We Are in the Grip of a Cost-of-Living Crisis

SHAUN WHITTAKER and HARRY BOESAK

NAMIBIA, LIKE THE rest of the world, is facing a cost-of-living crisis. Petrol (51%) and diesel (60%) prices in the country have risen sharply over the past year, while food prices recorded an annual inflation rate of 5,5% in February (although cooking oil jumped by 13,4% the same month).

Inflation is expected to rise to 7,1% this year, and might even reach 10,4%. The cost-of-living factors are food, energy, transportation, healthcare and housing. The monthly costs for a single person in Namibia is currently estimated at N$8 385,83 (without rent). 

However, in the context of the existing economic situation, this is already unattainable for most Namibians and, as circumstances worsen, even more citizens will be pulled into the economic hurricane.

Generally, the mainstream media blames the Russia-Ukraine war for this catastrophe, but this is only part of the explanation. Food and fuel prices were soaring before the USA/Nato proxy war and prices have risen higher than expected because of the supply disruption from Russia and Ukraine. 

In an interview with Democracy Now, entitled ‘Prices Soar as Corporate Profiteers and Speculators Drive Inflation’, Jayati Ghosh, a professor of economics at the University of Massachusetts Amherst, pointed out the contributions of market speculation in commodities and the record-breaking profits of the big oil companies at this time.

PRICE GOUGING

Price gouging is clearly going on – which includes agribusiness. 

Ghosh warns that what we are witnessing is only the start of ‘the abyss’, i.e. immense debt crises.

She also criticises the flawed economic advice of the International Monetary Fund (IMF) to cut the public sector (including pension funds) in the middle of an economic crunch, not to mention the climate disaster. 

What is really required, she reasons, is substantial public spending. So, the ongoing implementation of an IMF austerity plan in Namibia is an important aspect of the predicament.

Furthermore, the recent interest rate increase does not provide a solution for Namibian working people, nor does it address the causes of high inflation and the cost-of-living squeeze in general. 

It is crucial to place the cost-of-living emergency in historical perspective. The victory of neoliberal capitalism in the 1990s resulted in the worldwide redistribution of income from working people to the global oligarchs. 

Needless to say, the severe deterioration in living standards globally drove down effective demand.

DEBT DEFLATION

The consequent debt crises and economic stagnation show that the capital system cannot meet the basic needs of working people and in fact threatens our planet.

American economist Michael Hudson, in his ‘The Bubble and Beyond – Fictitious Capital, Debt Deflation and Global Crisis’, highlights the 2008 Great Recession, which almost destroyed the global capitalist system. 

For Hudson, the depiction of that event as a recession trivialises what really transpired and it should rather be called ‘a Lost Generation subjected to debt deflation’. 

The finance, insurance and real estate sector created ‘wealth’ through debt leveraging and (economic) rent-extraction, not real investment and employment. This led to the concentration of property and assets in the hands of a few billionaires, but widespread bankruptcies and austerity for working people. 

Debt deflation is the main cause of the global calamity as the enormous debt absorbs surpluses which are neither available for purchasing of goods and services, nor for the domestic market or job creation.

Austerity measures only push economies deeper into debt and, in the final analysis, debt leveraging raises the cost of living, while the economy is shrinking. Hence, the dominance of the finance sector gave rise to high-cost economies and massive impoverishment.

Another relevant example is how IMF austerity measures affect pension funds. These measures actually place defined-benefit pension funds in danger. 

They destroy employment and consequently weaken the surpluses out of which to pay retirees.

PRICE REGULATION

As a result, the savings of working people are scaled down as they are put in defined-contribution plans where citizens do not know how much they will receive upon retirement.

For Namibian working people to enjoy decent lives, they must urgently mobilise. Firstly, against high food and fuel prices, and to demand price regulation and an end to price gouging by big business. 

Focusing on inflation is too simplistic as we are dealing with a crisis of redistribution of resources. 

There is also a need for an economy-wide debt cancellation (especially the odious debts in the financial sector) for the country to make a fresh start and get real economic growth (rising production and consumption) going. 

Cancelling debts would be better than economic stagnation. Debt has become an instrument of social control in the capital system.

Working people ought to also insist on the implementation of (economic) rent taxes and the complete scrapping of income and sales taxes for them.

The wealthy must pay their proper share of taxes as they created the catastrophe. Such rent taxes could be used in Namibia for setting up food, energy and housing cooperatives to create employment.  

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