America is experiencing persistent goods shortages that are unprecedented in recent times. The global transport system is heavily overloaded, with dozens of sea freighters waiting in front of California to dock. Is America’s economy starting to emulate the former Soviet Union?
Consumer spending quickly rebounded from a sharp decline during the COVID-19 pandemic. More importantly, the pandemic and political responses have changed buying plans. Consumers shifted from dining and entertainment to buying goods. Stay-at-home orders drove a demand for building materials for DIY projects, while distance schools drove large Chromebook purchases. COVID stimulus checks encouraged additional purchases.
Every economy has c -acity constraints. Building new factories takes time; We can only modestly ramp up the production of sawn timber or computer chips at short notice. The changes in the composition of consumer demand have consequently created challenges. The labor shortage due to four million fewer workers has held back efforts to expand production.
Global supply chains use ships, planes, trucks, and trains to move parts and products around the globe. Just-in-time production does not require large stocks of parts and materials and requires reliable transport. But there are also c -acity bottlenecks in the transport sector. And the goods that consumers wanted to buy are either imported or made up of imported components. The demand for transport has increased.
Several disruptions in worldwide shipping have added to the load on the system. In March, the Ever Given ran aground and blocked the Suez Canal for six days. Two of China’s leading ports have closed due to COVID-19 outbreaks among dock workers.
The congestion in the ports will spread to the rest of the system. For example, containers on ships waiting outside Los Angeles cannot transport other cargoes. And containers to be loaded onto the ships waiting off the coast clog ports and warehouses.
As a result, we’ve seen significant increases in transportation prices, such as doubling the cost of shipping a standard container and equipment such as shipping containers and truck chassis. These price increases are a characteristic of the markets, not a bug. High prices help to get all used shipping containers up and running. High shipping costs make customers think twice about whether they can wait.
Despite the “broken” characterizations, the US ports are expected to set all records in cargo handling this year. Supply chains struggle to meet increased demand and do not fail to deliver what we normally buy.
Our elected officials imagine they can solve all of our problems. Unsurprisingly, President Biden -pointed a “port czar” in August and said, “If the private sector doesn’t take action, we’ll call them and ask them to act.” Many experts suggest that we need someone, presumably the government . An authority quoted in the Washington Post said: “It’s like an orchestra with many first violins and no conductors. … Nobody is really in charge. “
However, state control over the supply chains would help make bottlenecks permanent. Supply chains are too complex for anyone, including managers at companies like -ple and Nike, to understand. Companies use suppliers and do not know the entire logistics of their suppliers. The resulting economy is so interconnected that the shortage of wood has exacerbated transportation problems. As? As the economist Peter Earle from the American Institute for Economic Research explains, shipping containers need wooden pallets.
In addition, as the economist Friedrich Hayek noted, production only remains stable because companies make hundreds of small and large adjustments every day. Companies have reacted to transport bottlenecks. Home Depot and Walmart, for example, charter cargo ships and send them to ports with shorter delays.
Companies ad -t because they see the problems emerging and possible solutions, and have a profitable incentive to do so. However, un -proved changes would thwart the government’s plans. A government supply chain czar would almost certainly need -proval to make adjustments. How long will there be bottlenecks before bureaucrats decide to adjust?
Companies around the world work tirelessly to provide Americans with the things we want. Supply chains are uninterrupted and deliver more goods than ever. Politicians can help the most by encouraging these efforts.
Daniel Sutter is the Charles G. Koch Professor of Economics at the Manuel H. Johnson Center for Political Economy at Troy University and host of Econversations on TrojanVision. The opinions expressed in this column are those of the author and do not necessarily reflect the views of Troy University.