Inflation and the sufferings of Poor People -Sumaiya Binte Hossain
Almost every country around the globe is seeing uncontrollable increases in commodity costs. Ordinary people in various countries are now unable to cope with the effects of inflation. Inflation is a general increase in the prices of goods and services in an economy while the amount of goods or services remains unchanged. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money. The rate of inflation in the United States is now at 8.6%. This is the highest level in over 40 years. In this race, the United Kingdom is not far behind. People in London are protesting rising fuel and living costs. The country’s inflation rate was 7% at the end of the year. In 2022, however, the UK’s inflation rate is 9%. In the eurozone, which consists of 19 nations that utilize the euro currency, inflation was 5.1 percent in January. But now the inflation rate reaches 8.1% which is the highest point since the euro was introduced in 1997. However, because the country is entirely reliant on imported energy, the risk is significantly greater than in other European countries. Inflation in Germany is currently at 7.9%.
The situation is not favorable not only in Europe and America but also in Asia. In Japan, where inflation had been negative since the 1980s recession as commodity prices continued to fall, it increased to around 1% in December and now the rate is 2.4%. In Pakistan, inflation was 13% in January and now the rate is 13.8%. Inflation has been growing in India for several months, peaking at 7.4% in May 2022. In October, Bangladesh’s inflation rate was 5.6 percent but now the rate has increased by 6.29%. Economic disparity in society worsens as a result of inflation. For example, if commodity prices rise, producers’ revenues (such as factory owners’) grow as well, but consumer savings continue to fall. Landless farmers’ plight does not end there. Inflation is having an adverse effect on income and wealth distribution. As a result, people with limited incomes are suffering and the rich are getting richer. Inequality is on the rise, landless people are on the rise, and discontent in society is on the rise. Moreover, it has a particularly negative impact on the working middle class because their income is fixed.
However, it benefits debtors and hurts creditors. This is because, by selling their property or manufactured goods, the debtors can now earn more money and repay the loan. Creditors, on the other hand, will have less purchasing power. Those that engage in the stock market benefit during this period as the stock price rises, but those who invest in government securities or fixed-rate debentures suffer. In fact, Inflation is caused primarily by two factors: demand and cost. Due to “demand-driven” pricing, when clients’ demand increases, the price rises. On the other hand, as the cost of supplying things rises, so does the price. By the third quarter of 2021, everyone on the planet had been affected by the delta strain of the coronavirus. However, as the prevalence of covid decreased in the last several months of the year, lockouts and movement restrictions began to lighten. Then there’s the increased demand for specific goods and services. As a result of recent corporate scandals, demand for this specialty has skyrocketed. Restaurants and tourism attractions continue to see increasing crowds. However, the supply system was unable to meet the demand. This is due to the fact that the pandemic hasn’t completely subsided, and the production and transportation of commodities haven’t yet reached the epidemic’s early stages. This results in a mismatch between supply and demand for products and services.
Again, during the outbreak, getting supplies in and out of the nation was extremely difficult. Many countries did not have access to road or air transportation. As transit charges changed, many countries’ borders and air traffic were closed. There were also significant issues with water transfer. Due to a labor shortage in the ports, the items could not be unloaded on time. As a result, food supplies are in short supply. At the same time, the product’s production and delivery costs skyrocket. And, if the cost of production rises, the product’s price will automatically rise as well. As a result of the epidemic, a labor shortage has developed in the country, with the number of women working falling dramatically. During coronavirus epidemics in the United States and Europe, outbreaks appear to be aggravated. Women and elderly workers, on the other hand, have left the workplace in greater numbers, and many have not returned even after the situation has improved. Many elderly people are still hesitant to return to work, owing to health concerns. As a result, there has been a labor shortage, which is unlikely to be resolved anytime soon. The conflict between Russia and Ukraine and the rise in fuel prices, as well as other commodity prices, is another key factor in commodity price increases. Because fossil fuels are used in other productions, if the price of fuels like mineral gas rises, so does the price of other things.
Aside from that, recent geopolitical considerations and ongoing conflicts among the major European economies, including the United States, Russia, China, France, Germany, and the Middle East, have created a sense of energy insecurity in the near future. Furthermore, several oil and gas producing countries are not increasing their extraction in the hopes of future price increases. And when supply is scarce, the price inevitably rises. Due to energy limitations, the disease has also affected food deliveries to Chinese markets. Any current instability will have an impact on the international market. The central bank and the government of a country come up with a plan to control inflation. The plan adopted by the central bank is called monetary policy and the steps taken by the government are called “fiscal policy”. The Reserve Bank of that country boosts the “bank rate” when inflation rises sharply, that is when a substantial amount of money enters the market. As a result, other banks have been obliged to boost interest rates on a variety of loans. At the same time, if banks are forced to pay higher interest rates, people’s willingness to take out loans is reduced. They also spend additional funds to repay earlier debts. Buyers’ purchasing power is diminished in general. The Reserve Bank lowers the “bank rate” when the rate of inflation is negative or when the quantity of money in the market drops. Furthermore, the government purchases securities on the open market and pays cash for them.
On the other hand, the government implements a variety of strategies to keep inflation under control. For instance, if the price of items subject to indirect taxes continues to grow, the government may be able to lower the tax burden. Still, the low or moderated inflation can be a blessing for an economy because it encourages one to invest which reduces unemployment and increases national income. On the contrary, high inflation brings a curse to a country’s economy and the recent biggest example is Sri Lanka. As a consequence, maintaining a steady price level is essential for a country’s overall development, therefore inflation must be controlled.
The author of this article is studying in the Department of Economics, University of Dhaka.