A Truss-worthy Solution ?
Context :
U.K.’s Truss refuses to rule out welfare cuts to fund economic plan / HINDU / 04 Oct 2022
Extract :
Britain’s new Prime Minister Liz Truss triggered a fresh row in her party on Tuesday by suggesting that she could :
limit increases in benefit payments by less than soaring inflation as she seeks ways to fund her tax-cutting growth plan.
“We have to look at these issues in the round. We have to be fiscally responsible,” Ms. Truss told BBC Radio when asked whether benefit payments would rise in line with record-high inflation to prevent the poorest in society from becoming poorer.
Immediately lawmakers in Ms. Truss’s Conservative Party — some fresh from forcing top tax rate reversal — opposed any move to reduce the increases in benefits at a time when millions are struggling with higher costs of food and energy.
Penny Mordaunt, who is in Ms. Truss’s cabinet of senior ministers, said benefits should rise in line with inflation..
My Take :
UK PM Liz Truss seems to be an unorthodox economist
To me, she appears “ like – minded “ ( although I am no economist ), but most unlikely to win the Nobel prize in Economy ! Going by the internal revolt she is facing from her own party members, it is more likely that she gets nominated for Ig-Nobel !
Like-minded because of what I suggested to our Cabinet Ministers, 6 YEARS ago, to :
# Stop the vicious circle of DA ( Dearness Allowance ) chasing the CPI ( Consumer Price Index )
# Which, in turn increases Manpower Cost
# Which, in turn increases Product / Services Cost
# Which, in turn increases CPI
And,
Set into motion :
# A virtuous circle ( reversing the direction of the chase )
Ø Automation is Inescapable………………………… [ 30 Nov 2016 ]
Extract :
Reduce " Cost of Inflation " by limiting " Annual Wages-Salaries Increases " to 75 % of
the preceding year's GDP number ( ie: if GDP for 2015, is 8 % , maximum salary / wage
increase that can be granted on 01 April 2016 , will be 6 % ) .
Also :
Ø How to break the Vicious Circle ? ………………[ 03 July 2016 ]
Extract :
After recent announcement of 7th Pay Commission recommendations , there were many debates and " Expert Interviews " on TV channels
When asked :
" Will placing of Rs 1 lakh*crore into the pockets of government employees , push up the prices of all kinds of
products ? ", experts ( including Shri Jaitleyji ) agreed that there is a good chance that the prices may go
up by 1.5% to 2%
Of course , the common man has known this for ages !
Every time he got Diwali bonus or annual salary increment, the prices in shops invariably went up !
It was , as if the Shopkeepers ( and the Manufacturers too ) , were just waiting for these announcements
Of course , when product prices go up , the CPI goes up
In turn , the CPI linked wages / salaries go up , raising the cost of manufacture
It is a vicious circle of prices chasing the salaries / wages !
If , somehow , those salaries / wages remained " low " at each stage of processing / manufacturing , then the final product would come out " Cheap "
And lesser product cost would lead to a lower selling price and consequently , a smaller increase in CPI
Smaller increase ( or no increase ? ) in CPI , would mean smaller ( or no ) rise in CPI-linked wages / salaries
No problem !
People would need to earn lesser wages / salaries , to buy that product !
There will be less demand to raise those salaries !
In 1986 , inflation ( price rise / CPI etc ) , climbed to 9.2 % in Australia , forcing PM , Bob Hawke to tell his
countrymen :
" We have , for the time being , to accept reduced Standard of Living , and permanently , increased Standard
of Effort "
In same year , PM Lee of Singapore was facing 0 % growth in GDP !
So, he ordered one year WAGE FREEZE for all employees ( government as well as private sector )
He could not afford to let Singapore become a " High Cost Economy "
With regards,
Hemen Parekh
hcp@RecruitGuru.com / 05 Oct 2022
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