Sunday, 21 July 2013

INFLATION : A systematic tool to sieve-out the poor and under-privileged !

The causes of inflation simplified (or)
The calamity of making ECONOMICS a complex science !

At bottom, every human behaviour is driven by an existential predilection or pre-disposition that man may not always fully aware of. He is only a toy that moves as per the hidden directive energies in nature. Instead of being aware of such deeper motivational factors  of nature, what we are aware about is the sequential order of behaviour, ie. what usually follows one behaviour after the other, or one event after the other.

For example, a man drinks water when he feels thirst. We tend to attribute thirst as the cause of drinking water But the act of drinking water was only an current sequential event in a long biological chain, hence it is not  sensible and logical to attribute the CAUSE factor to THIRST. Thirst was in fact body’s signal method of  meeting its fluid need. Regular fluid need of the human body would have been a better CAUSE here than the feeling of thirst. In most of such routine events in life, one act or behaviour usually follows the other, in a routine sequence.

For achieving better clarity in understanding such existential motivational factors, we better divide these drives into two obvious categories, ie. needs of the body and needs of the mind.

Man has two bodies, one the biological body, and the other the social, or the emotional (that pertains to mind) body. Hence we better divide the needs also into that of the body and mind so that we could attribute most of our ECONOMIC NEEDS pertaining to our emotional needs, the chief theme of this small paper.   

We are familiar with the routine needs of our body such as food and water, sexual needs related to procreation, warmth of the body in winter and coolness of the body in summer, comfortable place to rest (shelter and related body needs) etc

What is the separate body of the mind ?  We better take  man’s ‘ego’ entity as his body of the mind, or ‘social body’, as ego is fundamentally a social product. Every one develops it as a result of man’s constant social interactions. Like heavenly bodies are in their assigned place in the space and orbit due to the work of gravitation, hidden energies involved in social interaction keeps every person in his place in society, and directs his social behaviour. ( please see more on this proposition from our blog: ( see the 2nd blog, end portions)  

As we are some what familiar with the motives of the physical body as mentioned above, the possible motives associated with the economic behaviour of a man can be analysed here as the motives of his social body, the ego. This is because of the fact that  with out any science of economics, members of animal kingdom seek and satisfy all their biological needs more over satisfactorily without the help of formal economics.  Though they also have ego phenomenon in rudimentary forms, it is not as profound as that in man. Animals are more body than mind, whereas man is more mind than body. 

The old economics was more about scarcity of products against man’s unlimited wants. But today, this scarcity aspect has more or less has vanished from the world, thanks to its Green revolutions and the industrial boost. Hence economics can have its scope and meaning re-defined, accommodating the newer realities of abundant supply of food and other life needs of man. As Henry Ford had said, world has managed to produce enough and more to feed the entire population, but why  we still have  majority of it in poverty is indicative of the failure of our management system and social values.

Unlike the animal kingdom, man can be said to be living in two worlds - -a physical world of land, buildings, rivers, airports and bridges, and the other the notional world, where the ego, his virtual body resides: the world of ideas, values, fears and concepts; the market place of predominant collective emotions. In  countries where value and respect for concepts like individual dignity is more stringent, this market place of emotions has a different colour, compared to where such  value concerns have scant regard.  Here, people behave at more ease with the fellow beings, if police and state officials treat the citizens with more dignity and care. In over populated societies, such kind of care from the state said to be impractical, hence the notional world of the egos is full of negative emotions like mutual fear and animosity. Naturally, unlike in the former model, the saving, investment and the profit related behaviour of citizens would be drastically different. For example, in USA, before the present economic slowdown in their country, people generally were not in the habit of  ‘saving’ for the future, as the social security schemes had been  more than adequate to take care of their uncertainties of future. People ate, drank and travelled the world immensely, burning out years’ of savings completely. .  

Hence, if the most relevant motive of man’s economic behaviour is to be singled out, it couldn’t be none other than his fear of future. His anxiety about the uncertainty of future, about food, shelter and cloths. Also, more importantly, about safe keeping of his individual dignity in society. It is also directly linked with his material wellbeing in our kind of societies, where human rights standards are very low and disturbing. His buying, selling, his hoarding, his investment and saving behaviour, the profit fixing for his produce etc. are  based and influenced predominantly by this anxiety for future. As we have already referred earlier, the scarcity factor of food etc. is not at all existing in  the modern world, except the fears around its equitable distribution due to its man-made administrative chaos.

