By Dian Cohen
I try not to speculate a lot about the future because that’s all it is – speculation. A great many trees have been sacrificed to explain what post-COVID normalcy would look like and many gigawatts of electricity have been spent on the internet postulating how the economy will recover. It’s been pretty much a waste of time.
When the virus took hold last January, governments around the world moved quickly to prop up their economies. Businesses everywhere were forced into adapt-or-die mode. These two measurable behaviors have changed the way we understood the economy to work. Eighteen months later, the global economy is twisted up like a pretzel and we can’t count on the benchmarks and theories we have used for decades to measure or explain the health of the economy. That’s why there are so many views about the future: is inflation the most pressing problem? What about the millions of jobs that are missing? Are we close to full employment? When will the stock market crash? How close is deflation and recession?
Nevertheless, we all have to make decisions about our own lives and the lives of those who depend on us. So let’s try to observe where the global economy and our own little corner of it is now.
1. The pandemic economy isn’t over. We’re just entering another stage of it. Much as we would like to, it’s very hard to just “move on” from COVID to a more normal life. Even as we try, as long as there are unvaccinated people anywhere in the world, the virus is free to mutate. We have vaccines here but they don’t help people who don’t get them. Some countries haven’t even started vaccinating. People are still getting sick and going to the hospital. Hospitalization costs rise as younger, healthier unvaccinated patients don’t die quickly like older people did last year. The longer they stay in hospital, they more they consume hospital capacity that you may need if something happens to you. If you have income and pay income taxes, you know that this is something you are helping to pay for.
2. The global supply chain log jam isn’t going away. Our finely tuned “just-in-time” manufacturing system that eliminated waste has not survived COVID. The virus caused and is still causing production slowdowns or stops that have not yet abated. Malaysian, Vietnamese and Indonesian factories, from whence so many of our manufactured goods come, have been idle for weeks. Ships and shipping containers are not where they are supposed to be — many of them are stuck at sea — creating a backlog of goods sitting in factories, waiting to be put in boxes. Many are waiting for truck drivers who themselves are in exquisite short supply. All these bottlenecks have resulted in shortages of many items – cobalt, lithium, steel, building supplies, cement, microchips. And shortages of components like these mean that homes and rental units and furniture and cars and smart phones and washing machines and bicycles are also backlogged. Prices of all of them are up significantly. Because our personal behavior has changed, what used to be predictable supply and demand is now “lumpy” – as an example, because so many people started eating at home, simple things like Ketchup packets and the packaging materials for sushi and Big Macs have become scarce.
To quote Geopolitical Futures, “Countless other hiccups in supply chains near and far are further complicating the situation. This has left finely tuned logistics networks overwhelmed and off-balance. It’s anyone’s guess how long it will take to untangle this mess. There are simply too many single points of failure – each of which can affect a dozen more – for things to snap back to working order quickly. However, the immediate situation plays out, though, there’s likely to be immense long-term implications as countries across the globe scramble to try to rewire the global trading system around their needs.”
Dian Cohen is an economist and a founding organizer of the Massawippi Valley Foundation.