On prices rising

Michael has beaten it to me, with a splendid account of what Poles have to face up to these days. The imminent price growth has been a par for the course since pre-pandemic times. Recent outburst of public outrage over prime minister Morawiecki’s purchase of inflation-indexed government bonds has left me unimpressed. I bought such securities for the first time in July 2019; my grasp of economics told me to protect against recklessly loose fiscal and monetary policies. Time has proven me right, while the pandemic and the war in Ukraine have amplified the effects of local policy errors.

Looking back at the autumn 2021, when I visited underprivileged families as a volunteer of Szlachetna Paczka, I remember well people complaining about rising costs of living, especially more expensive food, electricity and heating. I worried this could send millions of people into poverty if prices of essential goods keep rising like that. I also can boast of predicting the threat of stagflation which was in the offing even without warfare on the horizon.

The factors which to some extent will continue to drive prices up are: the pandemic (not really likely to ease off for good), the fight against climate changes (which prompts consumers to change their habits) and the sanctions against Russia. The very latter will sadly hit more those who rightly aim to punish Russia for its cruelty, than the Russians, who for centuries have been accustomed to depravity.

The struggle which looms ahead of Poles now is multi-faceted.

Food prices will not go down due to droughts, shortages of fertilizers and higher energy prices. Climate change and negative supply shocks related to the war in Ukraine will push millions into famine, while residents of the developed countries will need to spend larger parts of their household budgets for nutrition.

Dwelling upkeep costs will not go down as well. They will be kept high by the push for the greener energy and decreased supply of fossil fuels from Russia. This will be painful for several poorer Poles, who will need to save on virtually everything to keep their houses warm during the coming winter. I believe we will all need to give up on some thermal comfort in months ahead and withstand temperatures of +18C in our interiors. Appallingly, some European countries, such as Germany and Austria are about to switch on their once shut down coal-burnt power plants, committing a sin of not restarting their nuclear power plants whose environmental impact is incomparably lower than of burning coal.

Fuel prices have gone up by some 50% vs. February 2022 and they might decline a but, yet given the cost of transport is included in nearly every price, even without direct exposure to petrol stations’ price lists, everyone will be worse off. So far, judging by traffic volumes, few people have given up on motoring in favour of public transport, cycling or walking – does not bode well for the economy, for the climate and for the public health.

What is being first hit by the inflation is demand for discretionary, non-essential goods. But if are to gain control over the surging prices, we must stop chasing such goods, resist the temptation to flee money. The circulation of money has to be contained, hence lending ought to be curbed and saving should be encouraged.

I have no good news for you. The best times for our civilisation are already past us. We have to brace ourselves for austerity unseen since decades. Many of us will need to watch every zloty before spending it. Our consumer habits will need to be rethought. Wisdom and sustainability will have to take over. Sharing will have to become an alternative to buying.

Besides, I am glad personally I am not impacted badly by the inflation. I put aside less money monthly, but do not have to abandon any expenses for purely financial reasons (I drive even less, but not because I cannot afford to fill up my car). My savings are shielded reasonably well from the inflation. Each day I am thankful for the sense of financial security. I hope this gratitude fends off the evil, albeit the outbreak of war east of Poland, being a tragedy to millions of innocent people, reminds nothing can be taken for granted.