As the scope of this small write-up is not a full-fledged thesis on Economics, let it pay its attention only towards the aspect of ‘commodity pricing’ by the business community as an economic behaviour, and its direct relation with the phenomenon of inflation.

Those who are in their 40s and fifties of age must have heard stories from their parents about a sack of rice or wheat coming for certain ‘anaas’ ( earlier denomination an Indian rupee before the introduction of ‘paise’)  during their time. Same quantity of rice or wheat was available in our childhood for at least 10 times less than what is its current price . Prices would be 10 times more in the coming  20 or 25 years! Inflation, or the losing  of value for a given amount of money, is the bane of the present day world of economics.

What could be the chief cause of this calamity of inflation ?

Free market was supposed to be directed by the natural forces of Demand and supply. In the modern world, such temporary imbalances are instantly filled, thanks to the improved technologies, transport system, and improved irrigation, and modern agricultural technology advancement. So, those old theory can not be attributed as cause for the phenomenon of inflation. Even if prices increase temporarily, on short term incidents of lower supply, prices should come back to normal when supply position improves. Hence, the classical free market laws can not be attributed to modern inflation.

What could be a rational cause of the phenomenon of inflation ? Or the ever increasing rise of prices, irrespective of its temporary rise and fall, that reflect in government’s
index system ? The prices of every item 10 years back , by all standards, would be at least double by now, though the temporary inflation index might have gone up and down many times. But we know that prices once gone-up would never comes down to the previous level. If that was the normal course of the market, inflation would never have occurred . The course of price is always up, never down.

Understanding the phenomenon of price rise in simpleton logic

The chief reasons of price rise is, as mentioned above, is related to pricing of the merchandise by the manufacturer and traders. As there is no law or norm for fixing the profit margins, the price of a commodity or product is what is decided by the manufacturer or producer.

As those who do business is in the exclusive realm for profit, and making surplus capital, they will always resist to be a helpless victim of the ‘free market’ corrections, and balancing of prices and profits. Such forces are agents of uncertainty, which could happen at any time without caution and notice. Hence, it is wise for him to reap profits as and when circumstances are favourable, ie. any time is good time for accomplishing this prime goal of business. Hence, any reason or cause that allows him to increase the price will be definitely utilized by him to save precious time and energy.

Take up the typical case of short supply in the market for any given commodity to increase prices. Short-supply in itself need not be a cause of price increase unless there was an increase in cost of production. If the crops were not high as per expectation, farmer is entitled to charge more per unit of the produce in-order to cover up his earlier expected profit. Here too, there is a  law that says ‘anticipated losses are not losses’. If the  temporary short supply was due to end of harvesting season of a farm produce, it should not be a cause of price increase, as here too, there was not any change of cost of production.

Take for example the case of shortage of a raw-material in the market, and the subsequent price increase. When the price is increased due to short supply of a raw-material, in most of  such cases, the price increase was an arbitrary decision of either the manufacturer, or the farm-producer to take psychological advantage of the shortage. It was not due to any real cost of production, and the subsequent price increase at the first point of supply. Short-supply, hence always is a blessing in disguise for the trader class to increase prices arbitrarily. What energy in action is the earlier seen neurosis of the business class to make the profit accumulation a fastest possible process ! Everything here was in the mind only, without any actual increase in cost of production.  

The reaction of a price increase at the first point will cause a chain reaction. At every subsequent point of trade, an arbitrary hike is added, in tune with every trader’s motivation to accelerate his profit making process fastest possible. Thus, if at the first point price increase was 10 %, at the final point to the user/ purchaser, it would have become 30 to 40 %..

Even when the supply becomes normal, the corresponding price reduction would always be marginal. It leaves the base price of the product higher than the earlier price after every event of price increase. The above 30 to 40% temporarily increased price may get reduced to 20 – or 25 %, leaving the net price  substantially above the earlier prices every time. In short, any reason- real, or imaginary- for a price rise goes to the net advantage of the trader and the business man. This arbitrary nature of  price increase by the trader and business man is the prime cause of the phenomenon of inflation.

