RISING PRICES AMIDST FALLING INFLATION!
By Dr Fred M’membe
When I was first asked in a television interview why prices should be going up while inflation was going down in Zambia, my response was that there was a mismatch or contradiction between the real economy involving the production of goods and services and the financial economy belonging to the speculative world of casinos.
Today a respected accountant and economic thinker of our country, Bob Sichinga, has joined the debate. And he says:
“I wish to put my views on the topic of reducing inflation while prices are rising.
Let me make it quite clear, that that phenomena, is neither mathematically nor econometrically, nor accounting wise possible; drawing from my very limited knowledge, training and experience of 53 yrs as a Certified Accountant; I therefore would concur with South African Economist Haroon Bhorat and several others who have questioned the validity of the information coming from the Central Statistics Agency.
The answer to explain this dictomy lies in HOW the “index” is designed or composed.
- The inflation rate is an index, composing many components.
2(a) The first ones are the items or groups of items that make up the index; and how comprehensive the list is in reflecting the value chain of what the index seeks to reflect;
2(b) the second is the value elements that are or get attached to each item; and how accurate these values are;
2(c) the source of the items and the values that are used to compute the index; - How are the values, in this case the very prices that are used;
- How has the formula been determined. So although it could be argued that the formula (algorithism) or even the entire index, have existed for sometime, they could have been subjected to a change which has proven that the results of the computation are no longer accurate.
The change may have been deliberately altered rather than errorenously done, to reflect a lowering of inflation, but without remembering that other elements will be out of senc. I suspect it is a manipulation.
This aspect may be deliberately concealed, because the author(s) is/ are embarrassed by the error they have made, and its consequences. - My recommendation is that the entire index formula, and its calculation be subjected to an independent review/verification.
Not only on the determination but the accuracy of the value sources.
I am prepared to bet that it will be proven so. This is not an economic phenomena at all.”
There’s definitely some problems somewhere. We know of some statistical agencies that have gotten themselves in a fix by giving in to political pressures to cook figures. It’s easy to cook figures but coming out of it is very, very difficult. If not careful the agency totally loses respect, credibility, international recognition and support. We can only hope that our agency has not gotten itself into this situation now or in the past.
The situation of prices going up while inflation is going down is theoretically and practically a very serious contradiction that calls for disquisitions.
Fred M’membe
President of the Socialist Party