Zhu Andong and Yang Shuaihong: "Economics of Shortage" and the Systemic Crisis of Global Capitalism
Since the outbreak of the COVID-19 pandemic in 2020, global capitalist countries—particularly the developed Western nations—have experienced persistent shortages. Global energy and food prices have climbed sharply, triggering widespread concern and discussion. Many believe this phenomenon is primarily driven by exogenous shocks like the pandemic and will gradually dissipate as the pandemic ends. However, the shortages of these past three years may have a more complex background and deeper implications. According to the World Economic Outlook, a report recently published by the International Monetary Fund (IMF), global economic growth is expected to decline further in 2023. Although inflation has peaked, it is unlikely to return to pre-pandemic levels even by 2024. [1] An editorial in the American magazine The Atlantic at the end of 2022 elevated the issue of shortage to the level of a fundamental problem, noting that the basic contradiction of the US economy has shifted from "Americans cannot afford things" to "there are not enough goods to buy." This shift is directly related to the "secular stagnation" phase of the world economy—characterized by low investment, low productivity growth, and low interest rates—previously proposed by former US Treasury Secretary Lawrence Summers. [2]
In popular stereotypes, "shortage" has long been a label pinned to traditional socialist countries, while it seemed that capitalism was troubled only by "surplus." This view is associated with two representative academic works: first, Janos Kornai’s Economics of Shortage, which views shortage as an inherent feature of traditional socialist systems; and second, John Kenneth Galbraith’s The Affluent Society, which regards the post-WWII United States as a society of extreme material abundance. However, if we broaden our horizon slightly, we find that capitalist countries at the periphery of the world system have never escaped a state of shortage; even developed capitalist countries like the United States experienced widespread shortages in the 1970s. At that time, the oil crisis intensified the contradictions of the post-war capitalist accumulation regime, eventually evolving into a crisis of stagflation. The generalized shortages in the global capitalist economy from 2020 to 2022 appear to be triggered by a series of exogenous factors such as the pandemic, extreme weather, and the Russia-Ukraine conflict. However, considering the continuous intensification of the contradictions within the neoliberal capital accumulation regime since 1980—especially the decade-plus of secular stagnation following the 2008 international financial crisis—it is necessary to explore the nature and potential future trajectory of global capitalist shortages from the perspective of the deepening systemic crisis of capitalism.
I. The Phenomenon of Generalized Shortage in Global Capitalism, 2020–2022
Following the outbreak of the COVID-19 pandemic, global capitalism experienced comprehensive chaos and shortages. Crises in supply chains, energy, food, and labor existed simultaneously and became intertwined, with far-reaching effects. Although various exogenous shocks were the direct causes, the shortages of this period profoundly reflect the technical characteristics and institutional attributes of contemporary capitalist production.
(1) Transport Shortages and the Supply Chain Crisis
After the pandemic, shortages first manifested in the transport industry, which subsequently evolved into a comprehensive supply chain crisis and a shortage of industrial goods. At the start of the pandemic’s spread, the transport industry did not show obvious contradictions due to the reduction in economic activity and lower household incomes. However, moving into 2021, as developed countries took the lead in reopening and US import demand recovered under the government's "unlimited easing" stimulus policies, shortages in the transport industry quickly emerged and spread. According to IMF research, the average global shipping time began to accelerate significantly at the end of 2020. By December 2021, the average global shipping delay exceeded 1.5 days, a 25% increase in transit time. Specifically, average delays at US ports increased by 8 days compared to 2019, while the Port of Los Angeles saw an increase of 17 days, mostly due to port congestion. [3] By 2022, port congestion had not significantly improved. According to data from the British broker Clarkson, as of July 2022, 37.8% of the global container fleet capacity was stuck in port, exceeding the peak recorded in October 2021 and far higher than the 2016–2019 pre-pandemic average of 31.5%. [4]
Shortages in the transport industry stem partly from labor shortages caused by the pandemic and the long-term underinvestment in port infrastructure within the context of deindustrialization in developed countries. [5] Furthermore, the characteristics of maritime transport are an important factor. Before the pandemic, the flow of containers around the world was relatively balanced; shipowners usually did not need to return empty after completing a delivery. However, post-pandemic, due to differences in economic recovery and lockdown policies across countries—especially as East Asian exports to the US exceeded pre-pandemic levels while demand in other directions did not increase proportionally—a shortage of empty containers occurred on the export side while congestion plagued the import ports, leading to a rise in total transport costs. [6]
According to the Review of Maritime Transport 2022 published by the United Nations Conference on Trade and Development (UNCTAD), maritime shipping accounts for over 80% of total global trade volume. The rise in shipping costs and the decrease in maritime connectivity led to consequences including rising global inflation, food shortages, and supply chain disruptions. [7] In fact, the transport shortage was merely the fuse for the supply chain crisis; the vulnerability of supply chains stems more from two significant changes in global production since the 1980s. First, the formation of global production networks has split the production process of a single product into different stages and modules completed through a division of labor across different countries and regions. Consequently, a disruption in a single link is more likely than before to transmit throughout the entire network. Second, the popularization of "Just-in-Time" (JIT) production, which has even evolved into "zero-inventory" management models, lowers corporate costs but is highly dependent on a precise match between raw material inputs and finished product outputs.
