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Prasannan Parthasarathi and Juliet Schor

The era of cheap goods is over

Email|Print|Single Page| Text size + By Prasannan Parthasarathi and Juliet Schor
April 27, 2008

GLOBAL CAPITALISM is nothing if not fickle. Seemingly overnight, $19 DVD players, trendy T-shirts for $3.99, and $49 fares on Southwest have given way to $3 loaves of bread, $5 gallons of milk, and gas on its way to $4 a gallon. Will the recent inflation turn out to have been a temporary run-up, or are higher prices here to stay?

We're betting the trifecta of ecological limits, the unequal distribution of wealth, and the legacy of bad policy will end the era of cheap goods. Ecological footprint analysis suggests that global production and consumption are now exceeding sustainable levels by more than 23 percent. That's the backdrop when scientists confirm that 2007 was yet another year of rising carbon and methane emissions, when hungry Vietnamese workers stage massive strikes against Nike, and when major US retailers start rationing rice.

The new price trends are troubling for a majority of the globe's citizens, who, unless they can translate their numbers into political power, will bear the lion's share of what looks so far to be a painful ecological adjustment.

To see how the trifecta is operating, consider basic foodstuffs, whose rising prices are leading to riots around the world and a run on pantries here in the United States.

Bad government policies, crafted partly in response to unsustainable carbon dioxide emissions and powerful special interests, have led to the diversion of grains into biofuels. Consumption of these fuels grew by 20 percent last year. As ecologists predicted, this pushed up food prices. The wealthy drivers of industrialized nations have their cheap biofuel, but the poor go without food.

At the same time, growing wealth in China and India is leading to consumption of more expensive foods higher up the chain, such as meat, which is already a staple of diets in Northern countries. Prices go up, and grain and energy are diverted from feeding and heating people to feeding and housing livestock.

Finally, in Africa and Latin America, the run-up in food prices comes after two decades of neoliberal economic policies that have flooded their markets with cheap US grains, whose prices are kept artificially low by government subsidies and unaccounted ecological costs. In Mexico, NAFTA has led to a tripling of corn imports from the United States, and US corn has captured 25 percent of the market. Haiti, the poorest nation in the Americas, is the fourth largest market for exports of US rice, taking nearly 10 percent of exports of that grain. In turn, these imports wiped out poor peasants whose production would have provided a safety net when world food prices rose.

Predictably, in a world with supply constraints, the demands of wealthier consumers are crowding out the basic needs of the less wealthy. As the purchasing power of the wealthy grows, this dynamic becomes more powerful.

Similar effects are operating here at home and are likely to intensify. US elites are finally realizing that carbon must be priced. The prices of energy, food, and everything else will rise in response, and lower-income consumers will be squeezed out. In the United States, the poorest fifth of households spend proportionately twice what the wealthiest fifth do on supermarket food, fuels, and utilities. The gap will widen as high demand drives energy costs higher.

Inadequate funding for the public transport that gives people access to jobs, food stores, and other daily needs, and is essential to achieving reductions in carbon emissions, will worsen the impact on the less wealthy.

The nation can no longer sustain the same old policies that enrich the energy giants, agribusinesses, and other transnationals who bear a large part of the responsibility for the current mess.

We need broad-based reforms that cushion higher prices for basic needs by putting more purchasing power into lower-income hands, expand secure access to sustainable food sources, and provide climate-friendly power and transport. That requires egalitarian policies, bottom-up power, and sustainable methods of production.

The sooner we get on the path to this inevitable transition, the easier, and fairer, the process of adjusting prices will be.

Prasannan Parthasarathi is associate professor of history at Boston College. Juliet Schor, a sociology professor at BC, is a board member of newdream.org.

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