When reporting on the economy, Minister of Finance and Economic Affairs Chris Sinckler usually focuses on broad economic indicators such as gross domestic product, the unemployment rate, fiscal deficit, level of public debt outstanding, and the rate of inflation, among others.
By presenting these economic indicators, the minister is able to give the public a picture of the state of the economy from a macroeconomic perspective. And indeed, such evidence is extremely important in assessing the current state of the country from an economic point of view.
While the macro dimension of the economy is vital, economic problems and their policy prescriptions are in many instances micro in nature. Hence, there is an urgent need to disaggregate economic data to generate a clearer understanding of economic fundamentals and their impact on society. The desirability of such analysis is highlighted frequently in the case of inflation.
Recently, for example, Pinnacle Feeds announced an increase in the cost of its animal feeds to start in early June 2011. The reasons given for the increase were the high cost of electricity and increases in the price of raw materials such as corn. As a result, egg and poultry producers have declared that they will raise the prices of their products. Prices of other locally produced meats are also expected to rise.
Prior to these announcements, Minister of Commerce Haynesley Benn is on record saying that his ministry has set up a ten-member committee to advise Government on possible ways forward with respect to the rising cost of living in the country.
Indeed, this initiative is consistent with all the public pronouncements from the Minister of Finance in relation to tackling the cost of living and his promise to “have his team look at it”.
Clearly, the news from Pinnacle Feeds and the egg and poultry farmers as well as from both the Finance and Commerce Ministers illustrate the significant impact that rising prices can have on the economy, suggesting the need for quick and decisive action to minimise the cost of higher inflation.
But perhaps more importantly, the examples cited provide a strong argument for greater microeconomic analysis of inflation, given the cascading effects on the economy of individual price increases.
Against this backdrop, it is necessary that the public be provided answers to important questions such as, who are the members of the cost-of-living advisory committee and what are their backgrounds? What are their specific terms of reference? When are they supposed to report their findings? When will the public be informed of their findings?
Answers to these questions are important because they would set the tone both in relation to the level of seriousness of the Government in addressing this vexing issue of the high cost of living as well as the strategic approach that is being employed to tackle inflation in Barbados.
In my opinion, there is a strong feeling of hopelessness throughout the country in relation to escalating prices and many continue to wonder who will step up and offer some hope and realistic suggestions to help resolve the current situation.
Indeed, Government and the ten-member committee to advise on the cost of living now have a great opportunity to restore the confidence of Barbadians and a sense of hope that the cost of living will eventually be lowered.
