Readers Write In #424: Transcript of Interview with Matt Stoller on the Supply Chain Crisis, Great Resignation and Monopoly

Posted on November 8, 2021

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(by Aman Basha)

This is the partial transcript of an interview I did with Matt Stoller on important issues today. The total interview is an hour long and the remaining portions focus on the international finance systems, China, Hollywood, economists Modi and more (credit control, monetary policy, Obama and such). To see the latter, check the interview linked.

Aman Basha: I’m currently in an interview with Matthew Stoller who, despite not being a great fan of the British Monarchy, has titles to rival them, ranging from activist, journalist, former Congressional Aide, fellow at the Open Markets Institute and writing for everything from the Intercept to the FedSoc. Have I missed anything?

Matt Stoller: I don’t know, I’m just a writer.

Aman Basha: That’s an understatement. But anyway, I begin by going back to the start of 2021, when with vaccines, there was widespread optimism about a good recovery, good GDP growth, back to better normal. But that optimism has been replaced by trepidation over this Great Supply Shock where ports are clogged, gas prices are rising, the UK has run out of gas, supply chains have malfunctioned. Now one could have seen it with the big boat in the Suez, but you wrote about it in February 2020. Please share with us, what drove this premonition of yours and if anything is playing contrary to your expectations?

Matt: So I’ve been paying attention to the consolidation of economic power from the past 10-15 years. There’s been this movement really from the 70s but accelerated into the 1990s, to allow for firms to get bigger and dominate markets, the idea being that dominant firms were more efficient. That’s what economists thought, well if you’re big because of efficiency. There was another parallel movement to reduce inventories called the Just In Time Manufacturing model and it started in Toyota and then it expanded in the US in the 80s, 90s and 00s and so, now what we have is a series of dominant firms that run extremely lean hyper efficient systems of production and distribution that sounds really good, unless you have a problem with the system you depend on, because the tradeoff with these dominant firms and hyper efficiency is resiliency. So I looked at a series of supply chain crashes that happened starting in the late 90s and this was an earlier guy who discovered it but I did some work on it and what was found was there were shortages, even before the pandemic, in 2010-11 during the Fukushima earthquake hit Japan and certain goods manufactured only in that region and so you saw, shortages of those products, and since they were integrated into the global supply chain, the supply chain had a hiccup and you saw this repeat in isolated incidents. When I saw Covid as I pay attention to China, and realized it was going to happen worldwide, Then I looked at all these fragile hyper efficient supply chains we have, so we’re going to have really serious problems because of that. I wrote that article and said, look we’re going to have shortages because the hiccups we’ve been seeing from the past 10-15 years, occasional shortages of video tape from pharmaceuticals, they’re going to become pervasive.

Aman Basha: Ok, so what you’re saying is that there’s been a sacrifice of security for efficiency, and because of the pandemic, there’s neither right now?

Matt Stoller: Yeah, that’s right, we have neither today

Aman Basha: Another factor we’re hearing in this supply chain meltdown is the labor shortage or the Great Resignation, a lot of people quitting their jobs in the face of job openings which nobody is taking. How much of that is causing the supply chain crisis, and is it in a way similar to the 1930s awakening of labor after the pandemic?

Matt: Yeah, I do think it’s similar. So I think that worldwide, the focus on efficiency is very much about reducing costs of suppliers to create cheap consumer goods. One of the biggest costs in terms of supply is labor, workers, farmers, big question in India about farming. If you can take that cost out, then according to this theory of hyper efficiency, is if you can remove this cost of labour then you should. But what has happened in the US, and what I think worldwide, is that you’ve seen the suppression of wages and wage growth. You see poor working conditions in everything from manufacturing to trucking to agriculture, and after 30-40 years of this, people got tired of it. When they got laid off during the pandemic, people realized, we don’t have job security and we are not interested in returning to the same wages and conditions without the promise of job security. Thus the consequence of treating workers as expendable for 40 years is that workers have little reason to try to stretch them to get back to work. Now what we’re seeing are strikes, non-union people quitting, early retirements, leading to this significant labor shortage,

Aman Basha: Now we’ve come to your cul-de-sac which you’ve given nods to over and over again, which is monopoly power. In your book Goliath, a great read, you mention that most of world history can be defined as a struggle between monopoly and democracy. On first look, that’s a big statement, so apart from US history, are there any other historical events that conform to this statement.

Matt Stoller: So one of the foundational monopolies that connects the US and India is the East India Trading Company. When Adam Smith wrote Wealth of Nations, a lot of parts criticize monopoly power, that was the East India Co. In the US,

Aman: Boston Tea Party?

Matt:  Yes the Boston Tea Party, One of the fears there was that after monopolizing the tea trade, they would monopolize other critical goods. They looked at what happened in Bengal and realized oh, they could do that here, mass starvation and all. They realized dominant market power, coming from the Crown can be incredibly destructive to society, not just taking away our liberties, not just charging prices, but actually killing large numbers of people. The use of financing tools has always been a key to how societies are run, less or more democratic, these are the fundamentals in making, distribution and how you run them is key to society, You can see usury caps in Babylonian times, it’s foundational to human interaction once you get beyond a hunter gatherer society with organizational complexity. 

Aman: There was an interesting review in the Nation, where the counter argument was that this golden age as described in your book as the post World War till Vietnam (when the New Deal coalition broke up), their assertion being that this era happened because after the war, the US was the only developed industrialized country that hadn’t suffered any major damage and by the 70s, Germany and Japan were back as competitors. What do you say to that argument?

Matt: There have been periods in American history where we had more egalitarian political economy choices and periods where we had less. There’s a quasi Marxist argument that says all history is scientifically determined by the inevitable movement of capitalism. That particular critique in the Nation lined with the idea that, you had monopoly power in the States that was successful and there were labor unions that shared the monopoly rent. Then you had international competition undermining that particular model. But that overlooks a whole bunch of policy choices that policymakers made in the 40s, 50s and 60s to explicitly offshore jobs in return for certain geopolitical outcomes. There was nothing inevitable about these policy choices. Going back, the US was pretty egalitarian at some points and very non egalitarian at other points, not really related to global competition and more the outcome of domestic political debates and which ideas are at which points. To give a counter-example, in the 20s, 30s, 40s, the US was very closed off with lots of tariffs when the international trading system broke down after World War I and the trading order didn’t come back until the 50s. In the 1920s, it was a very monopolized economy with low labor representation. In the 30s and 40s, you had less monopoly and more labor representation when it was still closed off. So international competition made little effect, and I don’t buy that critique.