*Dr Mohamed Haidar (Economist, writer & commentator)
**Dr Alaa Shehabi (Lecturer & researcher)
***Prof Rodney Shakespeare (Economist, author)
Tuesday 14th June 2022
The post-Covid world appears to be a different one than before the pandemic, at least in terms of living standards. The present economic situation has rekindled the memories of earlier economic pressures that caused big adjustments to people’s lives. With spiralling fuel prices, unprecedented inflation, and poverty levels millions around the world are experiencing hardship as the means cannot sustain their needs. What is happening in the production cycle of the basic commodities? Is it natural or made-up by greedy corporations whose profits spiral upwards as prices continue to jump up? Are there hidden hands at work to squeeze the poor and impose the superiority of the rich? Where do we go from here?
Mohamed Haidar: Good evening, salam aleikum. The topic is the talk of the town at the moment. Everybody is talking about price increases, inflation an increase in the prices of goods and services. Almost everywhere, every household, government department, organisation, social media, the media newspapers everywhere. It is really one of the most important topics at the moment driving most of the questions: why this inflation, why the price increases. It is coming so fast and in a short period of time.
There is the greed of the companies who would like to maximise their profits based on this profit maximisation in the capitalist sphere. This is an opportunity for them to gain what they have lost during the past two and half years during the pandemic and the lockdown.
So, I am going to cover some basic facts about this and maybe shed a light on some areas like oil prices. Why is the oil price going so high? Is it a tricky game so people can find excuses to maximize their profits and rewards whether it is in the private sector or the government?
So, what is inflation? The basic definition is the increase in prices and goods and services in an economy. Or it is the difference between the recent price and the new higher price. This is inflation in simple terms.
Why are prices going up so fast? What is the reason for this? There are many reasons for this whether you are talking about microeconomics or macroeconomics. This phenomenon exists in any country in the world.
The major factors which lead the prices to increase or to make inflation grow at such a rate could stretch from economic or financial factors, social or political turmoil or change in government policy. Or there could be some unexpected reasons or some unexpected causes: calculated risk or uncalculated risk.
The calculated risk could be seasonal or known before. An uncalculated risk could be a catastrophe, an earthquake a pandemic, or a war. There are other reasons which drive inflation to go higher and higher. It could be the productivity or the performance of an economy, it could be the rate of growth, it could be the wage increases – it could be other factors like oil and energy products like what is happening now at the moment. It could be the fiscal policy or the monetary policy conducted by the government or the banking sector. It could be the government taking care of the social services which really pushes the government to increase taxes or increase the budget in order to control inflation like raising interest rates.
Other factors could be the increase of the population or political reasons. It could be a rise in the factors of production. Now as we came out from this pandemic, we had a lot or problems in manufacturing. Not only companies but sectors that stopped working. They were not performing during the last two years. They had a lot of stock, and they were not able to get rid of the stock. So, they cannot manufacture a new product unless they get rid of the stock that they already have. So, this will naturally slow the production and at the same time affect the factors of production – may be the investment, maybe the lack of employment. It could be the lack of raw materials. That is why we have serious problems with the supply of materials. The lines of supplying the materials. The logistics support the supply of materials. Or wages. They push the company or the government to raise tax or to create more money or for the company to raise the prices of its commodity for services provided.
This is all very important and that is why the government has become very responsible in finding out the reason. But we cannot generalise. If we are talking about the UK for example the reasons for inflation could be completely different to the reasons from those in a country in south Asia. Or Africa. But generally speaking, there are many factors. These are like common factors which affect the prices or cause them to rise in general.
If we take for example the pandemic period which had a very severe effect on the performance of any sector in any country in the world. You have to remember that during this period people were locked in their houses. A few people used to go to the factories or to the building sites. Factories reduced the number of employees; they divided their work shifts. So, it is not easy for the company or the economy to repair in a short period of time.
Because the economy is recovering and the ability of people to spend has increased the demand cannot be met. So, companies are unable to supply all the necessary materials or to get the necessary materials to start producing as they were before.
