A Reality Check on the Pandemic, Supply Chains and Our ‘April 2020 Mindset’
Last week, President Biden issued an executive order initiating a White House-led review of “key” global supply chains (including medical goods and semiconductors) that have been affected by the pandemic. The president’s timing was superb, as his new order was published on the same day as my new paper on pandemic-related supply chains and the federal government’s response thereto. That paper arose in response to claims from numerous politicians and pundits, including Presidents Trump and Biden, that pandemic-related shortages in the spring of 2020 had revealed major weaknesses in America’s “economic resilience”—weaknesses caused by past U.S. policies and demanding new federal government action.
Surely, these claims have a nugget of truth: Global supply chains and a nation’s openness to trade and investment inevitably involve a risk that a “shock”—war, pandemic, natural disaster, etc.—hits the world or certain key nations and roils domestic supply. And such issues definitely arose a year ago, when factories shut down, container ships sat empty at port, and our grocery store shelves were empty. Such is the nature of a once-in-a-lifetime shock to global supply and demand. Things tend to get messy.
However, the story of COVID-19 and our supply chains doesn’t end in April 2020, even though many folks in Washington are still today acting like it did. Since then, governments and markets have responded, and they’ve done so using both global supply chains and the significant industrial capacity that—contra the conventional wisdom—still exists in the United States. These experiences reveal that federal government attempts to reshore supply chains raise their own risks, and that freer markets can bolster U.S. resiliency by increasing economic growth, mitigating the impact of domestic shocks, and maximizing flexibility in times of severe economic uncertainty. This argues for a different approach to achieving real resiliency—an approach based on the open and flexible policies that America does best.