Lugar Lang: Inflation for dummies

Yesterday my daughter, who is in Grade 12, asked me to explain inflation and why the current 6.4% rate is alarming everyone except the staunch (or blind) loyalists. I admit I told her to ask a tita with an Economics degree so she’d get accurate information. (It takes a village, after all.)

Then we saw Secretary Ernesto Pernia of the National Economic and Development Authority (NEDA) say in the news that there’s no need to worry and that the situation is still manageable. And I realized that the deluded economists in government are part of the problem; one doesn’t really need to have a PhD in Economics to see the country’s dire economic state clearly.

If the economic managers continue to deny the problem, the government will continue on the downward spiral it is taking all of us in. Sadly, this administration has been consistently presenting altered news and misinformation from key social media “influencers” and other spokespersons to manage its image. Much like Marie Antoinette saying, “Let them eat cake” to the impoverished people. But the reality on the ground will speak for itself and no amount of false assurances will put food on the table. And no, it’s not because we are lazy that we are poor.

To be honest, the only thing I remember from Aggregate Economics class in college was my seatmate, who was the real reason I came to class. I got a low grade and deserved it, too. I didn’t know at that time that I was actually in love with a woman for the first time, and I expressed it by laughing at every side comment she made about imports and exports. Our professor probably thought I was laughing at him. So sorry for the aggravation, sir. Those were the days. But I assure you that I do understand inflation better today than when I was a giggly college girl. And I hope you have stopped smoking because your local Marlboros, which cost P25 at that time now costs P90 per pack. Am sure you know why. Read my lips: excise taxes.

Anak, inflation is defined as “the rate at which the general level of prices of goods and services is rising, and consequently, the purchasing power of currency is falling.” You could have Googled that yourself. What I know for sure is that the nine-year-high inflation rate of the Philippines was not caused by Trump. And that while global factors like the price of petroleum does affect inflation because the Philippines relies mainly on importing these products, the government cannot wash its hands of accountability. Solely in the government’s power is putting a halt to the additional excise taxes on petroleum that it has been collecting since the passing of its pet tax reform program, TRAIN this year. It doesn’t take a college degree to see that when oil prices increase (or decrease), it has a snowball effect on the prices of basic commodities.

Economists who are not in the government payroll have pointed out various ways by which the Duterte administration can alleviate the impact of inflation on the ordinary consumer. JC Punongbayan lists stopping the next rounds of TRAIN tax hikes on petroleum, reviewing the “Build, Build, Build” infrastructure program to lessen the amount of imports of raw materials like iron and steel in order to narrow the trade gap and strengthen the peso against the US dollar, and directly addressing the rice crisis by importing more and distributing more quickly. Those are well within the purview of government.

What is less obvious is managing people’s expectations and behavior. Punongbayan culls this insight from a recent IMF study that showed how the increased demand caused by panic buying and hoarding does drive prices higher by depleting supplies unnecessarily, among other effects. Yet this can only be done by those who have the means to buy (and the space to store). What about the rest who survive on a limited budget for daily living expenses? Let them eat cake? Or as Duterte put it, “Magtiis kayo sa hirap at gutom, wala akong pakialam?”

Perhaps the best illustration of the effect of this inflation rate is indeed our own groceries. Yesterday, my P2,000 went only to two bags, not even including chicken, of which there were no more stocks. And sorry, we can’t afford to take a taxi home either, because what used to cost P250 now costs P400, which can instead go towards purchasing about seven kilos of bukbok-free rice this week. And that, anak, is all you need to know for now.

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Posted in Opinion