In the 2020–2022 global supply chain crisis, the chip shortage was a typical manifestation of the vulnerability of current global production networks. On the supply side, global chip manufacturing is mainly concentrated in East Asia and the United States. In 2021, chip supply was simultaneously affected by China-US trade frictions and extreme weather in Taiwan, China, and Texas, USA. Entering 2022, the outbreak of the Russia-Ukraine conflict exacerbated chip supply difficulties because the two countries produce 70% of the world's neon—an indispensable raw material for chip production. On the demand side, in the context of the continuous digitalization of various production and consumption sectors, the impact of the chip shortage is comprehensive. According to an analysis by Goldman Sachs, at least 169 industries globally were affected by the chip crisis, including not only consumer electronics and the automotive industry, which obviously rely on chips, but also traditional manufacturing such as steel production and food and beverage processing. [8] Similar transmission mechanisms were prevalent in other sectors.
(2) Energy and Food Shortages
Since early 2021, energy and food shortages have troubled many countries, and the outbreak of the Russia-Ukraine conflict in February 2022 further intensified global energy and food security issues. If transport shortages and the supply chain crisis reflect the complexity and vulnerability of global production networks, then energy and food shortages directly threaten the vital material foundations of economic operation and social reproduction.
The International Energy Agency (IEA) believes the severity of the current energy crisis is comparable to the oil crisis of the 1970s, with the close interconnection of national economies amplifying its impact. Specifically, natural-gas-intensive manufacturing enterprises in the global production network are mainly located in Europe, while Europe’s gas supply is primarily dependent on Russia. Consequently, after the outbreak of the Russia-Ukraine conflict, energy costs for many European manufacturing firms surged, forcing production cuts or even shutdowns. High inflation related to energy shortages has also pushed many households into poverty. [9] The problem of food shortage is equally severe. According to the State of Food Security and Nutrition in the World 2022 published by the Food and Agriculture Organization (FAO) and other agencies, compared to before the pandemic, the number of people facing hunger and those in a state of moderate or severe food insecurity increased by 150 million and 350 million respectively in 2021. [10] Distribution-wise, the increase in hunger and malnutrition primarily occurred in developing countries in Asia, Africa, and Latin America, but the problem was also prominent in developed countries. According to World Bank data, amid generally high global inflation, food price inflation in European countries from October 2022 to January 2023 was more than 5% higher than the CPI for the same period. Consequently, households had to allocate a larger share of their income to food and reduce their volume of consumption. [11]
In recent years, global energy and food shortages have been caused by a combination of factors, some of which are difficult to eliminate in the short term. First, the frequent occurrence of extreme weather globally in recent years is a common cause of reduced grain yields and energy shortages. While extreme weather does not necessarily affect the production of traditional fossil fuel enterprises, it shocks the production of new energy, thereby increasing demand for traditional energy. Second, because modern agriculture relies heavily on chemical fertilizers, and fossil energy is the primary raw material for these fertilizers, the energy shortage itself exacerbates the food shortage. Finally, both energy and food shortages are closely linked to the international situation. For example, wheat exports from Russia and Ukraine once accounted for one-third of global exports, while Russia is the world's largest exporter of fossil energy and a major exporter of fertilizers. The Russia-Ukraine conflict intensified the severity of global energy and food shortages. [12]
However, even before the outbreak of the Russia-Ukraine conflict, the surplus and shortage of energy and food were in a state of continuous, violent fluctuation. [13] This fluctuation is not under the control of any single country; rather, it is heavily influenced by international geopolitics (such as the long-standing maneuvering between OPEC and Western countries) and is amplified by the speculative activities of financial capital in commodities.
(3) Labor Shortages
In traditional perception, labor shortage seemed to be the only shortage faced by developed capitalist countries, usually linked to high labor costs and low fertility rates. However, the labor shortages of the past two years have exhibited a different character.
First, under the impact of the pandemic, many workers were unable to work due to illness. Because of repeat infections and the effects of "Long COVID," a portion of the labor force may be unable to normally enter the labor market for a considerable period, which undoubtedly exacerbates the already tight labor supply in developed capitalist countries. According to an August 2022 analysis report by the Brookings Institution, approximately 16 million working-age Americans were infected with "Long COVID," of whom 2 to 4 million were unemployed as a result. [14] According to US Department of Labor data, as of December 2022, there were 11 million job openings in the US, accounting for 6.7% of total jobs—an increase of over 4 million compared to January 2020. [15] The labor shortage is all-encompassing, with over 1.7 million vacancies in positions related to warehousing, logistics, and sales, comparable to the 1.9 million vacancies for healthcare workers. This is precisely one of the important reasons for the transport industry shortages mentioned earlier.
Second, the social contradictions accumulated during the neoliberal period erupted in a concentrated manner under the background of the pandemic, intensifying the labor shortage. Since the 1980s, major capitalist countries have generally implemented neoliberal policies, taking measures such as suppressing labor unions and canceling social protections, leading to a comprehensive decline in the organizational strength, relative income, and risk-resistance of the working class. During the spread of the COVID-19 pandemic, some workers withdrew from the labor market due to illness, and their incomes and quality of life dropped sharply. Meanwhile, the bourgeoisie attempted to recoup the losses brought by the pandemic; therefore, without providing epidemic protection, they required workers on the job to perform higher-intensity work while also attempting to reduce wage costs. Coupled with the severe inflation caused by the global supply chain crisis, the situation of the working class became increasingly difficult. Against this backdrop, labor-capital conflicts in capitalist countries have become increasingly fierce. According to US Department of Labor data, from 2020 to 2022, the number of work stoppages involving more than 1,000 people per year in the US increased from 8 to 22, and the resulting loss of workdays increased from 966,000 to 2,213,000. [16] The situation in other countries is very similar. According to Bloomberg, labor-capital conflicts at key nodes of the global supply chain—from US railroads and ports to Australian gas fields and Peruvian trucking—are escalating. [17] In these struggles, the primary demands of the working class include wage increases and the provision of pandemic protection in the workplace, both of which are closely related to the effects of COVID-19 and generalized material shortages. [18]
Labor shortages are both a consequence of the capitalist economy falling into comprehensive shortages during the COVID-19 pandemic and a potential cause for further agonizing those shortages. Material shortages lead to an increase in the price of the reproduction of labor power, while a lack of labor in key positions similarly exacerbates difficulties in material production. This bears a certain resemblance to the shortage conditions of the 1970s: in both cases, capitalist production encountered resource constraints, experienced severe inflation, and saw labor-capital struggles unfold around that inflation. Although the current level of organization within the working class is far lower than in the 1970s, global production networks are also more fragile; a reinforcing vicious cycle may still form between material shortages and labor shortages.
