Middle-east Arab News Opinion | Asharq Al-awsat

Inflation | ASHARQ AL-AWSAT English Archive 2005 -2017
Select Page

High prices form the essential “thermometer” that various governments in the developing world use in order to measure the “situation” with their peoples, public opinion and the degree to which they have been accepted by the people.

For a long time, there has been a strong state of discontent and concern in Arab countries owing to the increases in prices of different commodities and services to the extent that they have reached unprecedented levels and records. However, this is not only an Arab phenomenon; it is a global phenomenon that is experienced by Asian, African and Latin American societies alike.

There are many reasons behind this, perhaps the most prominent of which is the increasing price of oil that has a great impact on the costs of shipping and communications, in addition to a significant and sharp decline that has afflicted the dollar and brought about weak exchange rates against other world currencies. Moreover, there are crises in the wheat- and corn- fields as a result of various climatic, environmental and economic conditions without overlooking the fact that some corn producers are focusing on producing corn as a source for alternative energy whereby the product is used to manufacture ethanol as an alternative fuel for cars.

Governments have resorted to different policies to tackle the new economic situation in two ways: by encouraging incentives for openness to market economies and by removing the obstacles in its way. The option, for some, was to remove subsidy from some commodities and to prepare for this critical and sensitive proposal through campaigns, meetings and symposiums through various forms of media. There are those who resorted to another method that included adding some charges and taxes to services and commodities in order to enable the government to balance the idea of subsidy with another proposal that may absorb the increase in prices and sort out the problem at least temporarily. This is contrary to the first suggestion that depends upon economics in order for the field to be open to absolute competition and for there to be options for competitive prices thus altering prices to give the consumer the most suitable option. Of course, there is a third option that relies upon subsidizing some commodities having the most important effect on the consumer; one that is clear and direct.

It is evident that the concept of price increases is a problem than runs deeper than short-term solutions. There are important elements that need to be reconsidered to find socio-economic “equality”, which can absorb inflation and price increases, most notably a critical subject that is related to wages and the minimum-wage. This alone deserves to create a new value and rights system within the market in which the employee has continued to suffer from exclusion, negligence and unrealistic positivism regarding real market requirements. In addition, it requires the reconsideration of policies regarding customs on commodities and service charges so that they may reflect the reality of consumption patterns and treat commodities in a just manner rather than making unjustifiable generalizations to the extent that matters become confused.

Price increases are a problem that could be tackled. There are many developing countries (such as the Asian Tigers and some Latin America countries) that have experienced similar circumstances and managed to find new formulas to deal with a difficult and strange reality by making painful and bold decisions, the first of which was to reevaluate their currencies against the dollar and draw up financial and economic policies that reflect the reality of the free but at the same time responsible market. In fact, there is no achievement in economic gains that do not reflect social welfare.