Cost of Living: Where are we heading?

Jun 15, 2008 Peeping Tom

---

Peter R. Ramsaroop, MBA,

INTRODUCTION

The effects of the rise in the cost of living was right in front of me as I looked out of my office building in Queenstown this last week. Soon we will not be able to drive our cars and may have to revert to other measures of transportation.
Around the world, the cost of living woes are being discussed from the living room, the board room to the political policy makers’ offices. Cost of living is the cost of maintaining a certain standard of living.

Maintaining one standard of living is being tested more now than any other time in recent history. From the developed countries to the poor countries, we all face the same issues.

People are cutting back their standard of living in many areas. Gas and food prices are of the greatest concern to all of us.

GUYANA VERSUS OTHER COUNTRIES:

We are no different on the cost of living woes than in other countries. This week I was in the United States and listened to the same discussions on the rise in transportation cost and food prices.

Many people are cutting out discretionary spending such as items on expensive clothes, excessive driving and luxury items.
Governments around the world are grappling with what to do. Most of the interventions by governments have been as short term solutions.

In the US, tax rebate checks were a key tactic used and there are calls for gas tax relief. In Guyana, our government has introduced tax relief on some food items and increased public servants’ wages. Tax thresholds have been increased slightly.

WHAT OUR GOVERNMENT MUST DO – A ROLL BACK POLICY

When the government was introducing the 16% VAT, many of us argued that the number was too high and that it will contribute to the decline in the economy and without an overhaul of the entire tax system, it will put the economy in a tailspin.

We also realized that the global crisis had just started where oil and food prices were on the rise and that our citizens will need all their spending power to remain intact.
We argued that the purchasing power of a dollar in 1992 was now worth just 24 cents and that with inflation in double digits and the Consumer Price Index on food items up over 20%, that any other pressure on the consumer would have grave impact.

Another argument that we had was that for every dollar spent by a consumer, it turns the economy over about 10 times. None of these facts were heeded by the government and they went ahead with the 16% VAT.
We also lobbied a year ago to raise the tax threshold to $50,000. The key for our economic policy makers to remember is that the more money we have to spend the more the economy will grow.

The danger we now face is that parents who can’t afford to pay for transportation for the children will keep them home and that I believe should be our greatest concern.

We must create new industries in order to create jobs and wealth. See SN Business – Cost of Living, Friday, March 21st 2008, where I outlined a summary plan for the government to embrace.

WHAT BUSINESSES SHOULD CONSIDER:

1. Four day, 40-hour work week for employees, on a rotation basis, when possible. This has been tested in many countries and has proven to be a good strategy.
2. Long Term contracts for materials and supplies, to secure at reduced prices.
3. A “ thinking out of the box” IDEA = a pooling of purchasing power VIA Chamber of Commerce and Guyana Manufacturers Association, for a large volume of purchases of materials and supplies. Support for CSME and South American Block should be a must.

WHAT CONSUMERS MUST DO:

1. Plant kitchen gardens for vegetables and fruits. President Burnham’s drive for us to grow more and sustain ourselves must now be heeded. Credit to the government for acknowledging that.
2. Consume more foods and fruits that are in season, and often at lower prices
3. Consolidate vehicular trips, car-pooling.
4. Conserve on Electric Power, Water, and Telephone usages.
5. REUSE and RECYCLE, whenever possible.
6. Lobby government to implement free transportation for school children.

CONCLUSION:
The cost of living solutions must be a coordinated effort among government, private sector and citizens. We all have to manage our standard of living; we have to look at new and innovative ways on our purchasing trends.

We must prioritize what is important, such as our children’s education, meeting the needs of our families and ensuring we all contribute to the growth of our nation.
Political pundits and government must realize it is not just the public servants that are suffering and as such getting pay increases and allowances, but all the citizens of Guyana.

The biggest move that will make a difference today is a roll back of the VAT to 7% and eliminate the zero-rated policy.
([email protected],www.visionguyana.com)

---

---