A top priority is to have better data and better business intelligence in government. Even after 30 years of globalization, there is astonishingly little detailed, publicly available information on product flows in global supply chains. Ministries need to restore the kind of engineering-based industry knowledge that was more common back when industrial policy was considered a key government function.
But in the short term, decentralized markets and price signals are the problem, not the solution. Governments will need to step in—whether by deploying soldiers to drive gasoline tankers or providing production subsidies—to mitigate some of the shortages.
When the immediate supply concerns abate, firms and policymakers must consider what kind of insurance or slack they should build into the production system over the longer term. Just as banks needed to increase their equity buffers after 2008, we perhaps now need to step back from just-in-time production and redefine productivity in light of supply-chain risks.
Diane Coyle, professor of public policy at the University of Cambridge, is the author, most recently, of Cogs and Monsters: What Economics Is, and What It Should Be (Princeton University Press, 2021).