices on the world’s people through globalization. The ongoing crisis of overaccumulation has been exacerbated by the negative social polarization caused by neoliberalism.
Global capitalism is still in crisis of legitimacy and capitalist hegemony, beyond the economic turmoil. A global revolt has gained momentumSince 2008, and increased in the years leading to the pandemic and then during contagion. Political crisis and social decay following years of neoliberal conflict and hardship are leading to the collapse states in countries like Haiti. Strike activity in the United States escalated in October (“Striketober”) while millions of workers refused to go back to poverty wages and miserable work conditions, leading to labor shortages throughout the economy. Seen from the viewpoint of the ruling groups, the current supply chain bottlenecks are the least of the system’s problems.
