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Will coronavirus herald the end of capitalism?
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Global supply chains are being destroyed by coronavirus

Big industries rarely exist within one territory. Large scale services and manufacturing companies depend upon global supply chains for commodities. These will fall apart as transnational links erode.

The Argument

Global supply chains are essential to capitalism operating efficiently, but they also provided COVID-19 with the means to spread so rapidly. “If trade is the engine of a market economy, then the hothouse for economic development has been urbanization. The concentration of human population within industrial and post-industrial towns and cities has ramped up both the production of goods and services and the market for their consumption. Cities are capitalism’s machines for making money, but in epidemics and pandemics from the Great Plague to the present have also been the epicentres of contagion.” [1] Capitalism, post-pandemic, is destined to fail because the supply chains it is built upon are unsustainable and inadvertently function as catalysts for future viral disasters. One global supply chain that has been disrupted by the COVID-19 pandemic is the American meat industry: “Over the past four decades, America’s meat industry has followed other industries in using just-in-time supply chain management techniques to lower the cost and increase the quantity of meat Americans consume. Animals are now bred and fed during a precise window, at which point they are supposed to be shipped off to the processor. If the plant for which they were destined has to shut down for weeks because of an epidemic, the whole system backs up… Unfortunately, our whole economic system, not just our food processors, has been reconfigured to minimize storage and redundant processing capacities.” [2] The vulnerabilities and shortcomings of capitalism have been highlighted by the COVID-19 pandemic, showing us how there is no room for error, no backup plan, for when global catastrophes disrupt our extremely intricate and delicate supply chain system. In addition, countries such as the United States are now being forced to confront the fact that they rely too heavily on foreign manufacturing. The United States outsources the production of medical supplies such as ventilators, masks, and pharmaceuticals to countries such as China because doing so is less expensive. Capitalism provides incentives to cut costs at every opportunity available. However, similar to American beef industry, "many U.S. hospitals operate a 'just in time' supply chain," as well, "which replenishes most medical supplies as they are used and rarely stockpiles them." [3] The reason many industries refuse to stockpile products or materials is that there is a risk that they might expire and go unused, and capitalism seeks to prevent wastage as often as possible. The 'just in time' supply chain is very efficient in terms of keeping prices low, but is not efficient during times of unprecedented disaster. As transnational links continue to erode, and international travel comes to a standstill, the United States will continue to see shortages. This is an example of how capitalism is not sustainable due to its inability to prepare for international emergencies.

Counter arguments

Businesses could easily abandon the 'just-in-time' supply chain system without inadvertently triggering the collapse of capitalism. Some economists have suggested "pushing companies to consider a 'just in case' supply chain to augment the 'just in time' model that had served the world in the past four decades. This is particularly the case for producers of essential goods such as food and medical devices, while the pandemic is destroying lives and livelihood."[4] "Just-in-time" inventory systems are popular among businesses because they prevent unnecessary waste. Raw materials are only ordered when absolutely necessary, and they're often ordered as late as possible, so they arrive "just in time" to be used. It's an intricate and precise system that keeps "upstream suppliers on short notice" so they can "produce inventory as needed and watch the profits grow." [4] However, "those upstream suppliers had to be as flawless as the just-in-time production facility, providing inventory or raw materials on time, every time. Factories went from months of parts on hand to just days, or even hours in a few places, so when something goes wrong, it jeopardizes everything. COVID-19 was that spanner in the works." [4] Companies have now realized that the "just-in-time" system isn't as reliable as previously thought, because if one link in the supply chain comes under any sort of strain, the entire chain falls apart. However, are businesses willing to adopt a "just-in-case inventory" system? Products would need to be manufactures en masse, despite the lack of demand for them, and stockpiled in case they're needed at a later date. This does not maximize profit the way that "just-in-time" supply chain systems do. The answer is that companies most likely will adopt a "just-in-case" inventory system if the alternative is the total deterioration of global supply chains and the end of our economic system as we know it. Although it could potentially be costly, it's nonetheless an easy preventative measure that many businesses will be more inclined to take after seeing how the COVID-19 pandemic ravaged their supply chains and their inventory. Global supply chains deteriorating will not result in the collapse of capitalism, because companies will always be able to find an alternative system.



[P1] Global supply chains are essential for capitalism to function correctly, but also facilitate the spread of viruses such as COVID-19.

Rejecting the premises


This page was last edited on Wednesday, 7 Oct 2020 at 07:33 UTC

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