I try to avoid wading into the field of economics, where a little bit of knowledge is a dangerous thing, and a lot of knowledge doesn’t seem to help matters much these days either. But I recall from the distant fog of a high school term paper that one of the initial complicating factors in the onset of the Great Depression was the buildup of inventory. I’d understood that the recent advances in communications technology, along with more efficient production and delivery systems, had largely streamlined inventories to be more responsive to real-time demand. But this WaPo article suggests that there’s still some lag time. Obviously there’s a difference between small-ticket items and the infrastructure-heavy automobile production described in the article. But the glut extends to consumer electronics goods and other low-end products as well:
In the longterm, that just means excess inventory will just have to be burned through before any increased consumer activity is reflected in actual production. But in the short term, all that inventory is going to be seeking the most active markets. That’s already resulted in some protectionism, with India banning Chinese toys in the aftermath of a flooding of the market. Again, we seem to be entering a period where the interests of sound economics and those of good politics will increasingly diverge.