Our country is currently dealing with major supply chain issues, which is resulting in a shortage of many essential supplies. But why is this happening? And what does that mean for consumers?

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Links:

• The Tuttle Twins and the Search for Atlas
• Foundation for Economic Education supply chain archive

Here’s a transcript of our conversation:

Emma: Hi, Brittany.

Brittany: Hi, Emma.

Emma: Today I wanna talk about something pretty crazy that has been in the news lately that you may have been hearing about here or there from your parents or from the news. But there are currently over 60 cargo ships stuck in the water off of the coast of California, and it’s been called the shipping crisis or the shipping delays. And these ships are coming primarily from Asia, where a lot of our clothing, electronics, toys, and physical goods are manufactured. And you might be wondering, what the heck does this have to do with the Tuttle twins? What does this have to do with us? But it’s actually something that I think we should all be concerned about because right now it’s estimated that these ships will be stuck out there for up to one month. And you know, when you think about these ships, it’s not just like your average cruise ship kind of thing, or it’s not a little yacht. These are giant cargo ships. So if you’ve ever seen a train and you see the box cars on each train, those are called shipping containers. And a cargo ship holds hundreds and hundreds, sometimes even thousands of those shipping containers and brings them back and forth over the Pacific Ocean, typically to America from these countries. So when we talk about these delays, we’re not just talking about a couple of hundred toys or one big pile of clothing that’s stuck out there. We’re talking about massive amounts of stuff that people are ordering and trying to get here in America. So that’s sort of setting the scene a little bit for what’s going on right now. They could be stuck out there for up to a month. And even beyond that, depending on if we’re able to unload the ships because of the problem and the reason why they’re not able to be unloaded, it’s not because of any sort of issue with the ships. It’s not because our equipment isn’t working, it’s actually because there is a lack right now of workers to unload the stuff off of the docks into the port of LA and load it onto trucks. And there’s also a lack of truckers to drive the goods around the country and get them to the customers that are ordering them into the stores and all of these retailers that need the products. So, it’s a pretty crazy problem. And Brittany, do you wanna talk maybe a bit about why we’re having such a shortage of these employees and of these workers?

Brittany: Yeah, I mean I think there’s a lot of different, reasons, but one of the reasons is the problem with our, you know, supply chain. There’s this sequence of processes involved in getting the production of these things and the distribution of these things. But right now in our country, we also have underemployment, or sorry, and yeah. Underemployment problem. And this is really interesting. We used to, you know, hear about, oh, people are unemployed, we’re having an unemployment problem. And, the problem is because of COVID, we’ve incentivized unemployment. So people are now making more, or at least making enough to get by collecting unemployment. And I’m not sure if it’s still happening. I, there used to be you got 600 extra dollars,  a week. I think it was a week. So that’s a lot of money, especially, I mean, you know, that’s what, 600 times for, that’s 24 extra, a hundred dollars extra a month. In addition to your regular unemployment. So one thing that I’m noticing that really scares me is I walk down, I live in Arlington, Virginia, and I’ve been just, I take walks a lot. I’ve been walking down and every single restaurant has a sign, every single, you know, like maybe retail business grocers have a sign that say Help wanted, and this is funny because we talk about the economy suffering and you know, Joe Biden would like to say, we’re in recovery. But if we were in recovery, then those jobs would be filled. Yeah. These jobs are not filled. And this is happening in all sectors right now. There’s an underemployment problem, which is sad because we have the jobs. Yeah. So we are seeing this problem with the supply chain and it’s very scary because this is how we get the things we need. And in our country, we’ve been really blessed to never have to understand a real shortage of anything. Now we had the toilet paper crisis, the great toilet paper crisis of 2020, but that was more a people were buying it up. Which is funny cuz you think like that’s the one thing people are scared of not having in case there’s a crisis is toilet paper. Right. But, so we’ve never really had to experience shortages, but if you’ve been to a grocery store lately. everything is running out and it’s a scary thing. I mean, I’m trying to remember, there was an article the other day about something else that was running. Basically, we are running low on everything because we have a very global economy. And I know we’ve talked about globalism as being. not so great of a thing. And we’ll have another episode all about that later on. But, globalism in the market is good. You know, we should be trading with everybody who can offer us the best cheapest supplies. There have been trade wars that people don’t agree with this. There have been trade wars and maybe there are some reasons to be, you know, suspicious of China, but we get so many great supplies from all over the world. But, right now, I mean, it’s very scary that we have all these shipping containers sitting being unloaded because our way of life is going to suffer. So, Yeah. It’s very scary.

