A global crisis

Fashions do not change quickly in economics - but when they do, boy do you know about it. For the past few years the trend has been for falling prices, a phenomenon enjoyed by western consumers who were able to enjoy the good life (well, an approximation of it) on the cheap. Now, however, the pendulum is swinging the other way: inflation is back, and how. To take two examples from today's paper, from protesting road hauliers on London's Westway to hungry Filipinos no longer able to afford their daily rice, prices of basics are shooting up around the world.

This is a global problem that has very different local effects. In Britain it is an expensive headache. The Bank of England should be cutting rates in a bid to soften a hard economic landing; but surging inflation gives rate-setters an excuse to sit on their hands. They can always quote last week's report from the International Monetary Fund that there is "no scope for further near-term monetary easing". Except the IMF is being too cautious. Take away food and energy and the UK is hardly home to runaway inflation, either in the shop aisles or on the shop floor: neither retailers nor workers are demanding huge amounts more money. A determined Bank could argue its way to cutting rates - but then this Bank is clearly not convinced. Politically, too, this is a thorny one. Conservatives may sloganeer about "the cost of living under Labour", but privately they admit they have no sustainable solution to what is a global problem. As for Gordon Brown, calling on oil producers to cooperate with other countries, as he does in today's Guardian, only underlines how little power is held by any oil-consuming nation.

Where Mr Brown at least sounds more convincing is on food prices. He is surely right that one of the long-term answers is helping poor countries to develop their agricultural capabilities. Sadly, the prime minister is only partly redressing a long-standing bias against food security held by western governments and institutions such as the IMF and World Bank. During this food crisis, poor countries have had an already difficult situation made worse because they previously followed bad prescriptions given to them by policy experts from Washington. Tortilla-eating Mexico used to be a homeland of corn, but thanks to policies promoted by the IMF, the World Bank and the US government (especially through the Nafta free-trade agreement) it has become a corn importer. The old orthodoxy was best summed up by Ronald Reagan's former agriculture secretary John Block: "The idea that developing countries should feed themselves is an anachronism from a bygone era. They could better ensure their food security by relying on US agricultural products ... available in most cases at a lower cost." How wrong both that assumption and his conclusion look today.

Of course, the food crisis is not all the fault of some dunderheads in Washington; bad governments in countries such as Burma - once one of Asia's biggest rice exporters - and those surging energy prices are also to blame. And in the short term only a moratorium on biofuel use might help lower prices. But to prevent this drama being revived regularly the west will need to reverse its previous policy and encourage poor countries (especially in Africa) to help their farmers get seeds, fertilisers, more credit and better roads. This is starting to happen, but more in rhetoric than deed. When he became head of the World Bank last year, Robert Zoellick called for a green revolution in Africa; his organisation's own internal evaluations later showed that it continued to neglect agriculture in sub-Saharan Africa.

This is not an argument for greater protectionism across the board. The EU and the US should not be subsidising their farmers at the expense of poor countries. But policy-makers have treated food security for too long as a disposable item; this crisis shows it is essential.