The cost-of-living crisis

Jul 20, 2024 Features / Columnists, Peeping Tom

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Kaieteur  News – In his most recent press conference, Vice President Bharrat Jagdeo waxed lyrically about the steps his government has taken to mitigate the rising cost of living. Yet, ironically his government’s inflation numbers do not suggest that such a crisis exists.

But as we know the inflation numbers in Guyana bear no resemblance to price movements in the economy. It is just left for Jagdeo to one day announce that Guyana’s inflation is negative, a feat that is not beyond the government.

Despite outlining a series of measures which his government took to cushion the cost of living, the facts remain incontrovertible: the cost of living continues to rise at an alarming rate, leaving the poor in precarious position.  The cost of living is even hurting the middle class.

Jagdeo wants us to believe that without those measures, the situation would be worse. Well, it is worse as it is now and this shows that the measures his government adopted have not worked.

Food prices have surged despite governmental concessions to importers. The real question remains: has the government conducted any surveillance or surveys to establish whether these benefits it has offered to importers have been passed on to consumers?

The increase in the cost of food in Guyana is added to be by limited production capacities. Despite being endowed with fertile land and favourable agricultural conditions; Guyana does not produce food on the scale necessary to drive prices down.

The government has been making a lot of noise about being self-sufficient in poultry production. This ought to have reduced the cost of such products on the market. The contrary has happened; prices have increased. It is cheaper to import chicken from Brazil, even with the high tariffs, than to buy it locally. But in order to protect the local poultry market, the government will not allow the mass importation of chicken from Brazil.

The cost-of-living crisis is far more complex than Jagdeo portrays. It is not merely about an overheating economy or higher demand. It is about an economic structure that permits sellers to hold consumers at their mercy, increasing prices at their whim and expecting consumers to pay.

Additionally, it involves a policy of urban change that see business propping up here there and everywhere and which drives up residential rents. This pushes ordinary citizens to the brink. As one person remarked, rents are now, the Right Honourable, Mr. Rent.

The lack of zoning often results in higher living costs for ordinary citizens. As businesses flock to urban and even new housing schemes, rent prices soar.  Guyana should have guarded against this phenomenon. The increase in residential rents contributes significantly to the cost-of-living crisis.

Guyana’s transformation into an oil economy has brought both opportunities and challenges. The influx of oil revenue has led to increased public and private spending, driving demand and, consequently, prices. However, the perception that an oil-rich economy can sustain higher prices has led to inflationary pressures. Businesses, anticipating higher consumer spending power, raise prices, creating a cycle of inflation that erodes purchasing power.

In an oil-driven economy, there is the perception that consumers have the ability to pay oil economy prices. This perception has allowed business to increases prices. In other words, you live in an oil economy and you are capable of paying more. Therefore, higher prices will be charged because Guyana is supposed to be a high-income country.

The public has been clamoring for higher wages. But this will not solve the problem because increasing incomes will only lead to a spiraling cycle of rising prices. As wages rise, businesses tend to increase prices further.

The notion that increasing wages will solve the cost-of-living crisis is simplistic and flawed. While higher wages can improve individual purchasing power, they often lead to price inflation. This is why Jagdeo’s talk about increasing disposable incomes cannot be taken seriously.  Businesses, facing higher labour costs as a result of having to pay workers more, pass these costs onto consumers, negating the benefits of wage increases.

This vicious cycle can only be broken through structural changes that address the root causes of high living costs. At the heart of the crisis lies an economic structure that favours sellers over consumers. This power imbalance allows businesses to set prices with little regard for consumer welfare. Addressing the cost-of-living crisis requires systemic changes in the way the economy operates. But that is outside of the ideological interests of the government.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

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• Both President Irfaan Ali and Vice President Bharrat Jagdeo, inflation, Peeping Tom, Press Conference, Vice President

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