However, building more production capacity involves a huge expenditure of resources for which the long term investment must be carefully researched and approached. Building more production capacity for what amounts to a temporary (even if only by a few years) market demand may mean that by the time it's actually brought online the market demand will return to pre-panic levels.
This means that the tens of millions of dollars expended in building new production capacity will not be recouped because the market demand will have dropped.
Should that happen, then those facilities will lay unused...and even unused, they require maintenance and preservation, which costs money, and payment for buildings and land...yet more money.
So the new facilities may become not only a financial loss, but a financial drain as well.
The question of increased productivity capacity must ALWAYS be in proportion with the long term market demands...
This is impossible and an appeal for central-planning committees. Long-term market demands are unknowable,
research can only provide a guess and you can't commit both feet to it either way.
It also makes it sound as if the decisions ammunition-makers face are different from every other industry.
They aren't. These routine decisions about production are called "running a business".
The "10s of millions" to expand production can be funded by PRODUCERS raising prices during a surge in demand.
(This is different from non-productive RESELLERS raising the prices during a demand surge, which can be called
"gouging". But if PRODUCERS raise the prices, I have no complaint. They are putting the value on their productive
work and I have no basis to argue, though I can choose to buy or not buy).
The PRODUCER price increase would do two things:
1) Automatically ration the product, so it goes to those who put a higher priority on it (willing to pay more).
Prices would float higher, to a level where those willing to pay it vs. those turned off would more closely match
production. But the ammunition would be on the shelves and people could decide if it was worth it to them
or not. Their call. Impersonal, fair, automatic rationing.
2) Provide money to fund increased production (make more people happy and make more money).
Instead of PRODUCERS raising prices to what people are willing to pay of their own
free choice -- for whatever reason, who cares -- and getting the new money to fund expansion
or adaptability, they let non-productive RESELLERS raise the prices and get big profits.
So PRODUCERS don't get the profits to needed to increase production and don't get the price discovery
information needed to properly price their product.
The result is inevitable: chronic shortage. Year after year after year.
With profits going to non-producers, new money for new expansion becomes a bigger issue than if they let the
market function: "Where would we possibly get the 10s of millions needed to increase production …?" Duh.
The idea that ammunition-makers must accurately know demand many years in advance is hopeless. They can't.
It's an excuse for Soviet style mismanagement contrary to market freedom, with its self-correcting feedback loops
that, in other industries, produces a world of plenty at low prices.
These guys are thinking and operating like the "boutique" shops down on main street, where one or two ladies
decide they want to make pretty glass ornaments. They have a lovely shop. So pretty.
Its fun to go in every day and putter around the shop and chat.
But when they get popular and they can't make them fast enough, well, they just keep doing the same thing.
Because they don't want to do it any other way. They COULD raise prices; this would cool off demand, but
their profits would expand and they could use the extra money to expand productions. Another shop across
town?
A boutique operation says, "Well, that's getting to be a lot to handle. Maybe not as much
fun. Let's just keep doing the same thing. I predict that in five years everyone will have all the
ornaments they could ever want anyway".
Many ammunition manufacturers are acting like "boutique operations", imagining they can
know what demand will be years in the future to justify not responding to actual demand
information.