Pessimism as a spur to action

Bushfire at Captain Creek, Queensland, Australia. Source: Wikimedia

The argument over whether the current price spike is transitory or something more persistent continues. For my part, both sides of the argument, as it’s usually presented, are wrong: it is a permanent shift in prices, but it’s not the result of excessive monetary financing over the last year (or indeed decade). It’s the result of the the era of cheap things coming to an end. Inflation is not “always and everywhere a monetary phenomenon”.

Either way, price rises are beginning to bite. The Financial Times picks up on one set of these, noting that its “breakfast indicator” – a composite index of the futures prices of “coffee, milk, sugar, wheat, oats and orange juice” had shot up 63% since 2019, with price rises accelerating over summer this year. The FT notes:

In a year of extreme weather, growers in key producing regions of many food commodities faced output declines. Wheat futures prices are up 20 per cent from the start of the year as Russia, North America and Argentina were affected by drought, while European producers were hit by rain. The last time wheat prices soared to current levels was in the aftermath of the 2012 drought in the US.

It has been a year of extreme weather, of course. But then so was the year before. And the year before that. Looking ahead, next year is likely to be the same. And then the year after that. And the year after that, and so on, stretching into the future. Climate change means that we should, on average, expect each year to be worse and harder than the one preceding it.

One impact of this steady decay – not the most important – is that the slight air of unreality about climate change policy is beginning to dissipate. For a period of time, it was possible for governments to make big declarations about their targets for decarbonisation, and punt these some distance into the future. This is, naturally, still happening – bonus prize this week for Australia – but those targets and, in particular, the collective failure to come even close to meeting them is beginning to feed back into conventional, short-term policymaking. The Office Budget Responsibility’s inclusion of the rising costs of climate change in its own forecasts for the path of the UK government’s debt was a