On top of that insurance on the freight or shipping the product has really increased a lot. To ship a container from China to the Middle East used to be 1,000 – 2,000 maximum. There are different sizes of containers. You have 20ft you have 40 ft – there are different capacities and different prices. And because of this problem, because of the lack of these logistics the people were unable to receive the materials in order to proceed with the work.
That is why now if you put an order in the UK for example. I have a friend in the UK who wants some furniture. He placed an order. The manufacturer refused to start the order unless he received the full amount of the product. This is something which never happened before. And at the same time the delivery time. If it is not in the depot, they can order it for you. It takes about three or four months to do this for this client. Many sectors are performing like this. Even in the medical sector we have the same problem. Even in the social sector we have the same problem. Even online. You order something. You expect it to arrive in one or two days and it does not arrive. So, this kind of delay will add cost for the services produced by the manufacturer.
At the same during that period the government was not able to receive its returns or its income from for example from customs, from services, from taxes on companies. Imagine the service sector and the co-ordination with the flight sector and with tourism. They were unable to perform properly. So how could the government collect tax from nonperforming work for example? Or they have a limited amount of income and their own troubles to get rid of this problem in the future.
So, you put all these factors together without the pickup of the economy. The oil sector started to pick up at the same time. If you go back to December 2019 at that time exactly the price of crude oil was about £75 which is a favourite price for exporting companies. But during the pandemic the prices started to go down until March 25. At that time the price went down to $20. Saudi Arabia wanted to sell like the future contract. They were unable to sell even for $10. Now the prices are starting to pick up and in February the price came back to $75.
But the moment the trouble between Russia and Ukraine started the view changed completely. So, because of that we started to hear about a lot of problems in the food sector, in the energy sector, some products from oil like petrol, diesel gas. These problems came suddenly. So why? What was the reason behind that?
I think this has enabled the countries and the governments to take advantage of the situation and it is an opportunity. It is an opportunity. Before this opportunity, it was the vaccination. The government has financed the vaccination from public funds, from your pockets and it gave it to these private companies to do this vaccination and they got almost nothing from it.
So, this may be the reason for the price to go beyond control. So, what is the solution to this and what is the government doing? You know that the government, in general, receives in most countries between 15 – 24 percent on the energy products. If you go to the petrol station, you have two types of gasoline: one is the premium and one is the cheap one. People were forced in most of the stations to use the premium one which is 198p. Four or five months ago it was 120p. And for the ordinary petrol it was 115 or 110. So, the price increased by 90 percent. Why is that? Why doesn’t the government have a policy regarding these companies and all of these sectors because mainly it is benefitting from that. It does not matter who is paying. You are paying and I am paying and at the end of the day it becomes like a policy. People have to take care of it.
So in general if there is no policy in the hands of the government in order to clamp down or to move the price increase it will lead to a very bad consequence. It may lead to the company to announce bankruptcy or lay off jobs or closing completely. We have moved away from Europe and we have suffering. In the chain of supply quite a lot of small and medium enterprises are still suffering from finding the raw materials that they want.
So the government issued the government plan. This is a political game. Although the government has recommended in the past not to leave the EU. If you remember in 2016 the government issued a booklet and it said if we stay in Europe we will gain. But if you decide because you had the choice and you decide to leave remember that we are coming to difficult times. We are going to face difficulties for many years to come. And this is what we are facing now. Can the government solve this problem? I conclude now. There are many other issues to be covered but time is short.
Rodney Shakespeare: I am going to tell you a few things which you will not believe and if you ask me questions, I will give you answers which you will not believe. This is very unusual. But there will be somewhere where you can find the answers.
Here is a very nicely published book. The first thing is that you cannot buy it. I did start by saying that I would say things you would not believe and when you asked me questions you would believe me even less.
Secondly, I cannot buy a copy. Thirdly I am being informed that translations are being made in 20 languages and I not informed about any of that. If there is anyone here who may have a little more information well they can inform me. But I am not going to pursue those matters which is another thing as well. So I am starting off with some strange information. And now it gets even stranger as to how this book came about.
