A report released today by White House economists contends that the pandemic exposed existing vulnerabilities in the supply chain that won’t go away as the pandemic fades, reports The New York Times.
“Though modern supply chains have driven down consumer prices for many goods, they can also easily break,” the Council of Economic Advisers wrote. Climate change, and the increasing frequency of natural disasters that comes with it, will make future disruptions inevitable, the group said.
White House economists analyzed the supply chain as part of the Economic Report of the President, an annual document that outlines the administration’s thinking on key economic issues facing the country, and on how to address them.
This year’s report calls for the government to do more to combat slowing productivity growth, declining labor force participation, rising inequality, and other trends that predated the pandemic.
“The U.S. is among and remains one of the strongest economies in the world, but if we look at trends over the last several decades, some of those trends threaten to undermine that standing,” Cecilia Rouse, chair of the Council of Economic Advisers, said in an interview. The problem is in part that “the public sector has retreated from its role.”
The report dedicates one of its seven chapters to supply chains. “Because of outsourcing, offshoring, and insufficient investment in resilience, many supply chains have become complex and fragile,” they write, adding: “This evolution has also been driven by shortsighted assumptions about cost reduction that have ignored important costs that are hard to turn into financial measures, or that spilled over to affect others.”
But some economists noted that making supply chains more resilient could carry its own costs, making products more expensive when inflation is already a major concern. Full Story
Related: Inflation Shows No Sign of Easing; Dockworker Strike Would Rock Supply Chain.