Emma: It is, And one of the reasons too, because this is such a massive problem, I actually took an entire class in college on what is the supply chain and how does it work because it’s this word that gets thrown around all the time. but basically, what a supply chain is, Brittany kind of touched on this is it’s all the processes involved in the production and the distribution of a commodity, which is a product. So, like if you have a favorite toy of yours, that toy has its own supply chain, or if you like a certain kind of food, that food has its own supply chain. And when you talk about the supply chain problems, cuz it’s kind of this like big boogeyman word that people throw around. But basically what it means when the supply chain is having problems is that there are entire processes in that chain that sequence of events that aren’t working. And right now, the problem with the process is labor. So we’re having trouble, like Britney said, people are not going to work. We have these crazy unemployment benefits that actually pay better than going to a lot of jobs. And it’s crazy because companies are raising their pay by a lot. I saw one thing the other day where waste management, which is a garbage collection company, is paying $7,500 bonuses. So $7,500 bonus just to sign on and start working as a trash truck driver. And they pay for childcare and elder care. If you have elderly parents or family, they will pay for their care as well and college tuition and all of these wonderful benefits. But even then, now that the government has, has become so sunk into this crazy entitlement program that they’ve basically created through COVID, they’re making it so hard for businesses to compete with that. And it’s caused this huge problem in our supply chain. So it’s not just that, you know, the truckers can’t unload things from California and get these products from Asia into our country, but it’s also that the labor market has become so competitive that, you know, one company is competing for these truckers while another one might be competing for them. So it’s not only affecting the clothes and the electronics and the goods and the physical things that are coming in, but it’s actually affecting, like you said, our restaurant economy and our ability to go out to eat and have people working there that can help prepare your food and serve you. And a lot of companies now are actually closing down or temporarily closing, going out of business, or shortening their hours because they can’t even find employees to work. They have plenty of demand. They have plenty of people who are willing to buy the products, but no one to actually help make them and prepare them. And that’s really scary because basically what’s happening here, you know, in a normal free economy, you know, obviously employment is a two-way street. The employee has power to bargain with their employer and say, these are my terms. If you want me to work for you, you need to pay me this much. But that only works when the economy is free. When you have the government coming in and saying, actually you don’t need to work because we’re gonna pay you more than that business could pay you, and here are your benefits, and here’s this and that. And by the way, if you get a job, we’re gonna take all of that away. It completely messes up our ability to negotiate and to come to those labor agreements. And that’s a big reason why we’re having so much trouble now with these businesses staying staffed. And it’s scary because it’s not just toys, it’s not just, you know, stuff coming in from Asia, but it’s actually the ability for our food to be driven across the country and delivered. Because a lot of large farms in America make most of the food for, you know, people all throughout the country. And a lot of that’s in the Midwest, which is very far physically far away from where our major population centers are. So that’s a big problem when there aren’t enough truckers to drive back and forth. They’re all, you know, these companies are in competition for the workers, but there just aren’t that many workers. So, that’s sort of what’s going on. And it’s kind of unfortunate because people are even predicting that toy prices going into Christmas this year are going to be way higher than normal and shipping times are gonna be way longer than normal because stuff is just taking longer. So it’s a pretty crazy problem. Brittany, do you wanna talk sort of about,  government meddling in the economy and maybe some stories that we’ve heard before? I know we’ve talked a bit about Ayn Rand. She has a book Atlas Shrugged that sort of, it’s crazy. It’s almost exactly like what’s happening today.