On a hot August evening three years ago now at 1.30 am I was going to bed and in came an email. I realised it had been written by somebody at 4 am. I recognised the name. It said the leader’s office, Iran wants you to write a book. How much money do you want? What is the book about I typed? And you will not believe the answer, neither did I.
It was that in 2015 there had been a nasty incident in Paris, the Charlie Hebdo attack. And the leader had written a letter to Western youth saying please give a fair hearing to Islam. And later in the year, there was another nasty attack in France and the leader wrote another letter. And I have to say these letters are in immaculate English. If you want to know how to write English contact the Leader’s office in Iran.
The message was basically please give a fair hearing to Islam. I was astounded as you must be because I am not Iranian, I am not a Muslim and I am not a Shia Muslim and I happen to know at least three, maybe four, people who would do the job a thousand times better than I.
So I sat down to type. And as I started to type I remember I started looking down and noticed that my hands had stopped which was a bit strange and I started to look over there and I had a vision. It was like a 3-D vision like in the cinema. And I was back in Tehran on a visit five years ago. I was outside a conference centre in the heat and the sun and a row was going on. I won’t go into that.
But what was coming back was the heat, the smell, the touch even the cold water that was poured down my back. And I asked myself what this and I is realised that it must be something that went on at that conference. And as soon as I got that in my head the vision faded.
And there was another vision. This time the colours were faded. This was of circumstances which are now 22 years ago at a reception just before a major conference. I had the most extraordinary conversation. And as I sat there looking at the second vision and saying what was that conversation an extraordinary thing happened. All of this is extraordinary. I suddenly realised that the problem which had been put to me 22 years ago which I had been working on for 22 years and couldn’t get there. I was getting there roughly in 2014 I suddenly knew that the programme which I had been asked about by a top American professor twenty years ago I could now solve.
So, I wrote back to this person who by the way is one of four individuals who have been sanctioned by the American government for holding conferences (one alas has just passed on). And they have been sanctioned in the most awful way possible.
So, I wrote back and said okay I agree to write the book on two conditions and the first one is strange. And here is another thing you won’t believe. It is every important and it throws light on this whole new subject that there should be no money involved. You cynics can find other reasons why there shouldn’t be any money involved but believe you me the important thing is that I should accept no money.
And here is the second thing you won’t believe. I wrote back and said I will send you the book and I predict that you will turn it down. I knew at that moment what was going to be in that book, and it would be certain to be turned down by the leader’s office in Iran. I think at that point I have told you enough of strange things. And now I will move on.
The book and there it is but you cannot buy it and I cannot buy it. It is based on thinking two and a half years ago. But the thinking and the issues are what is going on has actually progressed so you can find out what this is all about by simply visiting as website. We are able to go to sunparadigm.org
The issues range from an inflation which is out of control to half the world living on $5.50 a day to the fact that I don’t know how many billion women care for others and preserve the human race and don’t get a penny, to personal corporate and national debt which is higher than in 2008. To extraordinary figures on productivity. The great reset looks as if it was moving like lighting to a world where you will own nothing and you will be happy and you will be controlled by computer games. Your behaviour will be controlled by the social controls on your digital bank account.
And this is happening like lightning. And the only place which understands what is happening and has a counter move is the website sun paradigm. The issues are there. Another book has just been written but that is another story which I won’t go into. It addresses all the issues which I have actually touched on.
What it says is all of us have assumptions about reality and when we argue we identify this person’s false assumptions. What don’t do and what we can’t do is to identify all 59 false assumptions. And yet you can go on that website and you will find the 59 false assumptions. And then here is an extraordinary thing. When you say that assumption true what is the opposite you will fall on the floor because you will see time and time again the opposite is true and you will see that.
I am telling you something which is impossible. You will say how is it that all of us are now in a situation where our fundamental assumptions about reality seem to be okay but when we look at them to see what is the opposite the opposite immediately appears of having great intellectual strength. You will find that on this website. It allows you to address some of those big issues. The first three are global warming. I can’t go into the details of that. I will tell you very quickly that by a certain way of doing things you are able over time to get a voluntary control of population levels. So to change the concept of homo economicus which lies at the heart of mainstream economics there is economic democracy. The book is not a set of proposals. It is in fact a paradigm shift and when you make paradigm shift you can make the proposals yourself and they will come easily and naturally.
