Inflation and desperation

Published September 1, 2023
The writer is a senior research fellow at the Institute of Development and Economic Alternatives, and an associate professor of economics at Lums.
The writer is a senior research fellow at the Institute of Development and Economic Alternatives, and an associate professor of economics at Lums.

WHILE the debate on whether or not inflation and foreign currency and debt pressure will continue, and what effect they will have on aggregates like exchange rates, growth and solvency, is important, the real impact will be felt by the people of this country. Most of the impact is being felt by the lower- to middle-income groups. We really have to start thinking about what can be done by the state and society to help address their issues.

Over the last couple of years, the number of people, working in the organisations I am, or have been associated with, and who have started asking for help, has increased manifold. Where previously this was usually restricted to the lowest rung of the salary scales, now people even with mid-level salaries have started asking for help to pay school fees, electricity bills (especially when the amount increases unexpectedly and significantly, as of late), health-related emergency bills, and sometimes even to cover regular gaps between salaries and household expenses.

In recent months, a number of riders who have delivered food or other goods at our house have later called, since they had my mobile number, to ask for help. It always surprises me. I do not know the person in question. He may have just delivered food or a parcel once to our house, but feels that he can call on me for help. On the one hand, it tells of the desperation that people are feeling. Though they are working, and working full-time or even more, they cannot make ends meet and have to ask strangers for help. On the other hand, it does put the other side in an embarrassing position. It might be possible to help a few people a few times, and given one does not know the person, it is impossible to know whose need is higher, so this just leads to a lot of embarrassment for both sides.

The issue is not restricted to riders. You take a ride on a rickshaw or other transport service, and many drivers ask for help. You park your car at a parking area, the attendant asks for help. You go to a grocery store, the sales staff asks for help.

If the state’s priority was relief for the needy, finding money would not be an issue.

This is different from people asking for help at traffic signals. We are talking of people who are employed full-time and are working hard. But they can now no longer make ends meet. Inflation has made it impossible for them to live within the salaries they are getting.

One wonders what kind of social and psychological impact this will have. Clearly, it is not easy for people to ask for financial help from those they hardly know. Many feel, quite visibly, embarrassed, and find it demeaning. But they are forced to ask as they do not have other options. How can this not create trauma?

It is hard for the people being asked as well. It is hard to say no. It is harder to say no when you know the needs of the people are very genuine and inflation has made life very hard for most of them. But it is also not possible to help all who ask. This will impact us socially and psychologically as well.

At the state level, we need to increase the amount that is allocated for social protection programmes substantially. Every recipient should get a lot more, given inflation. But, and equally importantly, if not more, we need to expand the programmes and the net as well. We need to expand programmes for schooling and health coverage, as people have a tendency to cut down on educational and health expenses when times get tough; we need to add unemployment benefits to protect people who are losing jobs in these times, or are entering the workforce and are not able to find jobs; and we need to add income supplement programmes for those who might be working full-time and more, but whose income is still below some threshold level.

The minimum wage in Punjab is Rs32,000 per month. Many people, especially in the private sector, work below this level. Even though Rs32,000 might not be a livable wage, it could still be a threshold for providing support to the working poor.

Given the government’s financial constraints, the immediate question in such discussions is: where will the money for additional support come from? And the mostly likely answer is that the government does not have the money, and so programmes for the needy will not be expanded and/ or increased in number. But the truth lies elsewhere. We know that we provide massive subsidies to the rich in general, and to various interest groups in particular. If the state was actually serious about finding money, and if their priority was relief for the needy, finding money would not be an issue. Sadly, it is not a priority for the state.

Can society organise to help the financially disadvantaged better so that the need for personalised appeals, which is hard for both sides to bear, are not required? Individually, people give a lot. But this effort is unorganised, and many remain in need. Could we do better? We need organisations, from local to the national level, that people can trust before any such thing can be organised. We are far from that, and it is not possible to create these quickly.

These are hard times, indeed. Too many people are hurting too much. This will not only leave economic scars, it will leave social and psychological scars as well. The state is still not giving help to the people. It is not a high enough priority. Short of general unrest, there seems nothing that will move this state in the right direction. But general unrest and its high cost are difficult to predict. Society is not organised enough to manage help and relief well. The situation does not look good. Economic conditions will not improve quickly, so the pressure will keep mounting for some time to come.

The writer is a senior research fellow at the Institute of Development and Economic Alternatives, and an associate professor of economics at Lums.

Published in Dawn, September 1st, 2023

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