Inflation is the technical term for increase in prices. It is a measure of how fast prices of goods and services rise. It is the dominant issue occupying the minds of the public in latest survey conducted by this writer in July and August.
Several letters from Tilokie Depoo, Ramesh Gampat, Keith Bernard, Joel Bhagwandin, among others, offered explanation for causes (drivers) of “Inflation” to help with an understanding of the concept. It is triggered by a range of factors, not the least being global and internal transportation hiccups, war, Covid, weather, scarcity, demand, supply, shelter or rental, income, money availability, government policy, etc.
Government officials and statisticians defend the official inflation rate (around 4%, meaning average price of goods went up by 4% over the previous year) which is substantially lower than actual prices paid by consumers at the market. The entire public is affected by inflation, some more than others. The middle and lower class and the poor are most impacted. Government has been taking measures to alleviate the impact of rising prices especially on basic foods; more needs to be done to mitigate effects of price increase especially on sugar, flour, cooking oil, spices, rice, split peas, channa, and other basic grains and pulses.
The textbook explanation of inflation by the mentioned writers is welcome and very informative. Explanations of inflation is well and good for academia and policymakers but don’t provide relief to consumers. It is helpful when writers offer practical advice on how to address inflation. The composition of the respected UN scholar Dr Ramesh Gampat (Aug 13) provided perhaps the most erudite and eloquent explanation of inflation. Dr Gampat, like myself and other writers, is troubled with release of data from all governments of Guyana going back to 1966. We take them with a grain (nay a bucket) of salt. Some writers accept them at face value. All governments would like the lowest possible official inflation rate because it is tied to so many fiscal or social programs, contracts, and monetary policy. Governments all over the world (third world countries in particular) are known to manipulate inflation figures.
Developed countries are not known to mess around with inflation calculation because of consequences. In the USA, it is impossible to manipulate inflation numbers because several government agencies, independent of each other, calculate inflation. States also have their own agencies monitoring inflation. Their numbers tend to accurately coincide. Economists in charge of monitoring and calculating American inflation statistics or other aspects of the economy will not risk manipulating figures. They will pay dearly with their jobs and benefits and experience heavy fines and jail time for violating sanctity of their jobs. Congress is known to hold regular hearings on the economy, Federal Reserve Policy, monetary and fiscal policy, among other matters. The Secretary of Finance (Minister of Finance) and the Chairman of the Federal Reserve (Central Bank Governor) were known to (and can be) ordered to appear before Congress at anytime to answer questions on aspects of the economy or financial matters. Politicians are fearful of lying about inflation because they too can lose their jobs; voters can fire them unlike in Guyana. In third world countries like Guyana, parliament has virtually no power over the behavior or performance of Ministers. When PAC held meetings, Ministers (from both sides) tend not to show up. Parliament is powerless to hold them accountable. Hearings were never held on inflation and what could be done to mitigate it.
Dr. Gampat is one of Guyana’s finest economists who worked with the UN, analyzing economies in Asia and Africa, giving advice to governments. He and I are perhaps the only Guyanese to travel to Africa and Asia doing separate comparative studies with Guyana. He authored several books on Guyana’s post-independence economy that make for great reading on how governments mishandled the economy. Unfortunately, in Guyana the politicians from both sides know everything; they don’t need advice from brilliant economists like Dr. Gampat.
On a practical side of understanding inflation, unlike other letter writers, I traveled around the country every couple months visiting markets and talking to consumers. Prices for most items have more than doubled, tripled, quadrupled over the last eight years. Prices during the Covid period have not gone down to near pre-Covid level. To government’s credit, fuel price has been stable and even experience a small decline. Transportation price has been stable. Bread price was also relatively stable, even during and after Covid, going up modestly. Average price increase of certain goods over the last year could be 4% as government data claims. But prices for fresh produce have gone up by100% over the last year. And prices for many food items went up by 200-300% from mid-2020 to end of 2022, no fault of government but the pressures of war, Covid, and climate.
The ordinary person does not know or care about the technical term used to describe the rise in prices. They are only concerned about the effects of rising prices on their life and what can be done to lower them. Government can’t go back to price controls of the 1970s and 1980s to put a lid on inflation; that led to mass starvation. But measures are needed to help the poor especially those on fixed income — such as transference of money up to a certain maximum amount to pay basic utilities of low income people so more money can become available for basic foods. Unfortunately, that may trigger additional inflation.