Learning to live with high prices

What was that biblical tale about fat years and lean years? Well, it looks like we’re in for some lean.
And if you believe some of the big names in business and economic forecasting (who’ve been wandering in and out of Nottingham recently), then the fat years we’ve binged on for the past decade are now over the hills and far away.
So, are the Four Horsemen of the Economic Apocalypse about to gallop over the horizon in their place? Probably not. But we’re certainly in for a difficult period of economic adjustment, and my take on that is that it will last years, not months.
The reason isn’t the credit crunch, though.
It’s much more fundamental than how much you pay to borrow money and buy something big.
This particular end-of-era is about the price you pay for the everyday stuff we take for granted – the food you eat, the heat in your home and the fuel in your tank.
Put simply, existing on this planet is becoming very expensive.
More people in more countries want the basic resources that keep us all going – stuff like oil, grain, metals. Production of those raw materials isn’t keeping pace with demand (particularly the voracious appetites of countries like China and India) so prices are going up.
In the short term, Governments will do things to try to make that tolerable. Even without the Crewe by-election battering, I think it’s almost certain Gordon Brown will ‘feel your pain’ by ditching plans for a 2p increase in fuel duty in October.
What will be more interesting is if he takes drastic action to encourage people to adopt less resource-hungry lifestyles.
Big tax incentives for cleaner, more economical cars, better insulated homes, more energy efficient electronic devices…all these things make sense when the world is apparently struggling to keep pace with the demands we place on it.
So does research into higher food production.
This is long-term stuff. But it won’t work if only the UK does it. Binge-level demand is a global issue, and the problem we’ve run into begs questions about whether the world economy needs to be run in a more co-operative way.
There’s no point complaining about high fuel prices now. We’re stuck with it, and it may well be that the days of driving your 4x4 to East Midlands Airport for an amazingly low cost flight are slowly but surely on the way out.
The credit squeeze will go away, probably sometime next year. But cheap won’t come back – the party’s over.