Inflation will make us tighten our belts and prioritize the things we value above others
I almost gave up public broadcasting. The polarized debates of radio and television are meant only to excite people—the metric of success for media executives.
Instead, I turn to podcasts for enlightenment. When I wanted to learn about inflation, I listened to some recent episodes of the other hand with economic commentators Chris Johns and Jim Power. You have a smart but easy-going manner.
It has been 20 years since prices have increased at the current rate. In times like these, I’m glad I’m old enough to remember the 1980s.
Inflation reached 20 percent in 1981 and unemployment was 17 percent in 1986. Interest rates were over 16 percent in 1981 and just under 14 percent in 1993.
So I never took what came later for granted; Consumer goods, low inflation, low interest rates, full employment and wine drinkers at home. For me it’s all luxury.
Recent inflation raises many questions and some immediate problems, but it also calls for careful consideration of what is worth paying for.
First the questions.
Is inflation temporary or long term? Is it a demand problem – pent-up post-Covid spending – or a supply problem due to scarcity of raw materials?
Is it more about oil and if so, what are the knock-on effects? Should someone do something?
In public service broadcasting, these questions are easy to answer.
Inflation is all the fault of the lazy government and they should give everyone more money. Otherwise we have to choose between cold and hunger.
In the saner podcast, Chris Johns conveyed the complexities of inflation by describing the national and personal rate of inflation.
The headline rate of 5 percent tells us little because inflation affects everyone differently.
For example, the price of used cars has skyrocketed by 20 percent and new cars by 10 percent. But auto-inflation is zero unless you really need a new car.
There is not much the government can do about the global semiconductor shortage in car production, and people can live without new cars anyway.
But fuel is different.
If you drive regularly, your personal inflation rate is very high.
About 60 percent of fuel costs are accounted for by excise duty, VAT and CO2 tax. There’s talk of reducing these to offset rising oil prices, but is that a good idea? From an environmental perspective, there is some evidence that rising fuel costs are a tough love affair.
We should discourage fossil fuels and the use of cars. But people won’t get out of their cars without a fight. I drive far too often, although with more planning I could have used public transport.
Rising fuel prices and the introduction of congestion and parking charges are common policies to drive people out of their cars. Trouble at the gas station is the whole point of a carbon tax.
The proposal to reduce public transport fares by 20 percent is constructive as it increases the opportunity cost of a car trip.
So putting fuel prices aside while lowering fares at the same time makes transport more affordable – only for those who have the choice, of course – and an incentive for more sustainable behavior.
As the shift to electric vehicles intensifies and higher transport costs push up the prices of other goods and services, we need to make a stronger commitment to renewable energy in the long term.
But if the government responds by lowering the excise duty on gasoline or diesel instead, when might they raise it again? Never if they want to be re-elected.
Oil prices are also driving up household electricity bills.
The right way to deal with energy poverty is the government’s announcement of a flat-rate surcharge of 125 euros on top of the fuel flat rate. This is for the right people. The wrong way is to give everyone €200 off their electricity bill. A lot of people don’t need it, so it’s a terrible waste. For the broad masses of the healthy middle class, I have a better suggestion for dealing with higher heating bills – albeit one no politician could dream of: Put on a sweater.
Domestic heating accounts for around 10 per cent of Ireland’s CO2 emissions.
As with driving, reliance on heating oil and gas would be weakened if costs rose to the point where we pushed for alternatives, such as investing in insulation or simply heating less. It is painful, but furthers what is already national policy and produces a positive outcome.
Personally, I like to snuggle up in bed with a good book and a hot water bottle at night, but happy stoicism is forbidden these days. And if the government thinks voters will be grateful for the 200 euros, someone should warn them about eaten bread.
Speaking of bread.
Brennan’s cold cuts pan was 20 cents cheaper at Lidl than SuperValu last week. Like many eager shoppers, I know exactly what products to buy and where. Retail competition is fierce.
But food has been too cheap for too long and like fossil fuels, a reckoning may be due.
Jim Power consistently argues that food producers are being mauled to the bone and retailers know that most consumers don’t care where food comes from.
All they want is always cheaper food. As with fossil fuels, accepting a system based on 3 euro chicken, cheap milk and 23 cent beans is wrong.
Food producers, low paid workers, animals, our health and the planet can’t take it.
The bottom line is that everyone wants the world to get better, but nobody wants to pay for it.
Who knows? Perhaps inflation is God’s way of telling us that we need to change the way we live.
https://www.independent.ie/opinion/comment/inflation-will-make-us-tighten-our-belts-and-prioritise-the-things-we-value-above-others-41413805.html Inflation will make us tighten our belts and prioritize the things we value above others