On Monday President Biden attempted to engage very present uncertainty with prospective clarity. In prepared remarks for a White House news conference, the President said:
… on Thursday, I’ll be putting forward a detailed strategy outlining how we’re going to fight COVID this winter — not with shutdowns or lockdowns but with more widespread vaccinations, boosters, testing, and more.
Only moments later a reporter asked and the President answered:
QUESTION: Are lockdowns off the table —
THE PRESIDENT: Yes, for now. Yes.
QUESTION: — in dealing with this? Fau- — Dr. Fauci, why is that?
THE PRESIDENT: Well, because we’re able to — if people are vaccinated and wear their masks, there’s no need for the lockdowns.
In late winter and spring 2020 shutdowns and lockdowns were crude prophylactic measures for a poorly understood threat for which we had no proven defenses. We now understand the virus much better. Even this early, we understand the omicron variant better than we understood the original version back then… thanks to the openness and initiative of South African physicians and scientists.
We will know much more in the next few weeks. But we already know that this virus thrives in crowded, unventilated, interior spaces where breathing can become increasingly risky over time. We already know that air movement, distance between humans, reducing the potential viral load of exhaling or inhaling, and vaccination reduces risk.
We also understand now — in a way that most did not understand in 2020 — that flows of demand and supply are not similar to household tap water. The better analogy is a wide, wild watershed. A sudden significant shift in either demand or supply, drought or flood, prompts cascades of consequences that reverberate over time and space. It is much better to preserve, facilitate, and gently shape flows than crassly interrupt flows.
The noon news conference in the Roosevelt Room was a late addition to the President’s Monday schedule. A 2PM event in the Executive Office Building next door had been planned before omicron so rudely crashed our Thanksgiving. The notion was to gather various CEOs around the President to reassure consumers that supply chains are delivering. The President told his guests:
I want to hear from each of you about what you’re seeing this holiday season; how well prepared are you to and — to have products you need on your shelves; and, you know, how you’ve innovated and hired to overcome the supply chain challenges you have; and kept workers safe from COVID-19 so that the American people can have a holiday season that they’ve been long hoping for.
To which each of the CEO’s present responded with mostly positive news.
The CyberMonday event was both a substantive process of engaging key private sector stakeholders and a symbolic process to claim credit. Elinor Ostrom and others long ago (and ever since) have demonstrated that “Cheap Talk” (2568 more) is an inevitable and potentially important aspect of effectively managing complex adaptive systems (such as demand and supply networks). But Cheap Talk is not a magic formula. Cheap Talk can be cheapened to the point of negative returns. The conflation of noble and ignoble motivations is not unusual, yesterday afternoon’s session involved both. I’m not sure which was more prominent.
Even as this happy talk unfolded within the Executive Office Building, the Federal Trade Commission, Bureau of Competition ordered nine large food supply chain players to respond within 45 days (even Bob Cratchit got off Christmas Day) as follows:
The orders require the companies to detail the primary factors disrupting their ability to obtain, transport and distribute their products; the impact these disruptions are having in terms of delayed and canceled orders, increased costs and prices; the products, suppliers and inputs most affected; and the steps the companies are taking to alleviate disruptions; and how they allocate products among their stores when they are in short supply. The FTC also is requiring the companies to provide internal documents regarding the supply chain disruptions, including strategies related to supply chains; pricing; marketing and promotions; costs, profit margins and sales volumes; selection of suppliers and brands; and market shares.
This is not happy or cheap talk. This has all the markers of a fishing expedition into deep and rough waters. This could get very expensive.
At least yesterday’s FTC order is justified as only a study to “shed light on the causes behind ongoing supply chain disruptions.” In contrast, on November 17 President Biden sent a letter to the FTC chair asking for an investigation of Exxon, Chevron, and their competitors noting, “mounting evidence of anti-consumer behavior by oil and gas companies.”
Food and fuel are, of course, the most dramatic contributors to US inflation. Cheap talk, happy talk, and saber-rattling? All techniques of jaw-boning? Again, I perceive both symbol and substance.
All of this fits the policy framework set out in the July Executive Order on Promoting Competition in the American Economy. This White House is especially concerned with the longer-term economic and network effects of consolidation and concentration (me too). According to the EO:
A fair, open, and competitive marketplace has long been a cornerstone of the American economy, while excessive market concentration threatens basic economic liberties, democratic accountability, and the welfare of workers, farmers, small businesses, startups, and consumers…. This order recognizes that a whole-of-government approach is necessary to address overconcentration, monopolization, and unfair competition in the American economy. (More)
So, while wandering through the forest we find a supply chain responding heroically (if erratically) to unprecedented demand gyrations. This includes a stressed supply chain that feeds us well, but has recently been less predictable and is charging us (sometimes, much) more. Then there’s a third supply chain that seems to be built on a roller coaster. We have not enjoyed the recent angle of ascent (before the sharp decline of the last four days). What do we do with these hot, cold, and in-between options?
While the original Goldilocks ate her porridge and got her sleep, it is worth remembering that in the end she suffered quite a scare or worse. It would have been better if she had communicated and collaborated much more than she did. Or as one version of the fable tells us, “If she had been a well-brought-up little girl she would have waited till the Bears came home, and then, perhaps, they would have asked her to breakfast; for they were good Bears—a little rough or so, as the manner of Bears is, but for all that very good-natured and hospitable. But she was an impudent, rude little girl, and so she set about helping herself.”