In retrospect, David Olive writes, our economic response to the pandemic has been pretty good:
In the Great Reset of 2021, the $119-trillion global economy was guided back to near normality after one of the most severe blows dealt to it in generations.
Humanity has never attempted this before, nor has it needed to.
The COVID-19 pandemic, unlike the Spanish flu, the Great Depression and two world wars, reached the four corners of the world, crushing economies in its path.
Which makes 2021 a banner year, because economic recovery is now well underway in Canada and in most major economies worldwide.
The pandemic exposed major economic weaknesses:
Decades of offshoring and globalization have made the North American economy vulnerable to fragile extended supply lines.
China's periodic factory shutdowns this year due to COVID-19 outbreaks have held up supply of North American goods that once upon a time were made locally. Chinese and American ports are struggling to handle as much as three times the cargo they were designed to process.
And America is suffering an acute shortage of long-haul truckers who bring goods to Canada from clogged California and other U.S. ports.
All of that has brought a new appreciation of buying locally. This year has a seen a new “in-shoring” movement to repatriate offshore production to North America.
And, at present, those fragile supply lines are fueling inflation:
The inflation rate for October, Statistics Canada’s latest reporting period at this writing, was alarming, at 4.7 per cent — an 18-year high.
In November, U.S. inflation was even higher; at 6.8 per cent, it was close to a 40-year high. The main reason for the difference is America’s more severe labour shortage, due largely to unusually low U.S. immigration levels for the past several years.
But the economic consensus seems to be that inflation will be temporary:
The consensus forecast for Canadian inflation is 2.6 per cent next year, and about 2.0 per cent in each of the next three years.
We'll see. We still have a long way to go.
Image: Becker-Friedman Institute University of Chicago