Two years back, it was the pandemic that shook the world and brought most of its well-structured institutions to its knees. It all began with China and spread like a forest fire across the world.
That’s the true essence of globalization.
Recently, another event is cropping up in the USA and has full capacity to spill around: the rising inflation and approaching recession that seems inevitable as per Goldman Sachs and Bank of America Securities.
Tough situation arises when the impacts of such a condition in US may tend to threaten the global markets and supply chains. This will not be the last jolt that the world can face in the run to eternity. Inflation? Recession? What’s more in the world’s closet for humankind?
There may be people who choose to say that Climate change does not affect them. But every story already has become a climate change story.
Reduced productivity in farmlands, shifting agro-ecological belts, increased lumbering prices in US, disturbed weather patterns, forced migration due to sea level rise etc., all have an aspect of climate change attached to it.
Climate change is ready to push global inflation:
As per the widely-accepted concepts of economics, inflation happens because of an imbalance in supply and demand at a particular time in an economy, in short, too many rupees for procuring too few goods.
With a new factor at work, climate change and the consequent global warming has a role to play in this scenario, termed as Heatflation.
For several years of unacceptance of impending disaster, climate scientists indicated periodic shortages of major commodities in the near future.
In addition to this, several financial institutions have calculated the impacts of an ongoing “disorderly transition” away from fossils towards cleaner energy forms across the world. Fuel access is already troublesome and a privilege for millions of people.
The food institute explains: “The current heatwave is the latest in a series of punches hitting retailers and food manufacturers – from COVID shortages to the war in Ukraine. In the short-term, retailers will scramble to replace missing supply, looking to alternative sources of supply where possible”.
Because of high food prices and rise in ongoing procurement on Minimum Support Price (MSP), India’s inflation has already escaped its targeted values for the economy.
In the last few years, there have been bouts of food scarcity and abundance, rise and fall in precipitation and hence the related stresses on food and other commodities’ prices in the market.
“With a changing climate as the new normal, extreme weather like the recent heat waves and drought conditions will continue to decrease yields”.
In addition to this, if the local warmth in atmosphere leads to something akin to wildfires, it can even dry up existing reservoirs feeding up the crops.
Similarly, the US has lost its wheat crop in the northern Great Plains, because of heat and drought conditions hosting swarms of grasshoppers to feed on it, pushing the cereal’s price to its highest.
Tokyo’s Central Meteorological Observatory has warned of potential harm to the cultivation of soy and corn leading to their innate price rise.
Germany and Belgium have a similar stance with the potato crop.
The current state of the economy worldwide has given evidence of an inflationary built up by climate change with barely any idea to pass through.
As per a few experts, since the pandemic oil prices have indirectly added a significant 27 percent in ‘excess’ inflation.
Is it just food?
Inflation in a sector can debilitate the linkages for other sectors: “For restaurants, margins are eroding due to limitations in the ability to pass on all food and labour cost increases”. The weather-related insurance claims have begun to witness a rise in higher premium costs attached to such risky assets.
“Limitations include declining consumer sentiment as well as contract limitations in the case of B2B foodservices players.”
A professor of Economics and Law states: “If we wish to control inflation, we must address climate change now. We find that higher temperatures over recent decades have played a non-negligible role in driving price developments”.