II. The Relationship Between "Shortage" and Capitalism
The shortages in global capitalism from 2020 to 2022 have had comprehensive and far-reaching effects, raising a theoretical requirement for further exploration of the relationship between capitalism and shortages. Although shortages are not rare in capitalist economies, people tend to associate them with traditional socialism. In theoretical circles, one of the most significant drivers of this stereotype is the Hungarian economist János Kornai’s theory of the shortage economy. This doctrine posits that shortages are an inevitable result of the traditional socialist system. This section will re-examine Kornai’s theory, pointing out that although his doctrine was primarily directed at traditional socialist systems, the shortage mechanism he described possesses a certain degree of applicability to different social systems. At the same time, limited by its micro-perspective, "shortage economics" only explains the latent possibility of shortages; the way this possibility is ultimately realized depends on the preconditions upon which the normal order of production relies.
(1) The problem of defining "shortage"
Frank N. Magill’s International Encyclopedia of Economics defines a shortage as a situation where the price of a commodity is lower than the market-clearing equilibrium price, such that the quantity of a product people wish to purchase exceeds the supply. [19] Most economic literature follows this definition when using the concept of "shortage." Within this discursive system, an economy dominated entirely by the market would not experience persistent shortages at all, because once the demand for a commodity exceeds supply, its price rises until a new supply-demand equilibrium is reached. According to this logic, all factors causing shortages can only come from outside the market; these factors hinder market prices from tending toward an equilibrium state. In theoretical models of shortages, improper government intervention is often considered the "chief culprit," such as the government setting "official prices" [20] or imposing quotas on specific commodities, and so on. This definition based on market equilibrium has influenced the judgments of mainstream Western scholars regarding the future trajectory of capitalist shortages since the pandemic. For example, the World Economic Forum predicted that massive shortages would not occur in 2023, on the grounds that as the cost of living for households rises and inflation prevails, effective demand will decrease and the market will re-equilibrate. [21]
The focus of the aforementioned definition is on how to allocate a given supply of resources in a local market, which brings about two important problems. First, from the perspective of the commodity seeker, a "shortage" usually manifests as a shock to some "normal state." Because producers or consumers cannot obtain the volume of products they originally expected from the market, their economic activity plans are interrupted, and this interruption cannot be repaired simply through a rise in the equilibrium price. Furthermore, understanding shortage from the perspective of local markets may overlook the complexity generated by the interdependence of various sectors in a modern economy. For instance, a rise in energy prices might allow the energy market to form a new equilibrium, but because energy is a vital industrial input, its price increase may exert new shocks on the supply and demand conditions of many other products, thereby causing micro-market shortages to diffuse throughout the entire economy.
Starting from the actual production experience of traditional socialism, Kornai’s Economics of Shortage provided a metric for shortage different from that of mainstream Western economics: shortage means being unable to obtain the inputs required to realize a certain "serious intention." This so-called "serious intention" is the daily operational plan of the workshop. [22] Regarding the demand side corresponding to the supply side, the reason Kornai chose to express it as the seemingly vague "serious intention" rather than the more intuitive "effective demand with purchasing power" is primarily because, under the traditional socialist system, the price mechanism played a limited role in the vast majority of economic activities; the basis for production regulation was primarily the quantity of products rather than price. [23] This allows Kornai’s perspective to transcend market price phenomena and discuss how the quantitative demand for a certain input is formed within the concrete production process. If the formation of "serious intentions" under different social systems can be generalized, a more universal definition of "shortage" can be obtained.
In any stably functioning social system, producers and consumers form reasonable expectations of available products based on past experience and the conditions of other economies at a similar stage; this is the basis upon which "serious intentions" are formed. The meaning of "serious" lies in the fact that it is formed within specific modes of production and institutional constraints, distinguishing it from "needs" governed by individual desires that ignore material constraints. Although individual demand for commodities fluctuates, the total demand for each commodity by all economic participants in the entire society is relatively stable, which is the prerequisite for enterprises to organize production. In a capitalist economy, "serious intentions" depend on the investment and consumption decisions formed by economic agents based on past experience, and whether they can be realized depends on budget constraints such as monetary income, monetary savings, and financing channels. Under the traditional socialist system, the realization of an enterprise's "serious intention" might depend less on budget constraints denominated in money, but the mechanism for forming "serious intentions" is similar to that of a capitalist economy.
