Thursday, April 25, 2024

LEFT OF CENTRE: What the market could bear


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THERE?SEEMS?TO?BE a conscious quest to identify the appropriate “whipping boy” for the cost of living in Barbados, and any subsequent increases.
Fiscal policy, which is solely within the purview of Government, can impact the cost of living but it would be irrational to commence any analysis with fiscal policy.
I remember reading a document in 1985 entitled Price Determination In Barbados, authored by the late Wendell McClean.
At the time I was struggling with some of the basic concepts of macro-economics at the Cave Hill Campus of the University of the West Indies, but I remember the statement that most items in Barbados are sold at the “highest price that the market could bear”.
The concept of “what the market could bear” was foreign in that all of my other university courses spoke to competition, efficiency and cost competitiveness.
Collusion and price setting
How is it therefore possible for such a concept to be operational in Barbados? The document answered that question when it spoke to other concepts such as collusion, price setting and others.
Incidentally, the business environment that facilitated collusion and price setting is even more fertile today than in the 1980s as mergers and acquisitions since then have intensified.
Ironically, in the preamble to most of these mergers or acquisitions, one of the stated benefits is usually cost efficiency and better prices to the general public!
In the absence of organized competition for the current establishment, it is expected that this situation will continue indefinitely.
It is unrealistic to believe otherwise within this capitalist system that is the cornerstone of our democracy.
That being said, policies pursued by central Government that affect the level of duties on imported or manufactured goods will also impact the cost and, by extension, the cost of living.
Similarly, the adjustment of personal income tax and allowances would affect people’s disposable income and render it more difficult to afford items.
Raising taxes
Government is always faced with the double-edged sword of raising taxes or reducing expenditure.
Each path will cause pain and discomfort for some and, in some cases, all. Thus the general fiscal policy changes recently implemented by Government may have impacted more on general economic activity than on the cost of living.
The cost of oil on the world market, the cost of food items, and the cost of transportation to Barbados (not to mention our port costs) will always have some impact on the cost of living in Barbados. But let us not forget the concept of selling at what the market can bear.
The only conceivable cure for this concept is the barrel trade by each household, and not only at Christmas.
I am told that in the past, Trinidadians shopped in Barbados for their groceries and shipped them back home.
This cost-of-living discussion will go away when Barbadians make collective decisions on what is or is not a fair price for items offered for sale.


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