Focus on the supply side

The biggest question in the U.S. right now is how rapidly vaccinations will proceed. Yet only 8.5% of the new appropriations — under the most generous calculations — are directed toward vaccine supply and anti-Covid-19 efforts.

The biggest question for the world is whether the wealthier nations will put up the estimated $25 billion needed to jump-start a global vaccination campaign in a (relatively) timely manner. So far it appears that they will not — again, a supply-side issue. There did not seem to be much interest in putting such an expenditure into the American Rescue Plan, even though the resulting resumption of trade and migration would undoubtedly have benefited the U.S. by far more than $25 billion.

Major stories about supply-side problems receive only fleeting notice in the U.S. media. Poor infrastructure and distribution are making it difficult for the 270 million inhabitants of Indonesia to get vaccinated, yet very few Americans are paying attention. Indonesia is not usually the focus of attention — and people are not sufficiently obsessed with the supply side.

In the corporate world, there was the big announcement that Intel plans to move full speed ahead to produce more high-quality semiconductor chips and to put more chip factories in the U.S. That switch has come after years of disappointing results from Intel. Can it set things straight? Right now there is a chip shortage in automobile manufacturing, and given the potential fragility of Taiwanese chip supply, U.S. national security hangs in the balance…

Supply-side economics got a bad name because it was associated with too many economists who insisted that tax cuts would be self-financing, or who insisted on tax cuts above all other possible supply-side improvements. Yet all economists ought to proudly announce that they are supply-side economists, first and foremost. That is pretty far from the world we live in, especially as social media have made U.S. monetary and fiscal policies a touchstone for the entire world to debate, often in highly emotional terms.

Here is the rest of my Bloomberg column.

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