(2) The formation of "serious intentions" and the persistence of shortages
In a general sense, "serious intentions" may exceed product supply in two situations. The first situation is when factors outside the economy—such as the political system or ideology—influence people's expectations for obtaining products, such that "serious intentions" remain higher than actual supply over the long term, thereby bringing about persistent shortages; that is, economic production is unable to meet the requirements of people to obtain social products over a long period. This is precisely the situation faced by traditional socialist systems. From this perspective, the socialist goal of "catching up and surpassing" [N], which Kornai considered a non-essential cause, may precisely be an important factor in explaining shortages. The tendency for enterprises under traditional socialist systems to spend beyond their budgets was, to a large extent, the result of the pressure to catch up faced by the socialist camp in the 20th century being transmitted to the enterprise level. This pressure prompted enterprise managers to formulate tight production plans to better complete the evaluations set by their superiors. On the other hand, within the framework of the Cold War, the concept that "socialism is superior to capitalism" prompted people in Eastern European countries to benchmark their welfare levels against neighboring developed capitalist countries, despite the non-negligible gap in industrialization and economic development levels between the two camps prior to World War II. [24] This caused "serious intentions" for consumer goods under the traditional socialist system to be pushed up over the long term, exceeding the resource constraints faced by the country and resulting in shortages. As Kalecki perceptively pointed out, the relationship between short-term consumption and long-term investment under a socialist system is a political issue of the first order. [25]
The second situation is when, due to the interruption of the normal order of economic production, people’s experience and expectations of obtaining a specific quantity of products are broken. This situation is of more universal significance and is the situation currently faced by capitalist shortages. These types of shortages frequently occurred in traditional socialist economies because certain industries might face technical or organizational bottlenecks, rendering them unable to keep up with the growth of expected targets. [26] Similarly, when a capitalist crisis occurs, expectations for the normal economic order are broken, and shortage and surplus coexist in different senses simultaneously. Theoretically speaking, shortages brought about by interruptions in the economic order should not last very long, because people may revise their past experiences and re-plan economic activities to adapt to rising prices and insufficient commodity supplies. Households may reduce consumption of specific goods, and enterprises may change their input combinations, eventually forming a "new normal." However, in reality, capitalist economic crises can last for a considerable amount of time because the factors leading to production interruptions may be systemic rather than local. In a systemic crisis, the material and institutional prerequisites upon which the previously normal order of economic production relied are destroyed, and the formation of a new order may take much longer than market adjustment and the adaptation of expectations.
(3) The applicability of "shortage economics" to capitalism
In Economics of Shortage, Kornai proposed a mechanism for shortage under the socialist system that differs from traditional explanations. In his view, the main cause of shortage was neither policy errors nor the relatively lower material starting point of socialist countries or the target of catching up with developed capitalist countries, but rather the economic and social relations and institutional conditions of socialism. The core mechanism can be summarized as the "soft budget constraint." Under this mechanism, enterprises can always obtain state assistance and will not go bankrupt due to persistent losses. Therefore, enterprise demand for inputs is almost unrestricted by solvency, and investment carries no risk. Meanwhile, enterprise managers, motivated by professional responsibility, power, social prestige, and material rewards, will strive to obtain as many resources as possible from superior planning departments to expand investment, thereby forming "serious intentions" that exceed the actual quantity of supply. [27] The final result is that the more desperately an enterprise produces, the more its demand for inputs exceeds supply, and the situation of general shortage becomes increasingly severe.
Based on micro and sub-micro perspectives, Kornai described the typical pattern of enterprise production decision-making in the Eastern European countries where he resided. From this typical pattern, we can summarize two micro-preconditions for causing shortages: first, that economic participants, especially enterprises, possess soft budget constraints; second, that these enterprises generally possess the motivation to spend beyond their budgets. These two conditions exist not only under traditional socialist systems but also widely exist within modern capitalist systems.
Regarding the first condition, Kornai judged whether an enterprise's budget was a soft or hard constraint based on five aspects: whether the enterprise has pricing power over its products, whether the tax system is rigid, whether there are free state grants, whether credit exists, and whether external monetary investment funds exist. [28] Kornai observed that under capitalism, enterprise budget constraints are "nearly hard" but show a tendency toward softening. First, with the formation of giant enterprises and the concentration of production, capitalist enterprises have gained the power of monopoly pricing based on cost-plus markups. Second, out of consideration for solving unemployment problems, it has become standard practice for capitalist states to rescue enterprises whose survival is threatened through forms such as tax exemptions, subsidies, and government-guaranteed loans; this point has been strengthened as the limits of government budget deficits have expanded. [29] Although Kornai believed it was impossible to propose a universal proposition regarding the hardness of capitalist enterprise budget constraints, we can see clearly from the historical stages of capitalist development that the trend of softening enterprise budget constraints is consistent with the trend of expanding bourgeois economic and political power. This is further consistent with the trend of free-competition capitalism moving toward monopoly capitalism, and then toward state monopoly capitalism.
Regarding the second condition, even during the period of classical capitalism—when enterprise budget constraints were closest to the "hardest" state defined by Kornai—spending beyond budgets based on credit creation within the banking system could still occur. This also created the conditions for the periodic appearance of overheating in classical capitalism. As Marx said: "In a system of production, where the entire continuity of the reproduction process rests upon credit, a crisis must certainly ensue... when credit is suddenly ceased and only cash payments have validity." [N] In a typical capitalist business cycle, the boom phase of rapid credit expansion is precisely the stage where material production gradually approaches the limits of its resource constraints, unemployment falls, and the rate of profit begins to decline; [30] this is the precursor to the point where frenzy turns into panic and the crisis breaks out in the form of relative overproduction.
