Supply Chain Disruptions Should be a Bigger Election Issue

One of the most important issues of this election campaign has been the rising cost of living in Canada.

Across the country, families have been faced with rising prices for many goods. Food prices have gone up at grocery stores, clothing and apparel have become more expensive, while price hikes for used cars, bikes and gasoline have made transportation more expensive.

The rising prices can be seen in Canada’s rising rate of inflation. The most recent report from Statistics Canada found that the rate of inflation was 4.1% in August which was the fifth consecutive month inflation exceeded the Bank of Canada’s target range of 1% to 3%.

The rising inflation numbers have been a key talking point for the Conservatives throughout the campaign. Federal Conservative leader Erin O’Toole has blamed the Liberal government’s “reckless spending” for the rise in prices.

However, the Conservatives focus on spending and inflation is misguided because it ignores how disruptions in global supply chains can create shortages for key products and goods, thus creating supply chain bottlenecks that cause a temporary increase in prices.

Many economists and policymakers have argued that the spike in inflation is only transitory and is partly a result of supply chain bottlenecks and imbalances that will work themselves out as the economy continues to recover.

The rise and fall of lumber prices serve as an example of how shortages in production can raise prices and inflation.

When the pandemic hit, lumber mills were forced to close creating a shortage in supply. Also, millions of people transitioned to working from home and wanted to renovate their homes to accommodate working from home, thus raising demand.

The supply-demand imbalance threw much of the industry out of whack, and lumber prices soared. At the peak price point in May, lumber prices had quadrupled.

In response to the rapid price increase, Conservative MP Pierre Poilievre posted a video in which he blamed the rising prices on Trudeau and the Liberals spending too much money in response to the pandemic.

Over the summer, North American lumber companies responded to the surge in demand by quickly increasing production just as vaccinated people started going back to work and demand fell.

Since peaking in May, lumber prices have fallen about 70%.

The rise and fall of lumber prices also serve as an example of how Conservative politicians have missed the mark by focusing on government spending rather than how disruptions in supply chains can put upward pressure on inflation.

Problems with supply chains are not new and this has been a long-standing and well-known issue in Canada, but it has not been as near as big of an issue as rising costs and inflation through the election campaign.

As Canada continues to recover from the health and economic fallout from the pandemic, it is important that our politicians develop policies and strategies that pay attention to specific supply chains, particularly those that support disaster recovery and critical national infrastructure.

Canada’s unsuccessful attempts to secure PPE at the start of the pandemic underscore how disruptions in the supply chain’s resiliency are not just an economic issue, but also an issue for national security, health, and welfare.

Moreover, climate change poses a significant threat to supply chains as adverse climate events can cause disruptions.

A recent RBC report found that the recent wildfires in British Columbia “disrupted key rail routes extending outside the province, exacerbating delays in shipping that were already severe due to a global container shortage.”

Disruptions to supply chains will only become a bigger and bigger problem in the future unless our politicians recognize the severity of the issue and finally take action to do something about it.

Rather than worrying about government spending because of the inflationary risk, the Conservatives would be better off considering the future of supply chains as it may be more important to keep inflation and prices low and stable.

But the Conservatives aren’t the only party with issues on this file.

The other federal parties have mentioned either expanding Canadian manufacturing to diversify end-to-end supply chains or increasing the resiliency of our supply chains, but no one has released any tangible details for how they plan to make it happen.

Supply chain disruptions are a complex and boring issue but it is important. It deserves to be a bigger issue this election — especially when compared to the inflation panic.