Media Link: Standing Places interview.

I did an interview with former student Ivor Wells for his Standing Places podcast out of London. The chat is a bit of rambling meander across several topics, with pauses and background interruptions, but we manage to cover a fair bit of detail, starting with the issue of self-isolating during the pandemic. Think of it as two old friends having a yarn about life in these times.

7 thoughts on “Media Link: Standing Places interview.

  1. Hi Pablo

    Sheep hugging ! I had a quiet chuckle over that remark!

    You mentioned President Trump and the upcoming election.But surely the democrats are no better. There is a huge disconnect between USA political leadership and ordinary Joe and Joelene public

  2. First time I have ever listened to a podcast (for once I had some spare time). Really interesting. Thank you.
    I am kept awake by what post covid could look like but am optimistic.
    Loved the bit about creating debt to feed it by cash inflow.

  3. Thanks Peter.

    The IV was a bit of a ramble by my usual standards but we managed to touch on key points. You may recall from previous posts that I found somewhat surprising the low savings rates amongst big corporations these days. I understand that small business have smaller margins and hence lower savings rates–which are often intergenerational–but the major premise of capitalist enterprise until recently was to “save for a rainy day”and re-invest and pay share owner dividends and wages (including managerial wages) out of profit. In particularly good times that allowed for the distribution of what came to be known as “Christmas bonuses” to everyone up and down the corporate ladder, with wage increases tied to productivity gains that increased the profit pool from which both shareholders and employees benefitted. It also allowed firms to weather cyclical downturns without having to go into receivership or lay off their workforces.

    But now, apparently as a result of the turn towards finance capital-led theories of economic growth (what used to be called “neoliberalism” before the word got perverted and distorted to mean anything market-centric), the easier option is to assume debt and service it out of profit, using managerial pay and bonuses tied to profitability as incentive structures while keeping overall wage levels low and flat regardless of productivity.

    Trouble is, when profit dries up there is nothing left with which to service debt, which then becomes a snowball of interest compounding on top of whatever was borrowed as principal. To this can be added “just in time” production, which results in low stockpiles beyond what is required to meet immediate demand. Besides the myopic profit horizons that this produces, it also means that upsurges in demand cannot be met without increasing production rather than dip into stockpiles. The latter is worth noting because as the pandemic restrictions ease, firms will have very little excess inventory to sell to customers, so there will be a lag between re-starting production and delivery. Had some surplus stock been planned and retained, that could have been used immediately to satisfy resumption of demand.

    In effect, both of these managerial logics–reliance on debt and just in time production–have combined to leave firms worse off than if they had saved out of profit and stockpiled surpluses during lean times in order to meet demand and get back to normal production once things rebounded. And as usual, the immediate pain of these mistaken logics of production is borne by workers, not bosses.

  4. The problem is a firm that stockpiles excess supply will, in non-exceptional times, have extra expenses to produce and then maintain these stockpiles, which will be a competitive disadvantage, which will not help it compete with a just-in-time structure.

  5. The unit costs of producing stockpiled goods are minimal and the costs of warehousing them are sunken and marginal. The key is effective managemnt of supluses, say, by keeping two weeks rather than two months of surplus. That allows resumption of production without any lag in getting goods to market, whereas just-in-time producers will have the lag to deal with (assuming restart costs are the same for both). What constitutes an efficient and manageable stockpile rather than an excessive one depends on the product being produced, but producers in each commodity chain all have the same structural constraints to contend with. There are exceptions to the rule but the general notion of saving for a rainy day seems IMO to be a good one.

  6. I think it depends on the type of goods we are talking about. For some goods, warehouse space and management is a very significant overhead. For some, as you say, it is minimal. But in a tightly competitive industry, even a minimal cost difference an result in a competitive advantage.

  7. From a recent piece in Foreign Affairs:

    “In an earlier age, manufacturers might have built up stockpiles of supplies to protect themselves in a moment like this. But in the age of globalization, many businesses subscribe to Apple CEO Tim Cook’s famous dictum that inventory is “fundamentally evil.” Instead of paying to warehouse the parts that they need to manufacture a given product, these companies rely on “just-in-time” supply chains that function as the name suggests. But in the midst of a global pandemic, just-in-time can easily become too late. Partly as a result of supply chain problems, global production of laptops fell by as much as 50 percent in February, and production of smartphones could fall by 12 percent this coming quarter. Both products are built with components produced by specialized Asian manufacturers.”

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