So, I don’t have to argue about the causes of inflation. I say look at your understanding of reality and you will understand start to understand what the causes of inflation are. You will understand what is poverty. The book has a new explanation for poverty or persistent poverty. It also has a unique solution to that persistent poverty. All those things are there.
There is something in the book. To be fair it deals with cyber technology, but that technology is not finally developed. There is a 20 minute video that tells you in detail what I have told you about. Thank you for being patient and listening. There is a description of a paradigm shift on that website and another book which has just been completed. Thank you.
Ala’a Shehabi: I will be talking about some of the ideas that we were researching at the Global Prosperity Institute at UCL. I will begin by reviewing basic statistics that tell a story about the broader economic situation and the specific situation we face in the UK and why it is different from other parts of the world.
So in the UK, more than two million adults have gone without food for a whole day in the past month because they cannot afford to eat. There has been a 57 percent jump in the proportion of households that have been cutting back on food and skipping meals over the past three months of the year. The people would not have enough resources to eat.
There was an expectation that social policy and politics in this country would take on social benefits and the challenge to our movement is to mobilise very basic services that the country no longer provides. Universal services that used to exist as a privilege of being in this country have now been removed and we are seeing the effect of that through hunger at the most basic level.
This year we also expect energy bills to rise by one thousand pounds. There have been suggestions on how to ease the costs on people, but they don’t go far enough. Talking about the energy the UK has experienced a 52 percent rise compared to 39 percent in Italy for energy, specifically petrol. Why has energy risen so much higher in the UK than it has in Italy?
In answer to that the FT this week looks at inflation and compares it to other countries. What proportion of that is due to energy and what proportion is due to something else that might be unique to the UK? Even the Central Bank’s governor was saying that there is nothing I can do as 80 percent of inflation is caused by external factors – there is nothing we in the central bank can do to control inflation because it is external. In economics we call is exogenous to the system. Whatever we do in this country we can’t control that cost impact.
In fact, the FT completely contradicted the central bank governor because in the breakdown of the causes of inflation it found that 50 is due to elements concerning goods and services and they link those directly to the impact of Brexit.
So this is where the UK is different from the rest of the world. We in the UK are going to be facing the worst growth rate among the G7 and the G20. We will be hit the hardest in the upcoming economic recession and our inflation is the worst.
Our Central Bank is saying we can’t do anything about it. They are pretty sure about the economic dilemma. If you try to control inflation we increase interest rates but if we increase interest rates we affect the growth even more. So this in fact renders monetary policy or the interest rate futile talk because either way we are not going to solve the problem.
So we are not only going to have the worst economic recession. We are probably going to have the longest recession that has been predicted to last at least until 2024. So that is why we are different at least from the G20 countries. I can’t talk about the impact in the global south or the economic effects of the cost of the living crisis on them. We expect not just the poorest in the UK to be affected but also the poorest in the world. We will see increases in hunger and famine globally and the West retreating in any kind of support and aid until we see the images to offset that. Until we see the images that we saw decades ago of starving children.
So in the absence of basic food security and basic energy security what hope do we have to emerge from this having built a better world? Of course this is not just a simple energy crisis, or the war in Ukraine or the pandemic. We are talking about decades of austerity in the UK. It has been described by a writer in the Guardian as the decade that broke Britain. It is a decade of austerity and of benefit cuts.
You no longer have the kind of health service, the quality of health care. The health care sector has been decimated. Some of the poorest paid people in the country look after the most vulnerable will be hit the hardest because of the cost of living crisis. And they are the ones who have helped during the pandemic. And here we are talking about minimum wage introduction. There has been a bit of pressure. We have been talking about that.
The minimum wage is the only way to protect the poorest in society. But Boris Johnson said this week we can’t look at minimum wage reforms because of the wage price spiral. This is the economic argument that if you increase wages you create further inflationary pressure. So if the government starts giving more benefits or cutting taxes you create the wage-price spiral. People demand higher wages – you give them higher wages and inflation gets worse.
