Germany predicts “An Economy of Scarcity”

Unfortunately the UK is not in the same Boat!!

Handelsblatt, the heavyweight newspaper for economic and financial information in Germany, has predicted an economy of scarcity during 2021 and 2022. In a three-page feature in the weekend edition of 25th July their prediction was that shortages would result in economic activity becoming: Teurer, Später und Knapper i.e more expensive, delayed and prone to shortages.

Six reasons for this situation:

  1. general shortages of labour, mentioning lorry drivers and hospitality staff!
  2. demand for commodities and components growing faster than the productive capacity to provide them, particularly in the supply of timber, computer chips and plastics,
  3. hamstring of metals, chemicals and electronic components in anticipation of shortages due to Covid,
  4. interruptions to global supply chains due to “black swan” events, such as the “Ever Given” in the Suez Canal and the proverbial defective sack of rice in China causing the assembly line to stop in Europe two months later,
  5. global warming, one example being the storms which caused electricity shortages in Texas, closing the chemical and plastics production from Mexican Gulf oil. Industries like these are difficult to restart as the plants are mutually interdependent. Another example being the ravages of the mountain pine beetle in Canadian forests, usually kept in check by cold winters but not since temperatures increased. The result, an increase in US timber prices of 180% since Spring 2020,
  6. the practical end of the “Just in Time” mentality, resulting in companies holding large stocks of intermediate goods to avoid supply interruptions.

So, where does that leave the post-Brexit UK?

Certainly not in the same boat!

The article likens the economy of scarcity to living with an economy like that of the GDR. Of course, the UK is experiencing all these problems, however I suggest that the further layers of impediment to business resulting from Brexit makes it more likely we will have an economy more like that of North Korea.

Review by Anthony Cole, North Herts for Europe Committee member