AMAC Exclusive – By Daniel Roman
![Biden walking](https://static-asset.amac.us/wp-content/uploads/2023/02/28062255/Supply-Chain.jpg)
The term “supply chains” has entered the American political lexicon in recent months both as a genuine challenge to the American and global economy, and as a check-all excuse from the Biden Administration and its defenders for why the U.S. economy, which prospered during the Trump years and survived a lockdown, seems to have come to a halt in the post-COVID world. The Biden Administration, which has refused to admit the dangers posed by inflation, even when called out by no less a figure than Bill Clinton’s Treasury Secretary and former Harvard President Larry Summers, has seized on “supply chain problems” to explain the shortages of goods on store shelves, and why what is available seems to cost a whole lot more.
“Supply chain disruption” makes for an excellent excuse, because it simultaneously absolves the Biden Administration from any responsibility for causing the current situation and from any ability to fix it. When Pete Buttigieg, interrupting his paternity leave, told Congress that these disruptions were due to COVID, citing the example of a factory in Vietnam which might have to close in September, causing a shoe shortage in December (Vietnam has had one COVID wave, and no lockdowns), and suggested these disruptions were likely to last as long as COVID exists, he was suggesting the Biden administration could and would do nothing.
Let’s dispense with the theater. Supply chain disruptions are real. The Biden administration did not create them, and the current crisis had its origins in defects in the global economy which predated Biden, COVID, and even Donald Trump. When working at a trading desk for soybeans in 2014, I was witness to how little excess warehouse capacity existed in global ports. A single vehicular crash on a Brazilian highway could cost tens of millions in losses from wasted goods, as there was no storage capacity for excess goods in ports. When delayed traffic arrived, there would be nowhere to store agricultural goods in excess of what could be unloaded, and there would be no choice but to dispose of them. Because it was much harder in these countries to hire local workers and operate local assets as opposed to trading goods remotely and hiring local contractors, it was impossible for international investors who spent vast sums on the products to get warehousing. That would have required local legal teams, local offices, and often bribes.
Oddly, this problem–and it is one of the major sources of rising food prices–is one thing the Biden Administration could fix with an infrastructure investment if they were so inclined. For perhaps 10% of the price tag of Democrats’ bloated reconciliation bill, the United States government could invest heavily in building warehouses not just at American ports but around the world. The United States, as a government, could bypass many of the legal and diplomatic obstacles preventing private businesses from resolving this issue. Given the gap in the market, this would not only improve agricultural supply chains, but it would almost certainly pay for itself. Not only would the United States government likely make back its entire investment within two or three years, but after that point it would be pure profit, which would also provide a strategic reserve. That is the sort of original thinking which would cost far less and deliver far more (while being noninflationary) that the Biden Administration would look at if it was serious about addressing supply chain issues.
If a lack of storage capacity is a major cause of agricultural shortages, it is not by itself the reason no one can purchase PlayStation 5 in stores. As I outlined earlier this year in an article on the threat Chinese ambitions regarding Taiwan pose to the global economy, over the last decade the tech sector has allowed itself to become dependent on a steadily decreasing number of microchip producers until, due to internal developmental errors at Intel, the whole global economy is now effectively dependent on a single Taiwanese manufacturer and its foundries, namely TMSC. As everything from computers to televisions and cars are now dependent on semiconductors, they are now hard to find. While Biden cannot flip a switch to change this overnight, allowing China to threaten Taiwan also means allowing China to openly threaten markets, which already have no idea when companies will receive microchips. A weak foreign policy stance abroad is thus contributing to hoarding and uncertainty at home.
A similar problem has arisen with energy. Biden and his defenders are not entirely wrong when they argue that energy prices have increased at a faster rate than justified by any change in supply. But that ignores the extent to which they themselves have contributed to this. Prices are driven by future expectations, and under Donald Trump, the assumption was the United States government was determined to secure indefinite future supplies, not just to try and react to secure a minimum.
The consequence was price stability. It is all well and good to promote renewable energy sources, but renewables remain uncertain, and that combined with killing certainties such as the Keystone XL Pipeline is a good way to encourage speculators to assume prices will go up rather than down. Furthermore, the entire Biden approach to energy is to block projects private individuals and companies are paying for – pipelines and fracking – in favor of government backed subsidies for renewables, which only further increases inflation across the board, worsening all of these problems. If Biden was serious about fixing these issues, he would look at solving both problems head-on rather than using one as an excuse for why nothing need be done about the other.
But the Biden Administration is no more serious about supply chains than about inflation. And while Biden is doing nothing to help with agriculture, his high spending policies are making things worse across the board. Inflation is not the cause of agricultural shortages, as explained above, or of shortages of other products. But it does make them worse. Having plenty of money but less to buy logically produces two outcomes. First, it means people have less need for money, and hence less need to work, which contributes to the current labor shortage. (If you can’t buy a car, a computer, or the newest video game console, why exactly are you working extra hours?) Second, it means prices for what goods are available go up. Biden, by pumping endless sums of money into the economy, is exacerbating both problems. It is therefore dishonest for Biden to claim that because inflation did not cause either the labor or goods shortage, that inflation has not made both of them worse and his policies have not worsened inflation.
Ironically, the labor shortage is now reinforcing other shortages, because by making work less attractive, Biden has managed to generate a shortage of truck drivers and port workers, worsening the issue of a lack of products to buy with money that prospective workers now no longer need to work to earn more of.
So while the Biden Administration is not making up “supply chain” problems out of thin air, Biden and his team are being disingenuous when they use the concept as an excuse to do nothing about inflation, or suggest that things are beyond their control. Even if supply chain defects predated COVID, Trump, and Biden, Biden’s policies have made them dramatically worse. And inflation has exacerbated the impact of such policies, creating a circular economic malaise that Biden appears to have no interest in dealing with.
Buttigieg throwing his hands up in the air and saying there is nothing he can do if someone in Cambodia has COVID is not leadership. It may not be fair to blame the administration for all the problems in the world. But the administration is taking none of the actions within its power to address the current crisis, and it must be held to account by all Americans regardless of party affiliation for that failure.
Daniel Roman is the pen name of a frequent commentator and lecturer on foreign policy and political affairs, both nationally and internationally. He holds a Ph.D. in International Relations from the London School of Economics.