Since the 1980s, alongside global excess liquidity and the rise of financial monopoly capital, soft budget constraints and over-budget expenditures in the capitalist economy have manifested in new forms. In the United States, firms shifted toward a "shareholder value maximization" business model. This model ultimately evolved to the point where dividends and stock buybacks by large corporations exceeded their earnings, with the resulting funding gap filled by loose bank credit. [28] Shareholder compensation distributed in the form of dividends and buybacks was either used for personal consumption by shareholders or reinvested into financial markets, partially supporting the debt-fueled consumption of working-class households in a context of long-term wage stagnation. Excess spending under corporate soft budget constraints was eventually transformed into excess consumption by the household sector, while the resulting demand, which exceeded domestic productive capacity, was covered by long-term trade deficits. For developing countries, and particularly emerging economies, soft budget constraints and over-budget expenditures took another form: firms acquired additional funds for investment through the free flow of international financial capital. For these firms, whether the state of "over-budget expenditure" could be maintained was, of course, related to the profitability of their operations, but it depended even more on the conditions of international financial markets and the international capital flows driven by domestic financial speculative opportunities.
In modern industrial societies with a highly developed division of labor, appropriate and repayable over-budget expenditure is a powerful way to buffer risk. However, the over-budget expenditures in the cases mentioned above all possess a degree of unsustainability, thereby satisfying the conditions for the formation of shortages as summarized by Kornai. At the end of a typical capitalist cycle, the rate of profit has already declined, and borrowing based on expectations of future prosperity becomes unsustainable; thus, shortage becomes a reality during the boom phase. In the case of modern capitalism, economies experiencing over-budget expenditure are able to obtain resources from the outside to satisfy their internal "serious intentions," which in effect transforms potential domestic shortages into an issue of international trade balances. Under these circumstances, whether a shortage occurs depends on whether the order of these international trade balances can be maintained.
III. The Systemic Crisis of Global Capitalism Behind Shortages
According to the preceding analysis, the possibility of shortage exists within contemporary capitalism. To clarify how this possibility translates into reality and its ultimate level of destructiveness, we must further examine the preconditions for the operation of global capitalism over the past several decades. Specifically, at the level of material production, what weak links exist in current global capitalist production that might lead to a disruption of normal economic functioning? At the level of power relations, among the various components of global capitalism, how are "serious intentions" that exceed resource constraints realized and sustained, and can these relations be maintained? These two levels are interconnected and form the deep background of the global capitalist shortages of 2020–2022.
(1) The Material Basis of Shortage: The Declining Rate of Profit and the Neoliberal Response
The law of the tendency of the rate of profit to fall revealed by Marx, and the responses of advanced capitalist countries, constitute the material basis of current shortage phenomena. According to the general principles of political economy, capitalist production is for profit; therefore, firms will only produce when productive activities are profitable. The long-term downward trend in the rate of profit signifies not only a decline in the growth potential of the capitalist economy but also a waning motivation for the bourgeoisie to engage in productive activities, which creates the conditions for shortage. The last large-scale shortage in advanced capitalist countries occurred in the 1970s. It was triggered by the oil crisis, but the deeper cause lay in the sustained decline in the rate of profit since World War II, particularly from the 1960s onward. Because the falling rate of profit was caused by the state of productive technology and the balance of class forces in advanced countries, the then-popular Keynesian policies not only failed to resolve the crisis but instead brought about excessive demand and triggered a wage-price spiral, eventually resulting in the coexistence of inflation and economic stagnation (stagflation). [29]
Thereafter, capitalist states adopted a series of measures to raise profit rates and rescue capitalism from the stagflation crisis. In terms of technology, the bourgeoisie utilized new transportation and communication technologies to transform the organization of production. They implemented "just-in-time production" within firms to reduce costs and increase efficiency by minimizing inventories and accelerating turnover. Simultaneously, they laid out global production networks through direct investment and outsourcing, further fragmenting the commodity production process and retaining only high-value-added segments within advanced countries. Regarding the class structure, capitalist countries generally implemented neoliberal reforms, adopting measures such as suppressing labor unions, deregulating markets, cutting taxes for the wealthy and corporations, and reducing social protection expenditures to increase the corporate share of profit at the expense of the working class.
The aforementioned measures either cut part of the necessary expenditures for capitalist social reproduction or reduced the redundant space in capitalist production by rearranging production layouts. Their essence was to shift additional costs and risks onto society, ultimately exacerbating the fragility of the capitalist economy. Neoliberal policies at the expense of workers' interests affected the reproduction of the working class, both lowering the quality of labor and weakening the risk-resilience of working-class families. During the pandemic, this was manifested as a large number of working-class families facing existential pressure due to income disruptions caused by shutdowns or illness. Just-in-time production reduced corporate warehousing costs at the price of a weakened ability to respond to external shocks to the supply chain. Global production networks increased efficiency through a more meticulous international division of labor, but also made various countries more dependent on global trade. Meanwhile, because the trend of the falling rate of profit brought about by the rising organic composition of capital remained unchanged, [30] the willingness of private capital in advanced countries to invest—especially in infrastructure—declined. Furthermore, under the guidance of neoliberal ideology, government spending was slashed, and the maintenance and renewal of infrastructure in advanced capitalist countries became insufficient, even resulting in a decline in total fixed capital. [31] This introduced greater instability into the normal operation of productive activities. To a certain extent, the severe impact of extreme weather on agriculture and transportation in recent years can also be seen as the result of capitalism's failure to pay the necessary environmental protection costs for long-term production. [32] In summary, since the 1980s, capitalist countries have traded the long-term sustainability of economic operations for economic prosperity. The consequences have gradually been exposed in recent years, manifesting as the frequent occurrence of various accidents, the interruption of the continuity of capitalist production, and the difficulty of the capitalist production system in responding to these "external" shocks.
