30/10/2021, 05:11 Supply chain disruptions, explained | Facebook Bulletin

GZERO World with Ian Bremmer Subscribe

Supply chain disruptions, explained

What if the current troubles are the growing pains of a booming economy?
Ian Bremmer
29 Oct

Want to understand the world a little better? Subscribe to GZERO World

with Ian Bremmer for free and get new posts delivered to your inbox
every week.

You might have noticed shelves at your local CVS look a little more bare than
usual. Maybe you ordered a couch (or a Peloton!) in June and are still sitting
on the floor, waiting for it to get delivered. (Get up. At least sit on a box.) And
if you follow the news, surely you’ve been urged to get an early start on your
holiday shopping lest your kids wake up to a big pile of nothing come
Christmas morning.

https://ianbremmer.bulletin.com/1036159823889225 1/8
30/10/2021, 05:11 Supply chain disruptions, explained | Facebook Bulletin

GZERO World with Ian Bremmer Subscribe

A near empty shelf at a Target in Houston, Texas on October 25. (Brandon Bell/Getty Images)

What’s going on?

The short answer is that the Covid-19 pandemic has put global supply chains
under extraordinary strain, with impact throughout the US economy. This
disruption has taken place at every link of the chain, from the Asian factories
that manufacture and assemble goods and the ships that transport them, to
the US ports where they wait to be unloaded and the trucks that are
supposed to get them to warehouses and retailers.

As a result, virtually all industries and products—ranging from toilet paper

and coffee to gym equipment and lumber—are experiencing delivery delays,
shortages, and inflation.

https://ianbremmer.bulletin.com/1036159823889225 2/8
30/10/2021, 05:11 Supply chain disruptions, explained | Facebook Bulletin

GZERO World with Ian Bremmer Subscribe

These issues are affecting not just consumer goods, but also the raw
materials and energy to produce them, critical intermediate components like
semiconductors, shipping containers and truck chassis, and skilled logistics,
transportation and distribution workers (including seamen, dockworkers, and
drivers).

“For instance, a new car has become a luxury all around the world due to a
global shortage of semiconductors. If you're in the market for a new house or
want to build a factory, prices are going through the roof and projects are
getting delayed because building materials—particularly those sourced from
overseas, which is the case for most countries—are scarce and will take
longer to acquire,” reported GZERO Media’s Carlos Santamaria.

Why are supply chains under such stress?

The crisis has been described as a portrait of scarcity. You might think the
world is producing very few goods. Some have even compared the situation
to the Soviet Union’s chronic shortages, which reflected the failure of
centralized planning.

The truth is the opposite. More, not fewer, goods are being manufactured
and shipped than normal. In fact, as the White House Council of Economic
Advisers explained, this year “[US] ports are actually moving more containers
in and out than in any year since 2000 (moving about 19 percent more than
in either of the previous two pre-pandemic years of 2018 and 2019).”

https://ianbremmer.bulletin.com/1036159823889225 3/8
30/10/2021, 05:11 Supply chain disruptions, explained | Facebook Bulletin

GZERO World with Ian Bremmer Subscribe

That’s what’s straining the system.

America’s massive fiscal response to the pandemic (totaling nearly $5 trillion)

gave US consumers extra cash they couldn’t spend on in-person services like
haircuts or travel, boosting demand for (mostly imported) goods. As Covid
subsided and the economy reopened in the spring, appetite for stuff only
grew further. At the same time, the pandemic forced many manufacturing
and distribution operations (first at home but now predominantly in China,
Vietnam and other export hubs with strict lockdowns) to temporarily shut
down, reducing global goods output. Partly due to extensive labor shortages
caused by the delta wave and a tightening job market, but also to preexisting
fragilities in the “just-in-time” model, supply chains have been unable to keep
up with the surge in demand.

The data bears this out.

“By several measures of the economy, we're seeing an absolute boom right
now,” wrote Bloomberg’s Joe Weisenthal. Consumption and imports are way
above pre-crisis trends. The latest manufacturing survey from the Dallas Fed
shows “extremely robust, above-average measures for things like production,
new orders, growth rates, and hiring,” Weisenthal reported, claiming that a
key reason behind America’s supply chain woes is simply that “Americans
have money to spend and they're spending a lot of it.”

https://ianbremmer.bulletin.com/1036159823889225 4/8
30/10/2021, 05:11 Supply chain disruptions, explained | Facebook Bulletin

GZERO World with Ian Bremmer Subscribe

Supply chains weren’t designed to withstand the rapid increase in output

necessary to satisfy Americans’ unprecedented appetite for stuff. As Slate’s
Jordan Weissmann wrote:

There are only so many berths where cargo ships can dock, and only so
many cranes to unload them. There are only so many trucks that can
enter and exit the port at a time, and only so many warehouses where
goods can be stored. And there are also only so many trained dock
workers or truck drivers available to actually do these jobs.

