5 problems behind the global cost-of-living crisis - The Washington Post

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Around the world, the cost of living is on the rise.

In Britain, annual inflation hit a 40-year high in April, at 9 percent, with food and energy prices spiraling upward. Similar highs are plaguing other wealthy nations, including the United States, where the annual inflation rate last moth was 8.3 percent.

But soaring costs aren’t only a problem in the wealthier parts of the world. Annual global inflation is set to reach 6.7 percent this year, according to the United Nations, with developing countries in western Asia, Latin America and the Caribbean also feeling the pinch.

Even in the poorest countries, prices are climbing. In some regions of war-torn Yemen, basic foods were 85 percent more expensive in March than a year before, according to the Famine Early Warning Systems Network, which monitors global food insecurity.

In some countries, distinct factors are in play, such as Brexit and tax hikes in Britain.

But a range of issues that cut across borders is disrupting the modern global economic system and driving inflation around the world, among them the mammoth-scale problems of disease, war and weather.

Surging global food prices put staple meals out of reach

The coronavirus pandemic

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Economists date the start of today’s global inflationary troubles to the coronavirus. Its spread was clearly an economic shock, with borders closed and businesses and factories shut down.

But in many ways, it was only when the world began to recover from that initial shock that inflation started to kick in. Part of this was the result of what economists call “base effects” — that is, because prices were flat or even falling during the worst of the pandemic, short-term inflation became more noticeable as it started from a lower base.

It is apparent, however, that the rise in prices goes beyond that.

With demand down and travel restrictions still in place, supply chains have been upended. If a car manufacturer in South Korea faces a shortage of semiconductors, it will pass on the added costs of buying these chips to the consumer. And when countries emerged from shutdowns, there was often a surge in demand that led to higher prices — particularly for services, such as tourism.

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