Jacques Attali is a writer, the president of Positive Planet and the president of Attali and Associates. He served as a counselor to French President Francois Mitterrand and was the first head of the European Bank for Reconstruction and Development.

Inflation, which was thought to have been definitively vanquished 10 years ago, to the point of living with negative central bank interest rates, has recently reemerged on a massive scale. And there are not a few countries that will see price rises of 8% or more in 2022. Moreover, despite the optimistic speeches of officials, there is no guarantee that it will not be worse in the future.

To fight against this hazardous drift, everyone thinks that demand must be reduced. And we see the central banks of the United States, Canada, Great Britain and the European Union announcing that they are going to increase interest rates throughout the coming year, to reduce the borrowing capacity of each other, and to reduce demand and thus weigh on prices.

In fact, these measures, which are recommended by all the most classic university economics textbooks, will be totally ineffective. In fact, to do so is to understand nothing of what is going on and will only make the situation worse: The world is not suffering from an excess of demand but from a shortage of supply.

It is true that since the global financial crisis triggered by the 2008 collapse of Lehman Brothers, the world has been flooded with a lot of liquidity and central banks have vied with one another in their largesse to states and companies. Certainly, with the COVID crisis, many countries have given even more largesse to all of their companies that have had to stop their activities or that have suffered in one way or another from the pandemic. And it is true that, in total, as a result of these two crises, the world economy is more indebted than ever. And it would be reasonable to limit it in any case.

European Central Bank President Christine Lagarde arrives for a news conference in Amsterdam on June 9: The ECB signaled a series of rate hikes that may be scaled up from September if the inflation outlook fails to improve.   © AP

Nevertheless, the current world economic crisis is not mainly linked to an excess of demand but to insufficiency of supply because the world lacks the essentials. Serious shortages are taking hold of the essential elements of life for all human beings, in the North as well as in the South, in Asia as well as in Africa, in the United States as well as in Europe; for everything we eat, and for everything that organizes our lives, both the most traditional and the most modern.

All over the world, there is a lack of wheat, fertilizer, water, solar energy, wind energy, hydraulic energy, green hydrogen, lithium, titanium, cobalt and all the other rare metals needed to manufacture microprocessors and batteries. As a result, there is a lack of means to produce meat, drinking water, machine tools and, unfortunately, in some countries vital weapons to defend democracies. There is also a lack of people trained to do absolutely essential and difficult jobs: nurses, doctors, teachers, hotel and road workers and engineers. At the same time, we have far too many sources of fossil fuels, artificial sugars, pesticides and people to do all the jobs that use them.

Inflation is due to this lack of supply. It functions as a tax on savings and on nonindexed income, i.e., essentially a tax on the weakest, those least able to protect their income and assets. The pensions of the poorest and the incomes of the least unionized will not increase at the same rate as the rise in prices, and we will witness a proletarianization of the middle classes, with devastating political consequences.

So we have both lasting inflation and recession ahead of us. We will see food prices soar and real estate and stock market prices plummet. We will see hundreds of millions of people starving, revolutions in many, many countries, especially in Africa, while everything is done to restrict demand and to make the investments that would fill these cruel gaps more expensive: healthy food, sustainable energy, health, education.

So this is the wrong approach. Today, the need for a massive investment plan in healthy food, water, roads, digital, education, health, security, renewable energies and, in particular, green hydrogen, the real solution to the climate problem, should be clearly assumed earlier. All these sectors form what I call the life economy. As you can see, it is not limited to the climate issue, and it covers the means of eliminating the other threats we face: famine, disease and ignorance.

Ideally, therefore, we should be in a war economy to produce them at all levels.

Central banks should not just blindly restrict credit but should implement a selective credit policy for these sectors. Governments should put in place real plans to produce them in a forced march, allowing employees to work three shifts a day, seven days a week in these sectors with very good pay. Companies should redirect their activities to these sectors as soon as possible to take advantage of the huge demand that exists for them. Consumers should only buy products from these sectors.

Banks should only lend to companies that produce these goods and services or reorient themselves toward them. Savers should ensure that their money is only used for these purposes. Voters should only vote for parties that propose such a war economy.

Conversely, there should be a massive reduction in funding for any company producing or using fossil fuels, artificial sugars, pesticides and even, to a very large extent, nitrogen fertilizers, which are perfectly substitutable by natural products.

It is feasible. For the first time in a long time, the market needs the same things as nature and future generations. We must take advantage of this. It does not happen very often. The country or company that first takes the initiative in this direction will be the big winner of the 21st century. And it could, if its example is followed, save humanity.