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.
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
maximum salary / wage ncrease 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
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
" We have , for the time being , to accept reduced Standard
of Living , and
permanently , increased Standard
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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