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From a normative viewpoint, who should bear the cost of commodity price shocks?
In the 1980s, the cost of commodity price shocks was shared between companies and governments, while wage earners were sheltered by a high degree of wage-price indexation. Today, companies are sheltered and commodity price shocks are shared between wage earners and governments. What would the optimal arrangement be? The government can smooth domestic commodity prices over time, but it cannot forever keep them below their international market price; The choice between households and companies depends on preference for the present: if it is strong, then consumption will be preferred and investment (i.e. long-term growth) will be sacrificed; if it is weak, investment will be preferred. The current strong demands for a re - indexation of wages to prices correspond to a return to a strong preference for the present.
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Natixis
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Patrick Artus
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