There’s ample material available explaining the economic consequences of inflation. It’s easy to comprehend too, once you get the hang of it. But, what goes missing behind cold statistics is the harsh socio-economic reality.
When reading a newspaper, you will find articles and opinion pieces going on and on about how inflation leads to an increase in raw material prices, thereby resulting in lower profits for companies.
I want to talk about something I find amiss from these pieces - a human element.
You see, when the prices of protein-rich food go up (like it is happening now), a very large chunk of the population is deprived of sufficient nutrition. This causes malnutrition, especially among children. And because of the patriarchal nature of our society, it is the female child that suffers more than the male.
I won’t even get into explaining how inflation leads to lower real income and all. Let’s just try and get into the shoes of these kids and think.
Given that the family now needs more money to feed all of its members, the younger members of the family are pushed into labour (child labour). Due to lack of time, the child cannot be adequately educated (not that we have a great system for that) and misses out on a future full of opportunities.
Malnourishment also has a direct impact on long term well-being, both physical and mental. Health costs go up, implying more misery for the poor.
The capitalist in me muses: so, if there’s food price inflation in the country, there’s a higher probability of people getting sick, which means a higher profit potential for pharma companies? Hmmm. Interesting. BTW, I don’t hold any pharma stocks.
I don’t want to sound all morbid, but the psychological implications of inflation have been studied by researchers, and the results are heartbreaking.1
Marrying off the girl-child to a more “prosperous” family then becomes a necessity for the poor family struggling to afford a square meal every day. To get this arrangement done, fathers take loans they cannot imagine paying off in their lifetimes, and another cycle of anxiety follows.
Even if we look at history, major political and social unrest occurs because of hyper-inflationary situations. Masses become helpless, and a civic disorder sets in. This is also a period for people to lose their “logos” (logic) and take decisions based more on “pathos” (emotions).
History stands testament to this: economic disparity inadvertently leads to the rise of dictatorships.
Be it the fall of the Weimar Republic, to give rise to a Nazi Germany, lead by a twisted man with a funny moustache who killed who knows how many people, or the rise of dictators like Robert Mugabe in Zimbabwe, or Milosevic in Yugoslavia: time and again, dictators have been hailed during times of economic disparity, and inflation. And have caused it too.
Interestingly, 28/29 of the world’s hyperinflationary incidents have occurred in and after the 20th century (maybe the advent of fiat currency did this to us?)!
With the rise of digital money, and the ability of governments to put an expiry date on your money (yep, China is doing it - may be material for another piece?), we may see a managed inflationary environment. How effective will these measures be? It’s anybody’s guess…
So, next time a mainstream folk honks on about inflation and its economic impact, add a socio-psychological element to the conversation. Will make it more humane, if nothing else.
If you want to read more about what inflation is in an easy to understand language, with interesting examples, check this out.
Research study on the social and psychological impact of inflation in developing economies: file:///C:/Users/91823/Downloads/SSRN-id2082991.pdf