Instead of Soviet bread lines, think of what happened with Clorox wipes
during the early pandemic days: there’s more demand than ever and
production has increased fast, but not enough to meet the onslaught of new
orders.

As Weissmann put it, it is a crisis of abundance, not scarcity.

When will the problems subside?

Not for a while. Policymakers including transportation secretary Pete
Buttigieg, Federal Reserve chair Jerome Powell, and World Trade Organization
director-general Ngozi Okonjo-Iweala have said the supply chain issues could
persist well into 2022. This means that they’ll still be around through the
holiday season.

However, as the world enters the New Year, vaccination proceeds apace, and
the global economy continues to re-open, demand for goods will go down to
more normal levels and bottlenecks along the supply chain should ease.

According to a blog post published by the White House Council of Economic

Advisers, the stresses on supply chains should be expected to diminish “as
COVID fades and as people rebalance their spending more evenly between
goods and services.”

But even if supply and demand both normalize soon, it may still take several
months for supply chains to clear the existing backlog. Don’t expect
https://ianbremmer.bulletin.com/1036159823889225 5/8
30/10/2021, 05:11 Supply chain disruptions, explained | Facebook Bulletin

guaranteed overnight deliveries to resume anytime soon.

GZERO World with Ian Bremmer Subscribe

What can policymakers do about it?

Over the last three weeks, President Biden has met with stakeholders from
the shipping and logistics industry, along with executives from the country’s
largest retailers, to ramp up efforts to tackle lingering port bottlenecks and
container logjams.

On October 13, President Biden announced public and private commitments

to ease cargo congestion and mitigate shipping delays, including enhanced
data sharing and a deal to keep the Port of Los Angeles running 24/7 through
Christmas.

It’s unclear how much these interventions will help or to what extent Biden
can actually make the situation better, especially before consumer demand
shifts back to pre-pandemic patterns and the import boom eases off. After
all, record numbers of vessels have been stranded outside L.A.-area ports
(which process 40% of all shipping containers arriving in the US) despite the
latter already operating above full capacity, and many of the supply
bottlenecks originate in Asia and other parts of the world where the US
government has limited power to intervene. Outstanding shortages of
shipping vessels, cargo containers, chassis, truck drivers, railway workers, and
https://ianbremmer.bulletin.com/1036159823889225 6/8
 shipping vessels, cargo containers, chassis, truck drivers, railway workers, and
30/10/2021, 05:11 Supply chain disruptions, explained | Facebook Bulletin

warehouse spacewith
GZERO World can’t
Ian be addressed by executive fiat.
Bremmer Subscribe

In the medium term, infrastructure investments would help make supply

chains more resilient. As transportation secretary Pete Buttigieg said to CNN:

This is one more example of why we need to pass the infrastructure bill.
There are $17 billion in the President's infrastructure plan for ports alone
and we need to deal with these long-term issues that have made us
vulnerable to these kinds of bottlenecks when there are demand
fluctuations, shocks and disruptions like the ones that have been caused
by the pandemic.

Unfortunately, in the short run there is little the government can do beyond
ordering round-the-clock port operations and urging corporates to do their
part in a national struggle—measures insufficient to address today’s supply
chain disruptions.

How will this crisis affect Biden politically?

Supply chain logjams and their consequences—delivery delays, shortages,

and inflation—are undermining the “America is back” case the Biden
administration hoped to make in the wake of Covid-19. Some in the right-
wing media are accusing him of “stealing Christmas,” a message that is likely
to resonate with voters if the problems persist into the holiday season.

It doesn’t matter that the disruptions are a symptom of a booming economy,

credit to Biden’s successful fiscal policies. Politics is perception, and the
president’s approval ratings have dropped 10 points since June, no doubt in
part due to these issues. A Christmas nightmare scenario poses a real political
challenge for the administration, even if the president is not responsible and
has few levers to solve it.

***

What do you think? Let me know in the comments section below.

And if you haven't already, don't forget to SUBSCRIBE to my free

l tt GZERO W ld
https://ianbremmer.bulletin.com/1036159823889225 ith I B t t t d li dt 7/8
30/10/2021, 05:11 Supply chain disruptions, explained | Facebook Bulletin

newsletter, GZERO World with Ian Bremmer, to get new posts delivered to
your inbox.
GZERO World with Ian Bremmer Subscribe

Subscribe for free to GZERO World with Ian

Bremmer
Subscribe With Facebook

OR

Email address Subscribe

By subscribing, you agree to share your email address with Ian Bremmer to receive their original content,
including promotions. Unsubscribe at any time. Facebook will also use your information subject to the Bulletin
Terms and Policies

Comments

Log in with Facebook to comment

Privacy  ·  Terms  ·  Cookies  ·  © 2021

https://ianbremmer.bulletin.com/1036159823889225 8/8