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EMD-81-42 1 (1981-06-25)

handle is hein.gao/gaobacjkt0001 and id is 1 raw text is: 





STUDY BY THE STAFF OF THE U, S.



General Accounting Office


Materials Shortages And Industrial

Bottlenecks: Causes, Trends, Prospects





When the Nation's capacity to produce basic
materials--such as steel, aluminum, cement,
and chemicals-- is exceeded by demand, the
resu It can create production bottlenecks which
adversely affect industries that rely on those
basic materials. This can breed inflation. Rea-
sons for insufficient basic materials capacity                      I
seem to be overlooked or poorly understood.                        111111 UU U iI

The materials shortages of 1973-1974 were
the most severe since the Korean War. GAO
believes they were caused mainly by underin-
vestment in prior years. Although Government
intervention--environmental and price con-
trols--has been cited as the cause of underin-
vestment, forces within the private market
played an equal if not larger role in reducing
investment incentives.

Looking ahead, some current trends could
also inhibit future capacity growth. These
trends include uncertain energy costs, ex-
tended lead-times for capacity creation, and
greater sensitivity to investment risks. GAO
believes these trends provide a further basis for
concern over the supply side of the Nation's
economy.


~77


   EMD-81-42
JUNE 25, 1981

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