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Bootlegger and Baptist  (1983) coalitions are dynamic alliances that form a juncture between the overlapping interests of two unlikely factions. Whether these oddball partnerships are implicit or explicit, there cannot be enough emphasis placed on the fact they are dynamic. In most scenarios, these normally divergent interest groups tend to part ways once the initiative has been resolved.  The aptitude of Conservative Christians and Feminists finding common ground after shared advocacy for legislation regulating pornography is improbable at best. Once the bill is defeated or passed these odd bedfellows part ways until a corresponding initiative is revived due.

Aside from the temporary resolution of a public policy issue, other factors can shake up Bootlegger and Baptist dynamics. A shift in vicissitudes can severely alter the incentives structure of one of the adjoining parties operating within the alliance. Arguably the current microchip shortage afflicting the technology industry best exemplifies this concept. The news regarding the microchip shortage started to break back in early 2021. The supply shortage was mainly spurred by an influx in the demand for consumer electronics during the 2020 pandemic. It was originally speculated that companies involved in the distribution and sale of electronics and technology would be the “Bootleggers” of the microchip shortage. The investment publication Barron’s suggesting that the shortage would be lucrative for IT distributor Avnet. However, such suggestions were somewhat premature, since the microchip shortage has cost the automobile industry billions in revenue. Similar ripple effects are likely to impact other sectors of the economy heavily reliant on microchip components.

Now the role of  “Bootlegger” could potentially be assigned to microchip producers in Taiwan and the Taiwanese government. Several democratic mid-western senators came together to write to Taiwan’s  Bi-Khim Hsiao for help with navigating the components ravaging the American auto industry.  Taiwan has long held a comparative advantage when it comes to microchip production. The Biden administration has also sent over “… 2.5 million COVID-19 vaccine doses..” which is significantly more than what was originally allocated to Taiwan. Some commentators may call this an equitable trade, microchips for vaccines. However, this exchange isn’t quite so linear. The United States is really at the mercy of Taiwan since the product constraints are profoundly stymieing automobile production. The old saying goes “Beggars can’t be choosers”, which encapsulates this situation in a nutshell.  The United States simply lacks bargaining power in these negotiations conferring all the leverage to Taiwan. In contrast,  Taiwan has one of the world’s superpowers at their backdoor step pleading for help. This does not depict a deal brokered between equals, but rather emergency assistance from one nation to another.

The mid-western senators reaching out to Taiwan are our “Baptists” as they act as our moralizing agents. These individuals fulfill this role by stressing the economic calamity, carnage, and overall harm that the microchip shortage could have inflicted upon the U.S. economy.  The Taiwanese government and producers are the clear “Bootleggers”.  Since they enjoy the position of being one of the most robust and efficient microchip producers in the world they have an asymmetrical advantage over the United States. Not only from a production standpoint but also in terms of negotiation power. The United States is coming to Taiwan in desperation rather than a firm bargaining vantage point. Frightened by the prospect of the already ailing auto industry taking any more shocks, these senators are looking for a quick solution, with little consideration for optics or downstream consequences.  Not to mention the additional vaccine dosages are merely the cherry on top.

2 thoughts on “Bootleggers and Baptists-XXXI: Microchip Shortage

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