Saturday , January 22 2022
Home / Project Syndicate / Why Are Supply Chains Blocked?

Why Are Supply Chains Blocked?

Summary:
When forecasts are not specific enough to be actionable, the supply response cannot adjust in a timely or efficient manner. And because there is relatively little slack built into global supply chains, large deviations from normal patterns produce delayed responses, shortages, backlogs, and bottlenecks, like those today. MILAN – Supply-chain disruptions are severely hampering the global economic recovery. It is a strange situation in many ways. The types of products and services affected by delays and shortages – including a wide range of intermediate goods, from commodities to semiconductors, and the final products that depend on them – resemble what one would see in a wartime economy. And the disruptions took us

Topics:
Michael Spence considers the following as important:

This could be interesting, too:

Kemal Kirişci, Mine Eder, Mert Arslanalp writes Resistance to Erdoğan’s encroachment at Turkey’s top university, one year on

Blair Levin writes Steps the states should take to achieve the infrastructure bill’s broadband goals

Tom Wheeler writes Did the FAA cry wolf on 5G?

H.E. Hakainde Hichilema writes Zambia’s success will be Africa’s success

When forecasts are not specific enough to be actionable, the supply response cannot adjust in a timely or efficient manner. And because there is relatively little slack built into global supply chains, large deviations from normal patterns produce delayed responses, shortages, backlogs, and bottlenecks, like those today.

MILAN – Supply-chain disruptions are severely hampering the global economic recovery. It is a strange situation in many ways. The types of products and services affected by delays and shortages – including a wide range of intermediate goods, from commodities to semiconductors, and the final products that depend on them – resemble what one would see in a wartime economy. And the disruptions took us largely by surprise.

In fact, in the first quarter of this year, growth was overwhelmingly projected to accelerate, and experts were not exactly sounding the alarm that supply would fail to keep up. Yes, influential macroeconomists did warn that the combination of highly accommodative monetary policy, elevated household-savings balances, pent-up demand, and massive fiscal spending significantly increased the risk of inflation. And, yes, those forecasts – which appear increasingly prescient – implied that a surge in aggregate demand, fueled by a wall of liquidity and frothy asset prices, could outpace supply. But the likely duration of the imbalance remained unknown, and many argued that inflation – and, by extension, supply disruptions – would be “transitory.”

Many observers...

Michael Spence
Nobel Prize in economics, Economics professor at Stern School of Business NYU, author of The Next Convergence

Leave a Reply

Your email address will not be published. Required fields are marked *