This is also an incorrect way of looking at the causes of inflation. The causes of inflation are not wage rises. The causes of inflation are fundamentally the supply chain problems from energy or goods and services. In the UK we are not able to get our goods in because of Brexit. Not because we are overpaid or if we demand higher wages this will cause further inflation.
So there has been a lot of pushback with the prime minister trying to debunk this idea of the wage-price spiral. What should we be asking for to offset this and not to go through this every ten years? We know that as an outcome of capitalism one of the inevitable symptoms of capitalism is you have what is called a boom and bust cycle in the economy. There will be a boom period and there will be a bust. This cycle despite capitalism and economic growth which you may argue has benefits but there is this volatility constantly when economies are having to go through a cycle they create immense riches but also an immense decline in wealth over a short period of time.
And this is what is called a wicked problem in economics. Something that there isn’t a solution to. It is just a feature of the economic system, this boom and bust cycle. But what we do have are some economic tools like taxation and a welfare system where the rich don’t get that much richer in a boom and the poor don’t get that much poorer in the bust. So you have taxation levels that level out. When you have a boom period government is able to collect taxes more and save that for the rainy day when there is a bust.
But if you are living in a regime or an ideological regime that is right-wing or very neo-liberal you are taxed less and therefore they do not have the power to offset it as we see now. They do not have the power to offset the inflationary pressures which they could have had if they were taxing the rich in rich times.
There are some ideas that lots of ideas which are being toyed with. One that is being discussed is the experiment with the universal basic income. What if we gave people a standard amount. We give everybody a lump sum of £2000 a month what will happen? There are problems with the universal basic income and there have been experiments with it, especially in Scandinavia where people are given a basic income. It means you can carry on working, you can quit your job and become an artist or do whatever you want to do.
What does this do to economic productivity? This is the big question. Some people say they don’t prefer that because it diminishes the role of the government and they prefer something like basic social services. That is if we can ensure that everybody in the country gets free health care, education, legal services, shelter, food transport and information – free internet and free transport. If food was completely free if you had a budget every month to cover your good needs.
We have done the calculations in my institute. There is enough if you take all the tax income to provide universal basic services. You can cover all of these services and more in ways that are not being covered at the moment. You can provide broadband to every household in the UK. So we have done the maths. It is not very complicated. And you can find the report on the IGP website if you google it.
So there are possibilities for a different kind of economics and a different kind of world to get over the situation we see now when children go hungry and in which the government has agreed to provide free dinners for children and public transport is increasing. I will leave it on that note.
*Mohamed Haidar is an economist, lecturer and commentator with many years of experience in the field. He holds a degree from Yarmouk University in Jordan and MSc from Beirut University College (which is now the Lebanese University). He obtained his PhD from Durham University Business School. After working at the University first and at the Lebanese University later, he followed a career of journalism with the London-based daily, Al Hayat. He worked with the International Labour Organisation in Italy, preparing training courses for senior managers to enable them to run small and medium businesses in the Middle East. He published many research papers
**Ala’a Shehabi is an economist by training, social policy consultant and has been a lecturer for many years. She is the Deputy Director of the Institute for Global Prosperity at UCL, which conducts trans-disciplinary research into what constitutes a good life and prosperity beyond growth (originally termed by Professor Tim Jackson). Her research focuses on generative methods of centring people and the planet in economic development, particularly in the Middle East. This research is funded by UKRI. She has a PhD in econometrics from Imperial College London and previously worked for the RAND Corporation and Lancaster University.
***Rodney Shakespeare taught in UK schools and colleges for thirteen years. For ten years he was Visiting Professor of Binary Economics (holding the only academic post in the subject in the world) at Trisakti University, Jakarta (second university in prestige in Indonesia) where he taught on the International Postgraduate Islamic Economics and Finance program. Binary Economics is a new paradigm economics which, among other things, addresses the technological shift now smashing out traditional well-paid jobs. Rodney is a Cambridge MA, a qualified UK Barrister, and a well-known paper presenter and lecturer. He is a co-founder of the Global Justice Movement. In 2000 he received the (Martin Luther) King-Kelso Award. He broadcasts with various TV and radio stations
