[Economics] Pandemic, scarcity, inflation: it's time to reinvent the economy

[#CeLTiXxX]

Some win and some lose

 

When a pipe outlet becomes clogged (due to a demand shock), the water pressure tends to seek other drainage points. These deviations in the flow of economic resources reveal a panorama of winners and losers. In the worst months of the pandemic, the losses of traditional commerce were the profits of electronic commerce and the losses of restaurants were the profits of home delivery. Some effectively reinvented themselves. While some restaurants closed, others developed their services online, including outsourcing their activity to the dark kitchen model.

 

 

the chain breaks

Now, although its workers are not confined, it is the same for a restaurant to suspend its activities than to try to reinvent them when the raw materials to prepare its dishes are not available. One example among many is the United Kingdom, which has suffered from shortages of some products since the beginning of 2020. One of them was pasta: the supply chain begins mainly with Canadian wheat that is exported to Italy, where the pasta is produced. . The farm, the factory, shipping and trucking: all of these elbows and joints in the economic pipeline have been experiencing some kind of disruption. The reduction in production caused panic among British shoppers, who hoarded pasta as American consumers once hoarded toilet paper.

 

Transportation costs go up

Perhaps most of the supply shock is in the increase in transport costs, caused, in part, by the lack of truck drivers in Europe and the United Kingdom but, above all, by oil prices, which fell during the first stage of the pandemic and have largely recovered with the boom in economic activity in recent months. On this point, it is worth mentioning a shock that is not related to covid-19: the reduction in investment in the exploration and exploitation of oil wells. Banks and investment funds have anticipated government commitments to reduce emissions by reducing their investments in the exploitation of fossil fuels. This leads to a limitation in the supply of these resources and is presented as a factor in price increases.

Edited January 25, 2022 by #CeLTiXxX