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“Seemingly Out of Nowhere”

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Scott Lincicome

A few short interminable months ago, COVID-19 had made it almost impossible to find hand sanitizer, disinfecting wipes, and other cleaning products at the local grocery store or online. The shortages not only sent Americans scrambling for supplies (I actually mailed my mom some Clorox Wipes), but also elicited calls from both the right and the left for major changes to U.S. trade and economic policy. Florida Senator Marco Rubio, for example, in April wrote in the New York Times that our empty shelves proved that America, suffering a “severely diminished” manufacturing base due to U.S. politicians’ decades‐​long “choice to facilitate offshoring,” needed a “sensible industrial policy” that included “the re‐​shoring of supply chains integral national interest.” Sure, Rubio argued, “some heroic businesses have shifted production to help fill this gap and produce masks, hand sanitizer and other goods,” but “the nation is still behind” because “we by and large lack the ability to make things.” Scott Paul of the union‐​backed Alliance for American Manufacturing echoed Rubio’s view on those very same pages a few days later. Others implored the president to invoke the wartime Defense Production Act to “contract with companies throughout the country to widely produce and distribute free soap and hand sanitizer.” Others still said that the sanitizer shortages of March and April called both global supply chains and capitalism itself into question. “Medical masks are already in short supply, and everyday items such as hand sanitizer have become difficult to find,” said progressive economist James K. Galbraith in March, because “[T]he heavily globalized, consumer‐ and finance‐​driven U.S. economy was not designed for a pandemic.”

Fast forward to today: “Walk into any drug store, grocery chain or market today, and you’ll be hit with a wall of hand sanitizers and cleaning products that help fight against the coronavirus.” Wow!

So how did this amazing change occur? Did President Trump use the Defense Production Act to force U.S. companies to make these essential goods? Or did Congress, at Senator Rubio’s prodding, enact a “sensible industrial policy” that restored our manufacturing base, re‐​shored our supply chains and thus ended our “dangerous dependency” on foreign countries? Did we finally throw out global capitalism and “design” a better economic system?

Actually, it was just the market at work:

Lesser‐​known brands have popped up seemingly out of nowhere.

Although Brands International has always been in the business of making sanitizer, albeit on a smaller scale, the pandemic led it to ramp up production and focus solely on hand sanitizer, according to Mark Rubinoff, the Canadian company’s founder and CEO.

Brands International’s 10 production lines were converted to only making Germs Be Gone hand sanitizer. The company sold about 35 million bottles of sanitizer this year, up from 1 million in all of 2019.

SmartCare, a value‐​products brand of California‐​based Ashtel Studios, has been producing sanitizer since 2014. President Anish Patel said he had planned to build the brand this year and talk to retailers to get it into stores — and then Covid‐​19 came to the US and demand was “explosive.”

“What we had planned was going to happen in three‐​to‐​four years happened in a couple months,” he said.

The company already sold soaps, bath tissues and kitchen towels at Walgreens, CVS, Menards and Meijer. Patel said those relationships helped SmartCare set up an ever‐​expanding delivery schedule.

Israeli company Albaad, which makes wet wipes and feminine hygiene products, was started nearly 35 years ago and expanded to the US in 2004 with a production facility in North Carolina. Albaad CEO Dan Mesika said that demand is so high for wipes that the company has been getting requests via its website from individuals desperate to find wipes, asking them to send to their homes.

To help meet demand, the company developed Cleanitize disinfecting wipes, which Albaad expects to be released in September or October.

Walgreens and CVS started looking in some atypical places for hand sanitizer when demand outstripped supply. They placed orders to M. Skin Care and Miss Spa for hand sanitizer in the late spring. They had made hand sanitizer for the drug store chains off and on over the past decade, but the brands weren’t producing it at all this time last year, according to President Lisa Ashcraft. The company’s sanitizer products hit stores nationwide by June.

These are not cherry‐​picked examples, either. While most name brands are still sold out due to persistently high demand, a quick Amazon search shows dozens of other brands of hand sanitizer, cleaning wipes, and other cleaning products that were in critical short supply just a couple months ago. You can also get face masks (even N95s) or other important COVID-19 consumer goods if you still need them. Certainly, things aren’t perfect out there (the CNN article above notes, for example, that “some companies have resorted to putting sanitizer in unusual bottles” due to materials shortages), but these new producers and their products show how the market — not any government plan or policy — can quickly adjust in response to unexpected situations and thereby meet our essential material needs. It’s also a real testament to the incredible hard work and ingenuity of U.S. retailers and global manufacturers, driven by the aforementioned market signals.

“Seemingly out of nowhere,” indeed.

Of course, there are things that governments can do to facilitate these necessary market adjustments, but the most important ones mainly involve just getting out of the market’s way. The CNN article notes, for example, that the Food and Drug Administration “temporarily ease[d] restrictions on manufacturers looking to make sanitizer, outlining that ‘the agency does not intend to take action against manufacturing firms that prepare alcohol‐​based hand sanitizers for consumer use.’ ” In this regard, we seem to be following Korea’s lead, which years ago implemented detailed “pandemic preparedness” regulations that allow for the swift approval and production of testing and other essential medical equipment. Other actions, such as refraining from onerous anti‐​gouging laws that prevent price signals that would encourage new production and discourage hoarding, could also help speed adjustment. In general, however, all those tales of the death of American manufacturing and the failures of free markets and global supply chains thus far seem greatly exaggerated.

Maybe we don’t need to abandon capitalism after all.



Source: https://www.cato.org/blog/seemingly-out-nowhere


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