On February 3, 2023, a derailment in Ohio, USA, caused a leak of hazardous chemicals, resulting in extremely serious economic losses and ecological consequences. This accident is a typical case of the overlapping problems brought about by transformations in the American productive sphere since the 1980s. Due to aging infrastructure and other factors, the rate of train derailments in the U.S. is quite high; between 2013 and 2022, an average of 3.3 derailments occurred every day. [33] Under these conditions, railroad companies' focus on efficiency far outweighed safety. Since 2017, major American railroad companies have carried out reforms known as "Precision Scheduled Railroading" (PSR), pursuing extreme "operating ratios." They reduced costs by cutting crews, arbitrarily lengthening trains, and reducing inspections and maintenance at key positions—a central logic consistent with "just-in-time production." [34] By lobbying the Trump administration, railroad companies also abolished regulations requiring railcars carrying dangerous flammable materials to be equipped with electronically controlled pneumatic (ECP) braking systems. The consequence was that in an emergency, individual cars could not stop simultaneously, increasing the risk of collisions. [35] The train in the Ohio accident was 2.8 kilometers long, consisting of 150 cars, with 40% of the weight concentrated in the rear third of the train. This caused the heavier cars to crash into the lighter cars ahead when the accident occurred, leading to the pile-up—this was precisely the result of so-called "Precision Scheduled Railroading." [36] Another consequence of PSR is that while a large number of workers were laid off, those remaining faced higher work intensity. Before this accident, the COVID-19 pandemic and transport shortages had already pushed worker intensity to its limit. Yet, in early December 2022, the U.S. Congress even rejected workers' demands for seven days of paid sick leave, forcing many to work while ill, which increased the risk of accidents due to human error. To be sure, this accident involved a degree of contingency, but it reflects the current reality of "shortages" in the infrastructure of advanced countries and the fragility of production systems over time. This may lead to a higher frequency of similar events, thereby increasing the total social cost of production and strengthening supply constraints.
(2) The Impact of the Financial Capital-Led Accumulation Regime on Shortages
Pursuing valorization is the nature of capital. When the rate of profit falls and growth in the real economy is sluggish, capital seeks alternative ways to valorize. The result is that financial monopoly capital has broken through various government restrictions imposed since World War II [37] and permeated all commercial relations to an unprecedented degree, [38] forming a global accumulation regime with debt and ownership as its carriers and rent-seeking and speculation as its primary characteristics. [39] This accumulation regime, acting in concert with various neoliberal transformations in the sphere of production, has caused serious damage to the conditions of capitalist production and reproduction, increasing the possibility of shortages and exacerbating their consequences. Moreover, due to the dominance of financial capital over global capitalist production, these consequences are primarily borne by the proletariat and developing countries.
The intervention of financial capital into corporate operations is a significant feature of the financialized accumulation regime; this intervention possesses a distinct character of speculation and "short-termism." Due to the relaxation of financial regulation, financial capital can easily obtain controlling stakes in listed firms and then push them to adopt various methods to increase revenue and boost stock prices to achieve the required rate of return, finally transferring ownership of the firm through stock sales. Under this model, financial capital takes almost no account of the long-term development of the firm. Taking freight rail as an example, between 2011 and 2021, the seven largest freight railroad companies in the U.S. (including Norfolk Southern, the company involved in the aforementioned derailment) spent $191 billion on dividends and stock buybacks. During the same period, these companies invested only $138 billion. Adopting "Precision Scheduled Railroading" reforms and lobbying Congress to abolish safety protocols were precisely the means used to increase revenue to satisfy shareholder interests. [40] Before the dangers brought by these means were fully exposed, financial capital had ample time to withdraw, while the consequences were left for society as a whole to bear. This can lead to a massive waste of resources in an economy already facing shortages.
Furthermore, financial liberalization is often linked with globalization, and the speculative nature of financial capital introduces additional instability into global production networks. The layout of global production networks is established on the basis of the free cross-border flow of financial capital. Consequently, transnational financial capital—in the forms of international investment banks, hedge funds, and private equity funds—has replaced trade and industrial capital as the dominant stratum among the bourgeoisie and governs transnational trade and international production networks. [41] Leveraging their own volume and policies of financial liberalization, international monopoly financial capital can cause funds to flood into or drain out of a country rapidly, artificially creating booms or busts and reaping speculative gains from exchange rate fluctuations or even payment crises. This is a major reason why financial crises have occurred frequently across various countries since the era of globalization and financial liberalization. [42] Firms in developing countries within global production networks are often unable to cope with the fluctuations in exchange rates and the prices of food and energy brought about by the speculative behavior of financial capital, causing production to be severely impacted. Artificially creating and exploiting shortages and crises is precisely the way international monopoly financial capital secures its profits.
