Toyota announced in late August that it would reduce production by 40 percent in September, because of a shortage in semiconductor chips for its cars’ computer systems. This major cutback by the world’s largest carmaker was only the latest consequence of global production disruptions caused by the pandemic. The spread of COVID-19 forced factories worldwide to close, prompting shortages of shoes, steel, lumber, and other goods. The virus has also upended the shipping industry, which underpins international trade. Chinese authorities closed the port of Ningbo, which handles more cargo than any other port in the world, for two weeks in August after a single dockworker tested positive. Climate change and factory fires have also put severe pressure on the supply chain, as did the container ship blocking traffic for nearly two weeks in the Suez Canal, one of the planet’s busiest trade arteries. Low supplies are leading to higher prices for consumers, prompting fears of uncontrolled inflation. Has the pandemic broken the global production system?

Dean Baker is the co-founder of the Center for Economic and Policy Research in Washington and has written several books on macroeconomics and globalization. In Baker’s view, the production system has actually held up well to the stresses of a global pandemic. The ongoing shortages are largely spot instances, not structural or lasting problems, with production interrupted only temporarily, he says. He expects most shortages to end early next year, which should curtail fluctuating prices and calm inflation worries. That said, the pandemic has shown that governments worldwide need thoroughly to assess vulnerabilities to their infrastructures and make them more resilient to future shocks—especially from climate change.


Michael Bluhm: Beyond cars and semiconductor chips, what other goods are in short supply?

Dean Baker: There are a lot of areas where we’ve seen supply disruption. The price of lumber exploded in late 2020. Other building materials have gone up, as well. Now, lumber prices are back down. You’ve had shortages of food items—fruits and vegetables. Beef prices have gone up. There was a toilet-paper shortage at the start of the pandemic. Spot shortages are continuing to spring up.

We have a once-in-a-century worldwide pandemic, and the bottom line is, we’re doing really well. We’re not seeing people go without food—I’m speaking of the United States; obviously, there are hungry people in the world. Cars are more expensive, but it’s not as though you can’t get a car. Used-car prices have been falling in the last couple of months.

I mentioned fruit. That’s global warming—not the pandemic. We’re going to have to reevaluate and look where we could do better, particularly with regard to global warming, figuring out how we could make the whole economic system more resilient against its effects. But we’ve done quite well.

Bluhm: How much of this is caused by the coronavirus, and how much is caused by other factors?

Baker: You’ve had a lot of shutdowns directly related to the pandemic. Countries heavily dependent on Malaysia, Thailand, and Vietnam have been shutting down plants because the Delta variant hit them hard. Peoplse are holding these countries up as models, because they’ve done a pretty good job containing it, but in the last two months they’ve been seeing serious outbreaks, and that’s led to a lot of shutdowns.

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