Friday 18 July 2008

Water, the pinnacle of the economic pyramid

There was a news story last year about how inflation in China had spiked because of the price of pork if I remember correctly. It was strange - you have an emerging economic and political superpower, whose economy is heavily disturbed by the price of a single meat. Now the UK is undergoing a similar hike in inflation because of rises in the prices of food and oil.

The inflation spikes really bring out the inverted pyramid-like nature of an economy. For all the complexity and diversity of production in most of the economy, what underpins everything are a few essential commodities whose supply does not vary much.

Some environmentalists have indicated that wars may occur over water in the future. The assertion is credible. Petroleum we can do without, even if our standard of living falls; we can change to cheaper diets, at least in the rich countries; but water supplies, taken for granted in most of the developed world, are at the sharp pinnacle of the pyramid.

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