Finally, the financial monopoly bourgeoisie dominates the formulation of financial rules and promotes them on a global scale, yet the enforcement of these rules exhibits a clear "double standard." As creditors, financial capital demands strict financial discipline from debtors; yet, when financial capital itself faces risks of default and bankruptcy, it demands government bailouts on the grounds of being "too big to fail." At the outbreak of the 2008 financial crisis, due to plummeting house prices, a large number of residents who could originally have repaid their loans normally had their homes repossessed and were made homeless because they could not provide sufficient collateral. Meanwhile, the financial bourgeoisie, as the originators of the crisis, often suffered no substantive damage; instead, large-scale government bailouts exacerbated the concentration and expansion of the financial sector. During the pandemic, the Federal Reserve did not hesitate to implement unlimited quantitative easing to maintain financial market stability and prevent a stock market crash. Rather than dealing a blow to the financial bourgeoisie, the crisis consolidated its power. The same is true in the field of international finance. In response to the sovereign debt distress faced by various countries in the context of the 2008 economic crisis, international institutions such as the World Bank and the International Monetary Fund (IMF) proposed austerity solutions. Such schemes are conducive to creditors recovering loans but aggravate the economic plight of debtor nations. On the other hand, as the center of world capitalism and the concentration point of financial monopoly capital, the United States' external liabilities are almost unrestricted. Within this "double standard," the rules of financial capital display a clear hypocrisy. Precisely because of the dominant position of financial monopoly capital, when global production deviates from its normal state and shortages prevail, the financial bourgeoisie and those nations possessing greater financial hegemony can prioritize the acquisition of financial resources to buffer the impact of shortages. The ultimate result is that developing countries pay a higher price than developed countries, and the proletariat pays a higher price than the bourgeoisie.
(III) The Disorder of the World Capitalist System Brings Conflict and Crisis
According to the perspective of World-Systems Theory [43], various global economies accumulate capital as a whole; the normal operation of any single capitalist country is predicated upon the normal order of world capitalism, and this order constitutes the global capital accumulation regime of a specific period. Globalization since the 1980s is precisely an accumulation regime centered on the United States and dominated by financial monopoly capital. [90] This regime is an extension of the post-WWII global capitalist order, and within it, factors of imbalance are continuously accumulating. These factors are placing the world capitalist order of the past few decades at risk of disorder or even collapse.
With the end of WWII and the establishment of the Bretton Woods system, a capitalist world system order dominated by the United States was formed. This order continued the center-periphery structure of previous world capitalist systems. Although periphery countries were no longer direct colonies and had achieved political independence, they formed a new type of "industrial-technological" dependency in economic terms, as described by the Brazilian scholar Theotônio dos Santos. Because these countries had weak industrial foundations and their production was highly dependent on foreign exchange earnings and the acquisition of machinery and raw materials from the international market, the traditional export sectors of the colonial period—along with their backward relations of production or control by foreign capital—were preserved. This continued the previous division of labor model based on raw materials for manufactured goods between them and the center countries. [91] Center countries, especially the United States, profited from this through unequal exchange and the repatriation of profits, thus forming the so-called "Golden Age" of developed capitalist countries for more than 20 years after the war.
After the stagflation crisis of the 1970s, following the promotion of a new round of globalization and the decline of the United States' status as the center of world production, the U.S. changed its mode of exercising hegemony, while periphery countries also underwent a degree of differentiation. Economies in the current global division of labor can be roughly divided into four categories [92]: First is the United States at the center of the world system, which utilizes its monopoly over core technologies, its control over core resources such as grain and oil, and the monopoly of the U.S. dollar as the world currency to maintain its hegemonic status, obtaining cheap energy and consumer goods from across the globe while maintaining a long-term external deficit. The second category consists of developed capitalist countries represented by European nations, Australia, and Canada; they master core technologies and high-value-added production links, possessing high-end manufacturing, yet they have a strong external dependence on food and energy and do not possess financial hegemony comparable to that of the United States. The third category is manufactured goods exporters represented by East Asian countries and regions; they have taken over industrial transfers from developed countries, primarily exporting low-value-added manufactured goods to developed countries through labor-intensive industries. To gain an advantage in international competition and maintain the purchasing power of their foreign exchange reserves, these countries and regions tend to have their currencies undervalued relative to the U.S. dollar, thereby having to cooperate with U.S. monetary and financial policies and indirectly or directly financing the massive external debt of the United States. It is precisely their relative overproduction that fills the center countries' extra demand for commodities. The fourth category consists of raw material exporters represented by Latin American and Middle Eastern countries and regions; they largely continue the post-war industrial-technological dependency, having the most singular industrial structures and the highest degree of dependence on the international market. The severe inequality inherent in this global division of labor system is reflected not only in the distribution of interests between global production and trade but also in the varying degrees of dependence countries have on the world system. Obviously, the fourth category of countries has the strongest dependence on the world system. The sovereign debt crises in Sri Lanka and Ghana in 2022 are the best illustrations of this dependence. The economic operations of both countries are highly dependent on imported energy and thus on the foreign exchange provided by export sectors. Therefore, in the context of slow recovery in Western demand after the pandemic and the depreciation of local currencies caused by U.S. interest rate hikes, these two countries had almost no buffer space and inevitably fell into debt crises and dilemmas of shortage. On the other hand, even the United States, which occupies a hegemonic position and has a high degree of self-sufficiency in food and energy, cannot avoid dependence on the world system, because obtaining cheap consumer goods from the globe through long-term trade deficits has become an important material basis for maintaining U.S. social reproduction.
