Capitalist economists in general and neo-liberal economists in particular love creating mythical and mystical confusions around certain ‘economic’ notions. One such notion is ‘inflation’.
Under normal conditions inflation occurs in a market economy when consumer demand exceeds supply – a general increase in the prices of all goods follow. This is referred to as demand driven inflation.
If this is indeed the reason for inflation then South Africa, with 18 million people out of a population of 55 million in total living on government grants, with 40% real unemployment and 60% of people earning less than R3 500 per month should have no, or close to zero inflation. So why do we have inflation at all then? In other words market demand in South Africa is very weak given that the majority of people are so poor.
Well it is because production, wholesale and retail of goods in this country is highly monopolised, and the big monopoly firms collude to keep wages and costs low, while fixing prices very highly.
This forces the vast majority of South Africans to dis-save, in other words to spend more than they earn. This then works to the advantage of the monopoly banks who extend credit to the struggling population and realise massive profits from the interest charged on loans. So apart from exploiting the labour of ordinary working South Africans the big monopoly corporations further squeeze ordinary South Africans by means of price fixing, and credit.
Unable to cope many South Africans become physically and mentally ill which profits the big health and insurance monopolies. So people end up with massive electronic deductions from their incomes every month, leaving them with little money for food, transport, housing, education and recreation.
The beneficiaries of inflation are agribusiness, the wholesale and retail sectors, banking, insurance and of course the pharmaceutical and health industries (medical aid etc.).
Yet, bourgeois economists would have us believe that inflation is something mystical, like the invisible hand, or ‘market sentiment, or economic ‘fundamentals’, a bit like predicting the weather.
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