The other social evil of price increase is that, every currency that reaches the hands of its beneficiary by way pf price increase goes to make a surplus, and such surpluses first goes to enhance his purchasing and bargaining power in the society. In other-words, when ever a poorest of the poor pays an extra currency by way of an increased price for a commodity, the degree in which he was deprived goes to make an increase in the same degree the richness of the trader, or any other such beneficiary ! As this process goes longer, and becomes a regular phenomenon in the market, the poor gets more poor and the rich gets more rich, somewhat in the same degree. 

As price increase or inflation stays in the market as a regular phenomenon, the luxury commodities ( it includes even the good quality fruits and vegetables !) first go beyond the reach of the poor, followed by even the bare necessities of life such as grains and cereals. The assets such as land buildings are the first items that become un-affordable for the poor first, followed by the daily consumables. Such deprivations go hand in hand with the erosion of his social status too. For affording the bare necessities of life, or for meeting unavoidable  medical needs, the poor are forced to sell off his land holdings, and moves to hutment-clusters where the economically poor reside. Then the above narrated step by step deprivation process takes place in his life !  

When 'development' goes ahead in its present format, who suffer the most would be the ones who are drained of all their income sources, either temporarily,or permanently- on account of retirement, or sudden death of the earning member in the family, or sudden lose of job of the head-of the family. When the price of even the basic-needs of life items are also very high, these unfortunate ones have to ends their lives, or beg anonymously at remote habitats ! This blind course of price-rise could dangerously put life of man in great danger if wars or natural calamities engulf a region, or the entire country. The process of price-rise or inflation is a totally irrational and senseless course, that would land mankind into untold miseries any time. It would, of course, get the weak and the helpless annihilated faster in such mass calamities, leaving only the minority rich and powerful surviving, proving Darwin's theory right ! 

The above described is a day-light like plain economic process in the modern capitalistic societies, which, unfortunately for our age, is considered as the unavailable natural law, that of the survival of the fittest. Here, what gets seriously ignored is the plain, unnaturalness  in the process; ie. social approval of the tendency of the rich to have special consideration and special status in society, even when he is engaged in the anti-social act of  arbitrary increase in prices, and thus moving his life into higher echelons of social status and better quality of life.   

The increase in money supply  

Inflation can not happen merely due to price increase.  It often happens with a corresponding, or more than corresponding rate of money supply in the market. If it was due to price increase alone, the net result would have been reduction in demand, and also in purchase. Buyer has a limitation to cope-up with the increased prices of the commodities when his income remains the same.

Here what actually happens is that , when ever the business man gains through increased profit by way of the earlier seen arbitrary nature of price increase, he shares part of his gains with his employees, by way of annual increments and perks. Government employees are benefited too, by way of the dearness allowances in proportion to the market price index. When more money reaches the hands of the actual buyers, he stops murmuring  about the constant price increase. At least part of the increased market prices has been met by his income increase. When the business man knows that buying capacity of the customers are more than adequate, his perpetual hunger for more profits and gains compels him to apply the same technique again and again, thus keeping the market
inflamed every time !

Poverty, and the natural elimination process of the poor and the down-trodden

One who has the net gain from this exercise is always the business class, and the net loser is the bottom layer in the society, whose income sources remain the least increased every time. His buying capacity gets reduced to affording only the bare minimum for subsistence ! Nutritious food items, fruits and vegetables get absent from his bowl after every incident of price rise. Thus, this process gets resulted into a kind of natural elimination, or sieving out of the bottom layer in society in a sure and certain economic process. It is extremely simple a process, needing no great economic sense to understand.

The solution

A very strict and effective system of price control is the simple answer. For every further increase in price, by every sector, a permission from a special ministry could be obtained. Except some degree of annual price rise, NO interim price increase should be permitted at nay cost, unless a cost-sheet ,explaining the specific reason for the increase is submitted to the concerned authority.

Free market and its sacred balancing act was a thing of remote past, when barter system was prevalent in the world. In the modern price, market could be  easily manipulated to create artificial supply and demand scenes, to have price increases and more profit gains.

Some kind of control could be attained at the employer-end too, by way of  decreasing the difference in the highest and lowest wages in every industry and office. When such great difference exists in the wage level, business houses tend to manufacture and design special ‘elite’ products and services in the market to target this excess income of the buyers. This phenomenon also pumps the market with more money, thus adding up to the inflationary pressure. 

