Alan Zendell, November 14, 2021
There’s an article on the CNN website that explains inflation and what is causing it to rise so precipitously in terms anyone can understand. It talks about supply, demand, and the complex international components of modern manufacturing and shipping. The example of how many corporate entities and countries must function well together to create new motor vehicles was especially apt. The article essentially blames the problem on the pandemic. It lists supply chains as one factor in causing inflation to increase, but I think supply chain issues are an ominous warning for our future on their own.
Remember 2020 in the heart of the pandemic? I’m sure you’d rather forget it, but recalling certain events is instructive. Remember when a number of major meat processing plants had to shut down temporarily? Shortly after that, there were reports that cattle farmers, having nowhere to market their animals, were destroying them because it was too expensive to feed them. That greatly lowered the price of beef, pork, and even poultry at the height of the pandemic. But we were warned that down the road those things would all be in short supply and more expensive as farmers renewed their herds and flocks. Most of us ignored that; we had more immediate concerns, and in any case, there wasn’t anything we could do about it.
Have you tried to buy a car, computer, major appliance, or wide-screen television lately? It was probably more expensive but the more serious problem was that there were huge gaps in supply. Last April, I tried to buy a 65-inch Samsung television. I shopped at Costco, BJ’s, and Best Buy. There weren’t any and no one could tell me how long it would be before they’d be available again. I also had to replace my laptop computer. Again, I visited my go to sources, Costco and BJ’s. The brands I usually bought were nowhere to be seen. I finally found a Lenovo that met my needs. The fact that most Lenovos are assembled in the United States (fewer supply chain and shipping issues) is probably why. Friends looking for new refrigerators and dishwashers reported similar results.
Allison Morrow, who authored the CNN article, is a journalist who, despite her nine years at the Wall Street Journal, is not an economist. If she were, she might have noted that the pandemic was not the only thing fueling inflation and fracturing supply chains. Despite all our geopolitical and military issues, the American and world economies did quite well for the first seventeen years of this century. Inflation and interest rates remained stable at historic lows, and if no one in your family was getting his head blown off in Iraq or Afghanistan, you probably prospered. All kinds of fruits and vegetables were affordable and in good supply twelve months a year, and proteins (meat, fish, nuts, etc.,) were equally stable.
But former President Trump’s narcissistic tough-guy act resulted in disrupting world trade and shattering our economic and military alliances around the world. His unwarranted tariffs resulted in retaliatory moves, causing shortages of imported goods and shutting down markets for our exports, notably farm products. Trump even tried to blame Canada for an unsold surplus of dairy products in Wisconsin.
I’m not an economist either, though I have years of experience in econometric analysis, analyzing and predicting future trends. Until now, price increases and supply shortages have merely been an inconvenience, but I fear they may become a far more serious problem, one that threatens the stability of international commerce and the American economy. If the pandemic ended today with no further disruptions, world economics would look very different than in 2019. Many links in the supply chain simply don’t exist any more. Factories have closed permanently, shipping schedules overwhelm ports, and many aspects of our consumer-driven economy are likely to never return to pre-COVID “normal.”
Consider the cruise and airline industries. There’s been a surge in demand for travel and vacations this year. People need to feel normal again, and even the huge increases in travel costs haven’t deterred them. But what about next year? Will those trips still look attractive as costs of travel, hotels, and meals continue to skyrocket? After two years of realizing how effectively you can work virtually, using Zoom, Google Meets, or Skype, are you eager to resume any but essential business travel?
Post-pandemic and post-Trump, the world is a different place. We must be careful that our inconvenient high prices and fragile supply chains do not become the tip of an iceberg of permanent changes that have the potential to wreck our economy and result in worldwide chaos. President Biden’s focus on vaccinations and his negotiations with EU nations that reversed the worst of Trump’s tariffs and resulted in the Glasgow accord on climate change are a good start, but we have to keep our eyes on the ball. Despite essential issues like defending voting rights and the Constitution, the chaos here at home is a dangerous distraction. The long-term threats our future must be addressed starting now.