RISING PRICES in commodity markets have caused alarm, protests and even violence in places as diverse as Egypt and the Philippines. Even in wealthy nations, higher prices for fuels, foods and raw materials are squeezing consumers and businesses, at times painfully so. The cause of this problem is fairly obvious: higher demand from the world's emerging economies, coupled with the usual growth in mature markets. The effects-and the solutions-are more complex.
Inflation doesn't exist in a vacuum. It is the rise of one price in terms of something else, be that how much you earn, the time it takes to procure what you're buying or simply what other desirable things cost. If all prices and wages rose at the same time, you wouldn't feel much of a difference. But when the prices of a few key products rise without a corresponding increase in wages, you feel the strain on your budget.
In the past several years, prices for crops, metals, minerals and fossil fuels have been climbing steadily. A broad index maintained by the International Monetary Fund has jumped 75 percent since the turn of the millennium. Prices for several scarce materials, like platinum and oil, have more than tripled.
The most-basic explanation is that supply has not kept pace with demand. The higher demand has its roots in rich countries and the booms of the past couple of decades, as well as in the opening of new markets. At the same time as consumers in the West were piling up unprecedented wealth, governments in the East were expanding their willingness and their ability to export.
