Yves here. In our links feature, we only had a small portion of last year’s severe weather events. Even as devastating hurricanes like Helene and Milton have been in the headlines, there has been an almost universal level of articles about extreme heat tolerance (new daily and monthly highs, record highs for nighttime temperatures, new ocean readings) and major flooding produced by continued rain. Both droughts and floods are projected to reduce agricultural production, which will in turn increase prices, creating hardship and possibly in some areas, shortages. Yet economic forecasts simply ignore what should be “in your face” real world events.
Remember that in the US, if the voters turn out Team Dem, one reason will be that they are still suffering from the effect of a large jump in food prices, even if inflation has been reduced. In the UK, the government is reducing winter fuel subsidies. Although the poorest will still get the benefit, those at the top will not, and many experts have warned that their situation is dire. How will they and others live if (when) they are hit by high food costs?
Richard Murphy points out how it is clear that the UK will have serious problems with agricultural production in the next year, possibly for a long time, but the economic models do not give up.
And let’s not forget that food shortages and shortages create political chaos. Nomura back in the day created a model of household fuel and food costs as a percentage of median income in the Middle East. As predicted, countries that had fallen into high levels of basic living costs compared to normal living standards were more likely to, and in fact experience, the Arab Spring uprisings.
Having said that, macroeconomic models are not what they are designed to be.
By Richard Murphy, part-time Professor of Accounting Practice at Sheffield University Management School, director of the Corporate Accountability Network, member of Finance for the Future LLP, and director of Tax Research LLP. Originally published on Fund the Future
The Guardian reported yesterday:
England faced its second worst harvest on record – with fears growing next year – after heavy rain last winter hit production of key crops including wheat and oats.
For staple crops, wheat shipments in England are estimated to be 10m tonnes, or 21%, down by 2023, according to the latest government data analysis by the Energy and Climate Intelligence Unit (ECIU).
While the Treasury is preoccupied with its spreadsheets and the City confuses economic activity with private equity exploitation, in the real world we all rely on there is actually an ongoing crisis due to climate change.
The UK environment is in crisis. And it won’t be any better next year. I can tell you, as I live in a deep agricultural area, that the rain in the last weeks plays badly with next year’s planting in waterlogged soil. Flood plans are already very high here: another meter or so and I won’t see them higher, and this is October, not March.
I took this photo while in the Welney wildlife reserve. in the fields last weekend – that mark should be three meters above water levels right now – and it’s not. No one will walk near that ‘drain’, as it is called, for a while:
For decades, the need for financial returns has meant that we have ignored economic reality. We can’t do that for long: it will come back to bite us very hard.
And, for the record, there is a real risk of inflation in this – and changing interest rates will do nothing to change that fact, whatever Andrew Bailey might think. People need to be fed. They must be fed. They cannot afford the high interest rates that will make the lives of those most affected even more difficult.
It’s time for economists to start moving around and realize that there is more world than they are worth, and that’s where the real problems lie.
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