Higher commodity and food prices, we are told are a Good Thing. Our exporters (ie. Fonterra and foreign oil companies) get more money. But we consumers have to pay more to buy the same products, so are we better off? And what about the poor saps overseas who are paying more for less, or the really poor saps who are priced out of the market?
When you hear ‘rising export prices’ what you’re actually hearing is ‘inflation’ – nothing more is being produced but it is costing more money, that’s inflation by definition. As consumers, we pay more for the same amount (if we can afford it). It’s only good for the producer because their input costs aren’t inflating as fast as their prices.
Which brings us to the big input cost: wages. In theory, we should be compensated for higher food costs because our food exporters will increase activity, hire more people, and, so, push up wages across the country. This is how the gain for the country from higher export prices is meant to be spread through-out the economy. In fact, it’s not happening.
There is a concerted effort – from the government down – to deny workers wage increases. Apart from obviously contradicting the supposed goal of closing the wage gap with Australia, this means that the real value of most workers’ wages is falling (even ignoring the GST increase).
The corporate media is cheering on these wage cuts – we’re told we all have to do our bit in these tough times. But that just means the ‘benefits’ of higher commodity prices are limited to the exporters. Everyone else faces higher prices and lower wages.
The international story behind higher commodity prices is that there are more mouths to feed and more cars to fuel but the cheap oil is gone and food output isn’t keeping up. The disastrous grain harvest in Russia, the loss of crops in Queensland, and an expected poor rice harvest in Thailand are pushing up prices for these staples and also made the grain that feeds much of the world’s dairy cattle more expensive.
High oil and food costs are pricing the world’s poorest people out of the market. Food and petrol price riots have brought down the government in Tunisia and its neighbouring governments fear they may be next. Zimbabwe is experiencing fuel shortages because its foreign suppliers have insufficient supply. Riots are spreading around the third world and the death toll is rising. This is the real cost of that Good Thing – rising commodity prices.