Anthony Rowley

Macroscope | Supply chains changing for good is why inflation is here to stay

So many distractions have taken attention from supply chains that the danger of the world’s vital economic organs collapsing has been concealed from view

In the absence of voices of reason, political leaders are being led by the nose into recession, possible economic depression or even outright conflict

Reading Time:3 minutes

Why you can trust SCMP

An employee inspects a wafer at the production line of a semiconductor chip company in Suqian, Jiangsu province, on February 28. Semiconductors have emerged as the latest front of competition between China and the United States, putting progress on globalisation and the underpinnings of global trade under unprecedented threat. Photo: Reuters

Anthony Rowley

Published: 4:30pm, 11 Mar 2023

“How can inflation be transitory if supply chain disruptions are here to stay?” read the headline of a column I wrote in August 2021. It was a fair question then, and it is even more relevant now as it becomes clear that the global economic order has changed for the worse, maybe for a long time.

Yes, China has reopened for business after a lengthy period of pandemic-induced lockdowns and analysts are now hailing that fact as a plus for the global economy. But it is a China whose growth prospects and economic links with the outside world have eroded.

Until quite recently, not many people knew what supply chains were. Like the arteries and veins of the body, these global goods and services networks command attention only when things go wrong. That is the case now, and they are suffering not from natural sclerosis but from conscious destruction.

So many distractions have diverted attention from the supply chain issue – notably the Covid-19 pandemic, US-China tensions, Russia’s invasion of Ukraine and so on – that the very real danger of the world’s vital economic organs collapsing and ceasing to function has been concealed from view.

But continuing inflation is a symptom that should be warning us that all is not well with the global economic system. The malaise has gone from being acute to chronic – in the words of medical practitioners – meaning that it is not of a short-term nature but a long-term, perhaps even terminal one.

A crisis is rapidly approaching, brought about in part by the US refusal to accept China as an economic equal or to accept Russia’s position on Ukraine. This will end either in changes of attitude or in mutual destruction.