I can’t stop thinking about this James Meadway piece reflecting on what he terms our new age of scarcity. The fundamental point he is making is a simple one, concerning the environmental shocks which are increasingly ubiquitous. There is a tendency to see each of these as exceptional but the routine occurrence of once exceptional events means we urgently need to stop framing them as exceptional. The supply of basic goods will be reliably constrained by the multiplying effects of the climate crisis:
In May global food prices were nearly 40 per cent higher than they were the previous year. They are being pushed up as a result of a pandemic-induced labour shortage. Brazil, an agricultural superpower responsible for one third of the world’s coffee exports, a third of the world’s corn-feed for livestock and half of global sugar exports, is suffering its worst drought for a century. Exports have been severely restricted as a result, pushing up prices. Meanwhile, storms in Texas and a drought in Taiwan have hindered semiconductor production. Extreme weather isn’t just a one-off cost. As weather systems become more unstable, supplies of basic goods will become more constrained.
He suggests the impact of Covid-19 can be understood in comparable terms as supply shocks which constrain supply:
Lockdowns disturbed supply chains on an unprecedented scale, as production was wound back across the world and demand collapsed. As demand has returned, it has run into a series of constraints in supply that remain – from the backlog of orders, to the shortage of shipping containers, to continuing restrictions on the employment of labour, such as the “pingdemic” or ongoing factory shutdowns. Prices have risen for essentials including timber and steel.
This has exposed the inadequacy of just-in-time supply chains which exchange resilience for efficiency, as Carys Roberts helpfully articulates it. An economy predicated on abundance, at least in advanced economies, suddenly confronts ubiquitous scarcity. This takes place against the backdrop of a long term squeeze on living standards within neoliberal economies, suggesting that goods will become more scarce precisely after buying power has undergone a significant historical decline.
If I understand correctly, this is the driver of inflation which, argues Meadway, needs to be understood as a consequence of rising real costs which have emerged independently of demand. It’s a distinctive form of inflationary pressure in the sense that production and supply processes have undergone a structural transformation. This means that the standard playbook of raising interest rates will likely cut off investment at exactly the time when it’s needed in order to cope with the underlying environmental shift.