Home Current Events The Multiple Factors Behind Today’s Worldwide Shortages
The Multiple Factors Behind Today’s Worldwide Shortages

The Multiple Factors Behind Today’s Worldwide Shortages

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Image courtesy of Yunsik Noh on Unsplash

There has been no scarcity of news articles and news reports about the shortages of supplies worldwide. Included among the most frequent are pictures and video clips of container ships waiting to be unloaded in ports around the world, announcements about companies unable to hire warehouse workers or truck drivers, smart chip shortages impacting deliveries of new cars and trucks, and raw materials unable to be delivered around the world.

The editorial team at The Economist wrote an article that clearly outlines the sequence of events that created the current product shortages and predicts that these shortages are not likely to end soon.

Not surprisingly, the editors write that the immediate cause of the shortages is COVID-19. Instead of pointing to product shortages stemming from reduced manufacturing output due to worker COVID-19 infections, the editors write that the bigger cause is the $10.4 trillion global stimulus programs triggering consumers to spend more than normal.

Demand for electronic goods has increased. However, the chips that operate these products are unavailable because the production of microchips has been impacted by factory closures in countries like Taiwan, which is a major chip producer.

In wealthy countries, the stimulus has increased the balance in people’s bank accounts, allowing many workers to wait for jobs to open in industries other than the hospitality or warehouse sectors. Many employers are operating with shortages of hourly workers.

Beyond COVID-19 causality, the editors write that there are two deeper forces at work. Global decarbonization issues have increased the demand for renewable energy sources and increased the costs of natural gas, oil, and coal, since those suppliers are hesitant to invest in expanded production given the decarbonization movement.

The other force cited by the editors is protectionism. Political battles in many countries have switched the trade focus from economic efficiency to the pursuit of goals like labor and environmental standards. The flow of cross-border investment by corporations has decreased by nearly 50% since 2015.

The COVID-19 fiscal stimulus that created the consumer demand and triggered the shortages is going away as the risk of continued infection and economic disruption declines. Chip manufacturers and other industries are likely to increase production capacity in the future, helping to ease the imbalance of supply and demand.

However, The Economist editors observe that these deeper forces are not going away. Politicians need to carefully consider the policies that exacerbate public reactions.

One example the editors cite is the push for green power sources. As countries continue to push for more renewable energy sources, the shortages will force the costs of electricity to become higher. Manufacturers will pass that increased cost on to consumers, and utilities will do the same. Economic growth will slow due to these increased costs.

Politicians who believe that decarbonization will stimulate the economy are likely to be replaced by politicians who blame the increases in prices on the policies that created them. Governments will need to carefully match their green energy policies with the availability of renewable energy sources.

The editors remind their readers that the inflationary years of the 1970s led to a rejection of big government by voters. The real threat of the shortage economy is a voter backlash against decarbonization and globalization.

In the U.S., politicians from carbon energy-producing states like Texas and West Virginia are protesting regulations and laws designed to reduce the utilization of these resources. If the cost of electricity impacts the wallets of consumers elsewhere, they may question the wisdom of such policies.

The Biden administration recently announced that it will keep in place the Trump administration’s tariffs on goods produced by China. Those tariffs average 19%. In a shortage economy, those tariffs are passed on to consumers, who either pay them or choose to reduce their purchases of the higher-priced goods.

The Economist editors are correct in their analysis that steering our economies through decarbonization and globalization will not be easy. The logjam of unloaded container ships will eventually be processed. It will take a lot of cooperation and cajoling in the halls of our government to deal with the other forces without triggering a voter backlash.

I’m not an optimist. The road ahead will get bumpier.

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Wally Boston Dr. Wallace E. Boston was appointed President and Chief Executive Officer of American Public University System (APUS) and its parent company, American Public Education, Inc. (APEI) in July 2004. He joined APUS as its Executive Vice President and Chief Financial Officer in 2002. In September 2019, Dr. Boston retired as CEO of APEI and retired as APUS President in August 2020. Dr. Boston guided APUS through its successful initial accreditation with the Higher Learning Commission of the North Central Association in 2006 and ten-year reaccreditation in 2011. In November 2007, he led APEI to an initial public offering on the NASDAQ Exchange. For four years from 2009 through 2012, APEI was ranked in Forbes' Top 10 list of America's Best Small Public Companies. During his tenure as president, APUS grew to over 85,000 students, 200 degree and certificate programs, and approximately 100,000 alumni. While serving as APEI CEO and APUS President, Dr. Boston was a board member of APEI, APUS, Hondros College of Nursing, and Fidelis, Inc. Dr. Boston continues to serve as a member of the Board of Advisors of the National Institute for Learning Outcomes Assessment (NILOA), a member of the Board of Overseers of the University of Pennsylvania’s Graduate School of Education, and as a member of the board of New Horizons Worldwide. He has authored and co-authored papers on the topic of online post-secondary student retention, and is a frequent speaker on the impact of technology on higher education. Dr. Boston is a past Treasurer of the Board of Trustees of the McDonogh School, a private K-12 school in Baltimore. In his career prior to APEI and APUS, Dr. Boston served as either CFO, COO, or CEO of Meridian Healthcare, Manor Healthcare, Neighborcare Pharmacies, and Sun Healthcare Group. Dr. Boston is a Certified Public Accountant, Certified Management Accountant, and Chartered Global Management Accountant. He earned an A.B. degree in History from Duke University, an MBA in Marketing and Accounting from Tulane University’s Freeman School of Business Administration, and a Doctorate in Higher Education Management from the University of Pennsylvania’s Graduate School of Education. In 2008, the Board of Trustees of APUS awarded him a Doctorate in Business Administration, honoris causa, and, in April 2017, also bestowed him with the title President Emeritus. In August 2020, the Board of Trustees of APUS appointed him Trustee Emeritus. In November 2020, the Board of Trustees announced that the APUS School of Business would be renamed the Dr. Wallace E Boston School of Business in recognition of Dr. Boston's service to the university. Dr. Boston lives with his family in Austin, Texas.

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