Every reporter worth his laptop is writing about the supply chain. The supply chain is in trouble. The supply chain is broken. Who is to blame for the failure of the supply chain?
The supply chain is fine.
Our economic problem is the demand chain.
In a normal economy people are doing different things at the same time. Some people are cocooning. Some people are running around with kids. Some are planning vacations, and some are buying luxury goods.
For the last two years, this has not been the case. Everyone has been demanding the same things at the same time. We demand bleach. We demand masks. We demand take-out. Now we demand gas. We demand products. We demand to be entertained.
This is the demand chain. Businesses plan based on stable or, perhaps, slightly rising demand. There are seasonal variations. They know to raise pumpkins for Halloween, turkeys for Thanksgiving, candy for Valentine’s. They don’t plan based on sudden lurches in aggregate demand. You can’t turn everything off-and-on like a faucet. (In much of the world you can’t even turn the faucet.)
It’s frankly amazing how well the American economy is doing. There have been hiccups, and minor, periodic shortages here and there. But Americans are eventually getting what we want. That’s because we have the money to pay for it.
This is not true in most of the world. Most of the world has been suffering grievously over the last two years. Incomes are dropping, so businesses can’t make as much, so prices rise in the face of incomes dropping and people go hungry. This is the reality of the Global South.
Americans are lucky. We make software. We create value by cutting costs. Economically, we are killing it, even if it doesn’t look like that from the inside.
Yet we’re the ones who are whinging. Our “First World Problems” are going to reap the whirlwind as the world’s economy finds its footing again. Our national narcissism is doing more to kill our global goodwill than Trump ever could.