Meanwhile, although all countries depend on the aforementioned global production order to varying degrees, with the development of internal contradictions within the world system, this order is becoming increasingly difficult to maintain. According to the view of world-system theorist Giovanni Arrighi, the shift in the way U.S. hegemony was exercised after the 1980s marked a turning point where the strengthening of U.S. power was no longer seen as consistent with the overall interests of the world system but merely served its own interests; this was the transition of the world system's accumulation cycle from an expansionary phase to a declining phase. [93] With the shift of the global production center from the United States to the East Asian region, the position of the U.S. in the global capitalist economy has declined significantly compared to the post-war period. Even if the U.S. dollar remains the world currency, long-term trade deficits will damage dollar hegemony, and this process is largely irreversible. To reverse this situation and simultaneously solve the problems of domestic industrial hollowing out and unemployment, the United States began to promote a re-industrialization strategy in 2010. [94] However, because it is difficult to change the fundamental causes and mechanisms leading to de-industrialization, the U.S. can only use means of suppressing other countries to achieve its goals—measures such as launching a trade war against China or using the situation of the Russia-Ukraine conflict to promote the transfer of European industry are manifestations of this. On this issue, the United States is caught in a dilemma: if it does not suppress other countries, its position in global production will decline further; if it does suppress other countries, it will threaten the conditions for its own social reproduction which relies on cheap goods from other nations. In this context, as the hegemonic power, the United States is not only increasingly unable to maintain the order of the existing world system but is increasingly transforming into a disrupter of that order, impacting the stability of the global production system. This will not only break the normal production conditions of various countries dependent on the world capitalist system, thereby bringing and intensifying shortages, but also possesses the possibility of evolving into more violent conflicts and crises.
IV. Conclusion
Faced with the widespread shortages and chaos in the capitalist economy in recent years, many scholars and institutions have compared it to a "perfect storm." This metaphor comes from a movie of the same name released in 2000, used to refer to a combination of rare events that cause extremely serious consequences. Indeed, the COVID-19 pandemic, the Russia-Ukraine conflict, and extreme climates can all be seen as exogenous rare events, and the direct cause of capitalist shortages in recent years can indeed be attributed to these events. Therefore, some scholars believe that shortages are only a temporary phenomenon, and as long as these events pass, the global economy will gradually return to normal levels.
However, as stated above, the shortages in capitalism during the COVID-19 pandemic are related to the systemic contradictions accumulated in global capitalism over the past several decades. These contradictions were already evident long before the pandemic, manifesting as sluggish economic growth in capitalist countries, intensified social conflict, and the frequent occurrence of "Black Swan" [44] events in various political fields. [95] The widespread global shortages that have appeared since the pandemic are another eruption of the systemic contradictions of capitalism, and this eruption may not yet have reached its peak.
First, the material production basis of current capitalist shortages and systemic crises lies in a series of neoliberal reforms implemented by capitalist countries to counter the falling rate of profit, the purpose of which was to reduce corporate costs and increase profits. To this end, some expenditures necessary for maintaining social reproduction were eliminated, and the fragility of production increased; repairing this system means needing to add extra costs. For example, many institutions have begun calling for enterprises to shift from "just-in-time production" to maintaining a certain level of redundant inventory. However, under an economic situation of falling profit rates and pessimistic economic expectations, how many enterprises can make such adjustments remains unknown. This means that the fragility of the capitalist production system in responding to shocks will continue to exist for a considerable period.
Second, in developed capitalist countries, although financial capital still occupies a dominant position and attempts to avoid the consequences of the crisis through various means, it is precisely for this reason that the neoliberal order dominated by the financial monopoly bourgeoisie is increasingly losing its legitimacy, and class contradictions within developed capitalist countries are consequently becoming more intense. In this situation, the shortage of material means and the shortage of labor may produce a mutually reinforcing effect. This effect will persist for a period after the conclusion of exogenous events related to the two types of shortages and may bring about a stagflation crisis similar to that of the 1970s.
Finally, the risks faced by the global capitalist system are likely to intensify further. From the perspective of production, the global production network is a whole; under the impact of various "Black Swan" events, the degree of damage and speed of recovery vary across different economies, leading to the destruction of the overall structure and rhythm of the global production network, making it almost impossible to return to pre-pandemic normal levels. In this situation, the more a country depends on foreign exchange, the more vulnerable it is to the risks of shortage and bankruptcy. After 2023, more countries may fall into sovereign debt crises similar to those of Sri Lanka and Ghana. From the perspective of power shifts in the world system, it is not yet known how long the Russia-Ukraine conflict will last, but due to the inevitable decline of U.S. hegemony—combined with the need for developed countries to divert increasingly serious internal class and social contradictions—economic, political, and even military frictions initiated by the U.S. to defend its hegemony may continuously appear in the future. At that point, the global production network may even face the danger of falling apart.
As a major socialist country deeply involved in the global production network, China is an extremely special presence within the capitalist world system. At the beginning of its entry into the global production network, China took over a large amount of industrial transfer from developed countries, undertook the manufacturing of labor-intensive goods in the world system, and exported low-value-added products to developed countries. However, to a significant degree, China has resisted neoliberalism, adhered to the socialist system, and persisted in independent innovation. Therefore, over the past few decades, China's position in the global production network has continuously climbed, becoming the only country in the world to possess all industrial categories [45]. Today, as the trend of declining U.S. hegemony is inevitable, China is viewed by the United States as its greatest challenger. Frictions and conflicts between China and the U.S. are highly likely to escalate further. From the history of world capitalism, the decline of hegemonic powers and the reshaping of the global order have never been peaceful processes. China not only needs to prepare for the further deterioration of global material supplies and production order but also must prepare for the possibility that the United States might provoke malicious incidents.