Is there is a silver lining to the pandemic?

Jul 3, 2021

Certain shifts in labour markets and worker negotiating power might be cause to celebrate, and lead to greater economic justice in Western Countries. This short and rough-hewn essay was triggered by the observations of a particularly thoughtful Left-of-Centre commenter from Australia in the Quillette comments section.

Comments by Kiashu: “Lockdowns, by destroying small businesses, will create more and similar problems in future. We do not need Just In Time, we need Plenty of Spares. We do not need One Big Facility, we need Many Small Facilities. This will employ more people, require less resources, have a smaller environmental impact, be less efficient but more effective. People will be able to work closer to or at home and spend more time with their families and in their communities, and so on.

Lockdowns, by destroying small businesses, will create more and similar problems in future. We do not need Just In Time, we need Plenty of Spares. We do not need One Big Facility, we need Many Small Facilities. This will employ more people, require less resources, have a smaller environmental impact, be less efficient but more effective. People will be able to work closer to or at home and spend more time with their families and in their communities, and so on.

Of course, this is unlikely to happen. Government is not friendly to small businesses, to families and communities.”

The easiest way to accomplish this is to externalise regulatory costs into one pot, and then enact a small turnover tax (which would probably be less than 0.5% in most systems) to pay for the regulatory costs. What we are really talking about here is the emergent oligopoly which tends to happen in hyper-efficient markets through the alignment of big government and big business interests, over time. In regulatory systems where the big boys call the shots, regulatory costs will always push smaller players out of the market- giving an inherent advantage to the huge behemoths who are free to squeeze their employees as much as they like.

It is worst in America where Crony Capitalism has moved from reigning to ruling, but it is inevitable anywhere where there are markets paired with regulatory regimes. Simply put, the big boys always write the rules, and they always tend to write them in their favour. The easiest way to counteract this tendency is prevent this pretty standard method of keeping smaller new competitors from entering the market.

On another topic, there is some pretty weird shit happening with container costs at the moment. During the pandemic, the flow of goods was interrupted heading back to China (whilst they continued to produce and export) with the net result that huge amounts of 40ft containers began to accumulate in ports and inland depots. It’s a bloody mess, and paired with a shift in consumer demand from services to physical goods during the pandemic, it has triggered inflationary costs. This in turn caused a panic in global supply chains, pushing warehouse links in the global supply chain to shift from a just in time to a just in case mindset in order to fulfil their orders- with the net result that goods sitting in warehouses only exacerbated global supply shortages.

It’s been worse in America, by all accounts- we haven’t really been hit at all in the UK, other than through somewhat annoying price hikes on highly in demand goods. But it’s distorted the value of the yuan relative to the dollar and the euro, and led to inflationary fears which are somewhat unjustified. Only time will tell.

Here’s one positive trend which might be cause for optimism though, although you might not have seen it so much in Australia. In almost every physical sector in the UK other than warehousing, the pandemic seems to have given workers in the physical economy a chance to re-evaluate their priorities. In many roles such as cheffing and for delivery drivers this has led to the chance to demand pay often 40% higher than previously expected- and it appears to be system-wide and not likely to evaporate for at least the next three years. Similar patterns have been seen in America.

At the same time, the commercial property sector- especially in areas dealing with office space or call centre work- is due for imminent collapse, as many employers have found that their workers are actually more efficient working from home. At lot of this stems from the disastrous mistake of open plan offices, where distractions from co-workers heavily outweighed any slight gains from your boss being able to see you.

So we are looking at some happier workers who now get to spend more time with their kids, and others who suddenly have the negotiating power to stand up for more pay. And the best thing is it won’t even be inflationary in the long-run. The huge cost savings from shuttering offices and call centres can simply be redeployed to fairer wages for many types of physical workers.

Of course, it will cause disruptions. Cities will be hit, in many areas- but this will be more than made up for by an increase in affluence in rural and suburban areas. The Pret A Manger economy will be particularly hard hit. But it might also trigger a housing boom. Oligopoly players can control the market where there are significant scarcity costs, but when you can build a house anywhere you want, the only way to control the housing market is by clogging the supply pipeline- something which is a lot more difficult to do when smaller firms entering the market don’t have to pay a fortune to hold building land for the duration of a building project.

I cannot stress how crucial it will be if there is a disruption in the link between access to employment opportunities and the fact that cities generate exorbitantly high living costs, in terms of housing. Quite apart from the fact that we are talking about the Road to Economic Serfdom for the young, it has caused huge numbers of people to fall off the edge of a cliff, in financial terms, becoming homeless.

Here in the UK, although we have 300,000 homeless- but much of the problem has been managed by the provision of temporary and emergency housing- a lot of which has been accomplished by the conversion of redundant office space. Unfortunately, the same cannot be said of many parts of America, where a Homelessness Industrial Complex seems to have grown-up involving local government bureaucrats capturing this market as a client base to in order to extract more taxes and make corrupt deals with developers who also happen to be contributors, one way or another.

Reason.com – 6 Mar 20

California's Government Has Turned Homelessness Into Big Business

The new money will be consumed in a bureaucratic hiring frenzy, used to pay state-level salaries and pensions, and build a bigger "homeless industrial complex."- Text from the Reason article.

Back in the nineties, one of the leading UK homeless charities (possibly Shelter UK) did a study which looked at the recently homeless without pre-existing drug or alcohol dependency issues. Six months later they came back and found that of those who didn’t initially have these problems, 50% had developed them in the six month period which had elapsed. To call this a humanitarian crisis which is causing permanent harm to those caught up in it is an understatement. Many people simply don’t realise that significant portions of those they see on the street had no alcohol, drug or mental health issues, before they became homeless.

The correct response is 'There but for the grace of God go I'. Falling through the economic cracks can happen simply because the living costs in a particular area become to high and because some people in cities live such atomised lives- they have no one to turn to in their hour of need. Government seems incapable of handling the problem in many parts of America, but shifts in economic opportunity from cities to sub-urban and rural areas, might just ease the problem for many people in the future- so that they don’t have the permanent harms inflicted upon them that many of the current homeless population have had to cope with.

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