By Bryson Jumbe
Malawi attained and continues to maintain single digit inflation. From 21.7 percent registered in January to 9.3 percent by August 2017, inflation has been on a downward trend. The Reserve Bank of Malawi estimated the economy to preserve single digit inflation for December 2017. Reports now peg the inflation at 7.7 percent for this month.
In the midst of this achievement is slow economic productivity being experienced as a result of power outages. And questions are being asked as to what is driving down our inflation rates. Could the power outages be the reason why prices tend to be stable and so, check inflation?
As confusing and unimaginable as this may be, the blackouts could well be keeping our inflation rates low.
One of the economic viewpoints on inflation by J.L. Hanson is that, "it occurs when the volume of purchasing power is persistently running ahead of the output of goods and services, so that there is a continuous tendency for prices to rise because they fail to keep pace with demand for them."
This is exactly the opposite of what is happening. With the power load shedding, most people's incomes are being eroded. Suppliers of consumer goods are well aware of the situation on the ground, and cannot take the gamble to adjust prices upwards anyhow. For if they do, who is going to buy them, since the purchasing power of people is weak. In this way, prices tend to remain stable and inflation kept to single digits.
Arrigo Levi, a journalist by profession and an amateur economist, interviewed some of the 'leading practitioners' in the field of economics from the US. The list include Milton Friedman and Paul Samuelson.
He also discussed economic aspects with Paul McCracken, who served as Chairman of Nixon's Council of Economic Advisers. This prompted him to write a book titled "Journey Among the Economists."
In the book, he also shared his insight on 'inflation' with Walter Heller, who instructed two US presidents, John F. Kennedy and Lyndon Johnson, in their time.
One of the discussions Arrigo Levi had with Heller was that of America's eight year boom during the tenures of Kennedy and Johnson. Levi observed that the boom ended in inflation, and in his own words;
"The only sure way of curbing inflation is [was] to provoke unemployment and slow down productive development."
That is, inflation can be reduced by inducing measures that can consume people's incomes thereby weakening their purchasing power. Such measures include provoking unemployment and halting productive development.
Irrespective of the clear parallels between America and Malawi, period of occurrence, and this being an amateur economist view, the power outages in Malawi could be curbing inflation by slowing down productive development as suggested by Arrigo Levi.
This might not be an intended strategy, but the blackouts could have been indirectly controlling our inflation all along. What will happen once economic activity picks up, is a matter of speculation.
Prices might shoot up uncontrollably to cover for costs during the idle productive time experienced during the load shedding programme. As a result, inflation might reach souring levels again.
Well, these are simply the views of amateur economists on curbing inflation, and possible outcomes.