Brittany: Yeah. I wanna touch on two things cuz I wanted to give some more examples of some supply chain shortages going on right now. But I’ll talk, again real quickly about Atlas Shrugged. So sometimes, you know, the government will interfere and say like, oh, you shouldn’t be offering something at a price. We talked about price gouging in another episode where when there’s like a storm or something, a lot of times water will, the price of water will skyrocket, things like that. And that’s because it takes more time or it takes more effort or it’s dangerous for these merchants, these businesses to sell them. And so they have to incentivize and they’re, you know, supply and demand. Sometimes people want more of something and so they’re willing to pay more. Now the government sometimes steps in and says, no, you can’t do this. We need to regulate the price of something. In the or, a case of Atlas Shrugged, you have,  it’s a book, I think we talked about Iran, another episode. Oh, we talked about Atlas too because there is a, there is wonderful Tuttle twins book about it. So, what happened in Atlas Shrugged is the whole economy is messed up because the government starts trying to tell private businesses and these innovators what they can do with their product. And the innovators don’t like this And so they all start disappearing and they form their own society where people called the Moochers, the people of society that wanna get all the stuff for free can’t touch them. And they, Atlas shrugged analogy is there’s a statue called Atlas. He holds the weight of the world on his shoulders is the story. And sometimes Atlas has to shrug, sometimes he’s gotta let the world go because the circumstances are so bad, the government’s too oppressive. Now I wanna talk about a few examples of how you can expect to see all this play out because I think this is very important. So, right now actually Costco and Walmart are once again limiting toilet paper because they’re worried they’re not gonna be able to have some as time goes on. And we’ve all recently done that. We are recording this on Columbus Day and there usually are big sales on Columbus Day. There’s always been like, buy a mattress at a discounted price or get this well, they’re not doing that this year because people are so scared that they’re not, they’re gonna run out of things. And so they’re skipping that cuz they don’t wanna oversell by people, you know, buying more things because it’s on sale. Another thing, So, Black Friday is a big thing that happens a day after Thanksgiving. People swarm stores for these great deals. Well, target is actually doing their Black Friday early because again, they are so worried that by the time November comes, we’re not gonna have this. Wow. And this goes into another problem, which you kind of mentioned with toys. People are very scared about Christmas because they don’t know if we’re gonna be able to stock the things people want. So, you know, we’re used to Amazon priming something. I am used to pretty much Googling whatever it is I want and saying, oh, I can have this delivered to me sometimes. I had something delivered to me, Emma the other day in five hours. Wow. So I’m so used to this, I get my cat food delivered in, you know, hours. And this is not, this could very well change the way we view all this stuff. Because we’ve never really lived in an environment where things are not going to get to us, are literally not getting to us. And the most infuriating part is they’re here, they’re in shipping containers. Yeah. So really scary times. I think this is a really good topic to approach right now.

Emma: Yeah, definitely. And this is one that we might be checking in on with you guys throughout the year. Yeah. Because I think it’s something that’s going to keep developing. We’re not sure how long those ships will be out there as of now. we’re gonna release this episode a little bit ahead of schedule. So, you guys are hearing it, as it’s happening. But right now the ships are still out there and we don’t know when they’ll be able to come in and people make all sorts of predictions. And like I said, people are saying it might take up to four weeks, but we really don’t know. And we’ll keep checking in with you guys as this stuff is happening because of course we wanna be talking about what’s going on in the world. And that’s our the title of this podcast is The Way the World Works. So as this continues to develop, we’re gonna keep checking in with you guys on this. but for now, I would encourage you to, you know, if you’ve read the search for Atlas, the Tuttle Twins book, look around the world around you and try to think in terms of that story and think of where are the producers going disappearing. You know, where, what producers in your life that you know of are get, you know, where, are things getting more expensive? Where are the delays? How, and why is this happening? And start to sort of think about cause and effect because that’s something that I think we’ve become very disconnected from in our central planning world. And if we can start thinking about cause and effect and what causes problems like this, hopefully, we’ll be able to avoid them in the future. So we’re gonna wrap it up there guys. I will link to the Tuttle Twins in the search for Atlas in the show notes. If you don’t have that one, highly recommend it. It’s an awesome kid-friendly version of sort of Atlas Shrugged, which I know is a very dense book that’s more geared toward adults. So we’re gonna wrap it up here, guys. Thank you for listening and we’ll talk to you all again soon.

Brittany: Talk to you soon.