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For over a year, we have been seeing shortages getting progressively worse and spreading across all of our major supply chains. The imbalances between demand volume and companies’ ability to produce and distribute supplies are pushing prices significantly up, and making experts worry that the ongoing shortages may actually persist for years. Economists have been warning for decades about the consequences of outsourcing the production of our consumable goods and running massive trade deficits year after year. During the “good times”, being reliant on other economies to produce the goods that we consume didn’t look like that big of a problem. But now it’s a different story.
After so many disruptions, it has become clear that our trade policies have put us in an extremely vulnerable position. Our dependence on the rest of the world to manufacture and process our products is rapidly turning into a national security issue. A recent crisis that can illustrate the seriousness of this problem is the current computer chip shortage. Without a steady flow of semiconductors, our modern society can’t function smoothly. Those tiny $1 chips are everywhere – in our cars, transportation trucks, farming gear, hospital equipment, home appliances, smartphones, and pretty much in every electronic device that connects to the Internet – and there are millions of them.
The semiconductor shortage is affecting numerous industries and it is serving as a painful reminder of how much we have become dependent on technology. But even more importantly, it has shown how imprudent it was to outsource the production of most of our chips to Asia. According to the Semiconductor Industry Association, in 1990, the U.S. used to fabricate 37% of all computer chips in the world. By 2021, this figure had dropped to only 12%. Last week, the CEO of Intel has bluntly admitted that “it could take several years for a global shortage of semiconductors to be resolved”. This year alone, automakers are predicting a profit loss to the tune of several billion due to halted production lines. The same struggle is being faced by essentially every segment across the consumer electronics industry.
And there are many other industries that also outsource their production even though our country possesses all that’s necessary to fabricate those goods in-home. Most of the food we eat today is grown and processed in other countries and that has remarkably reduced the number of small family farmers in America. Since 1980, America has lost 50 percent of its cattle farms, 80 percent of its dairies, and 90 percent of its hog farms.
Therefore, as long as our political relations with China remain favorable, we will probably continue to get the products we need from them. But in case our tensions grow and the Chinese government decides not to provide us with those goods anymore, we will see extensive shortages popping all over the nation overnight. Another supply chain woe that can expose the wrongs of outsourcing is the shipping container shortage that has been delaying the delivery of millions of products to US stores. China is the world’s leading manufacturer of such containers, and as it faces challenges to increase its production due to its own economic problems, the rest of the planet has to wait until those containers are available so that they can ship their products or receive imported materials.
Moreover, an NFBI survey found that it has never been harder for small businesses to hire workers and many of them are facing mounting pressure to survive. As our economy continues to gradually reopen, some economists fear it won’t happen soon enough to save thousands of small businesses. Data from Alignable’s June Revenue Poll shows that 35% of all small business owners are still at risk of closing permanently by the end of the summer. The Poll revealed numerous factors that have been putting the lives of those businesses in jeopardy, including the remaining closures and restrictions, growing inflationary pressures on prices, soaring gas and transportation prices, and labor shortages.
If our small businesses continue to be decimated by the thousands, at some point, we will become entirely dependent upon big corporations to get the products we need. And keeping in mind that these large companies outsource most of their production, we will become more at risk of suffering from shortages than ever before. The extreme imbalances we have been witnessing right now will become a permanent thing. Americans are just now realizing how the latest supply chain disruptions sparked extensive damages to our economy. They are about to feel the impacts of decades of outsourcing and weakened supply chains right where it hurts them the most: in their wallets. And as this crisis won’t likely be solved any time soon, we will see our economic challenges dramatically intensify from now on.