Notes From The Margin

February 12, 2008

Concerns On The Cost Of Living

We have been watching with interest the efforts of the government to contain the rising costs of food, and while we see a genuine effort being made we have serious concerns about how sustainable that effort is.

Pinnacle Feeds warned about the impending price increase and was asked by the Minister of Agriculture to hold off pending talks with stakeholders. After intially stating that Governement could not subsidize the industry the minister went to bat at cabinet and the following statement appeared in the press today.

The Thompson administration agreed to the price increase but promised financial support to poultry and dairy farmers. When contacted, Minister of Agriculture Haynesley Benn assured farmers they would not be out of pocket.

“We have assured the farmers that they would be compensated. A mechanism has been worked out where there will be a price support for the farmers. A sub-committee met on Friday afternoon with farmers’ representatives and they will report to the Minister of Trade who will meet with them along with the Ministers of Finance and Agriculture.

“We would’ve worked out by that time how the farmers would be compensated. We will get back to the farmers’ representatives as to how soon compensation will come,” he said.

While we applaud the aims of the Government, this clearly cannot be a long term solution particularly in the face of a global rise cost of grain.

Now to be fair the subsidising did not start with this Government, the BLP subsidised domestic power prices by way of a subsidy on the fuel charge. At the time we on the margin chalked up to being an election gimmick that we felt would quickly disappear. However this spreading of subsidies into a new area gives us pause.

Economics cannot be denied.

The upward pressure on prices is mostly exogenous in nature, that is, caused by factors outside of the Barbados economy. There would appear to be a “perfect storm” contributing to these raises including increasing oil prices, increased use of food for fuel, demand for raw materials such as steel etc. by the rapidly developing economies of China and India, and the list goes on. In the face of these forces a policy of subsidization simply is not sustainable, it is at best a stopgap measure that has the potential to damage the economy if it is allowed to continue beyond its limits.

We on the margin are not saying that the government should NOT subsidise, but we would be more comfortable if there was some public indication that the government acknowledged where the limits to this policy are.

Marginal

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7 Comments »

  1. Marginal:

    Man give us a break. Did you not listen to yesterday’s speech from the throne?
    In a similar moment in time, nearly fifty years ago, John Fitzgerald Kennedy said:

    “All this will not be finished in the first one hundred days. Nor will it be finished in the first one thousand days; nor in the life of this Administration; nor even perhaps in our lifetime on this planet. But let us begin.”

    And as the Chinese proverb says, a journey of a thousand miles begins with the very first step.

    Comment by Linchh — February 13, 2008 @ 6:17 am | Reply

  2. I do have to admit that I didn’t hear the speech. From my readings of the papers it seems to set out a fine agenda for a new government. What specifically are you referring to?

    Marginal

    Comment by notesfromthemargin — February 13, 2008 @ 11:56 am | Reply

  3. Marginal, I am glad you made the comment since I have also privately expressed my concerns with the cost of living problem and the gov’t.
    Have you noticed or is it only me with the belief that the only things we complain about are food, electricity and water?
    Cell phones selling everyday, braids, weaves and wigs selling everyday, clothes, alcoholic beverages. When I hear with my ears that the people who sell the above things are losing money or out of business, then I will believe we have a cost of living issue. The issue to me is the cost of high living.
    I have not bought icecream in nearly two years, that is a luxury, I buy only necessities. I pay my mortgage and my bills. I heed the advice of the Central Bank Governor, thus no credit cards, no bank loans, in short no frivolous spending.
    If chicken goes up to a level where I can only afford to buy a little, I will cut back on my portions. We eat too much anyway hence the complaint about obesity.It is all connected to my mind’s way of thinking.
    Frankly I do not see how any government can do the impossible or why they should even try to. It would be better to have food stamps or some other means to aid the persons who are the real ones experiencing difficulties and let life go on since the cost of living will always be high, or living high will always be costly. I mean we all know that poor people are poor, therefore assist the poor persons; that is where the effort should go. I think I am poor but I am sure it would not stand up to scrutiny.
    I have every intention of making informed choices. A government cannot be all things to all people, it should most definitely concentrate on those who for one reason or another find themselves in compromised positions.

    Comment by Anonymous — February 13, 2008 @ 2:37 pm | Reply

  4. Forgive the length please Marginal. Some things make me talk/write, others don’t.

    Comment by Anonymous — February 13, 2008 @ 2:40 pm | Reply

  5. Anonymous makes some good points… but not everyone is buying weave and cell phones even if it feels like that sometimes. Cost of living will hit the poorest first and hardest, pensioners, the unemployed and low waged. Something need to be done for the poor, maybe not the relative poor, but for the absolute poor action need to be taken.

    Comment by Confused 888 — February 15, 2008 @ 1:47 pm | Reply

  6. Interesting…but here is what I have noticed…right across the Caribbean it seems that people are voting for change….that “change” we Caribbean people are looking for, will NEVER come no matter which party is in power in any Caribbean island.. These new politicians in the Caribbean are committed to the free market (which in itself isn’t bad), but not at the expense of the cost of living for the common man..just my thought..and this is why I think that even though you may think that the subsidisation is unsustainable, they will have to make it sustainable…something will have to give….or else your entire economy will collapse…for sure corpses can’t be productive in the economy right?

    Comment by jamaicangirl2007 — February 15, 2008 @ 10:26 pm | Reply

  7. Hi Jamaicangirl2007,

    Something will had to give from the moment back when the BLP started subsidising the electricity bills. Money spent on subsidies means it cant be spent where it would normally have been spent.

    What I’m trying to say is that while this can work in the short term, in the face of the larger factors driving the inflation, it will very soon stop being a solution and become part of the problem. There’s only so much we can afford to subsidise.

    As to a long term sustainable solution? I really don’t know. You are right, corpses aren’t productive in the economy. I hope there is a solution.

    Marginal

    BTW Welcome to the Margin, hope to see you in the comment section more often.

    Comment by notesfromthemargin — February 17, 2008 @ 10:53 pm | Reply


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