The establishment of our times, which we claim democratic, has been degenerated into a realm for fierce competition, or even war to have control over the old traditional realm of Kings and emperors; the realm of ruling the country, It still has all its old power, grandeur, Royalty, and control over immense wealth of the country. Being it vaguely defined as PEOPLES OWN FORM OF GOVERNMENT and nothing else, the rights, status and dignity deprived ordinary people ( the subjects ) of the old realms are now engaged in a maddest possible fight to capture these neo realm of COUNTRY –RULE. Hence, our modern day establishments are NOT sacred realms of peoples collective, with the historic, moral responsibility of achieving universal goals of equality, rights, dignity and human civilizational growth.

The runners of the game are desperate men wanting to avoid theirs and their families falling into the disgrace and deprivation of the old times, by making use of the rare opportunity of the share in country rule to amass wealth for them and for their many future generations in the shortest span of times. This unfortunate state of affairs has made the trading and manufacturing community in every nation the best partners in achieving the same goal. This particular tacit arrangement helps to plainly breed the above narrated sieving out the poor and the deprived naturally into a classic realm of the poor in every nation.

For meeting the ideological compulsions of modern age , where altruism and social responsibility are catchy moral slogans that enhances the social status of the rich and the powerful, special realms have been kept these poorest of the poor where charities of different sorts are pumped. Every modern establishment, thus, maintain this realm of the poor and the deprived like a super refugee camp, and engaged in a competition of a sort to show that their real poverty level always bit above the global statistical average ! Indeed a very tragic state of affairs, but it is the norm of the modern age, that media drum it out 24x7 as the democratic era of the 3rd millennium !

In short, the existing model of economic growth, by depending upon the industrial class to build more and factories and production centres has to be thoroughly reviewed for its ability to end-up in healthy future societies where social equality and individual dignity prevails. In the present set-up, no other skill other than that of entrepreneurship is encouraged and respected. Every other realm of ability and knowledge and pursuits is expected to aid the former realm, for practical reason. Concept of a healthy society dies in such a socio-economic set-up.

As Rousseau had once quipped , ‘ In a word, I could prove that, if we have a few rich and powerful men on the pinnacle of fortune and grandeur, while the crowd grovels in want and obscurity, it is because the former prize what they enjoy only in so far as others are destitute of it; and because without changing their condition, they would cease to be happy the moment the people ceases to be wretched’.  He plainly meant that it is only the sense of inequality that the rich enjoy: NOT the actual pleasure from the superiority of their rich food or surrounding. The dry bread that the poor daily eats gives them  equal satisfaction what the buttered bread that the rich eats every day, as far as such difference is NOT a matter of social status discrimination. What ever the rich does in his palatial house is the same the poor does it at his hut, including eats, mating and enjoying the social pleasures. Before the invention of electricity, weather control devices and speed locomotives, to days’ rich and poor both had lived a more equal life with regard to amenities of life.

The gross inequality has emerged when such amenities have become institutionalized symbols of the life of rich, and society built massive boundary lines between the lives of the two different classes. As Rousseau said, the pleasure of the rich would vanish the moment such amenities are made universal standard of the life of every one, or by intentional social engineering by genuine collective realms of modern society, such dividing symbols of social differentiation are gradually taken away from society.
For example, the star based hotel system, the gross inequality in the matter of production of high value and low value cars, restrictions in the size and scope of house building, gradual avoidance of class distinctions in public transport travels including that of air-travel, and total avoidance of King time public ceremonies in the honour of democratic office bearers of government etc would serve the CAUSE of social equality in long run.

But price rise and inflation is the root channel of generating social and economic inequality in society. It is NOT a natural work of market, but the work of intentional greed of one group of members in society, supported by an establishment that ideologically is in tune with the anti-civilization tendencies of the age. If the Feudal system of the past is non-existent today in its old form, present capitalist system too is NOT different in essence from Feudalism; it goes on creating Feudal Lords of a different kind, with their same status and role in modern society. The status, reach, influence of the rich and powerful in today’s world is NOT at all less than that once enjoyed by the Feudal Lords of the past !

Authored by: Abraham Joseph
An  independent philosophy, mind,Reason,spirituality and Polity seeker, researher&writer.
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