Oftentimes, women living in countries where unfair economic conditions prevail have difficulty participating in the workforce. One of the most important factors causing women’s inability to contribute to the economy is high inflation. Let alone the fact that high inflation leads to moral decadence, it destroys everything that cherishes life and awareness while swelling the prices yet not increasing the value of life. It creates political and social corruption.
For this reason, the US and the EU always prioritize the fight against inflation. A recent and tangible example is that, for the first time in history, inflation is described as a threat in the National Security Strategy of the United States of America. The difference between developed and underdeveloped countries is this: Developed countries care about creating value while underdeveloped countries care about assets. Interestingly, the aspects that increase the real value of assets are the right to own property, other civil rights and liberties, quality education for everyone, and the rule of law. Therefore, achieving high economic growth does not always provide the welfare and development that people of a country deserve. The market actors who are upset by Fed Chair Powell’s recent address should learn how to tell one from the other.
If inflation is allowed to go up unchecked, values would deteriorate and then the assets. So, in order to turn short-term gains to long-term and lasting value, inflation, which creates value corruption, must be tamed. As I have mentioned in my previous articles, German hyperinflation and depression in the 20th century had resulted in the rise of Hitler, who drowned the world in blood under the pretext of “fighting the corrupt system”. Totalitarian regimes in Latin America persecuted their people for similar reasons. A country’s state of constant turbulence and crisis often tends to provoke the desire to control and dominate everything.
Wise and rational leaders do not want lasting measures to control inflation and suspend the price mechanism because they know that once the balance is upset, it will be a long, difficult and costly process to restore it back to normal. They also avoid making any decision that might increase the effective demand before determining the causes of inflation. Experienced decision makers know very well that wage and salary hikes put in effect to ensure that citizens are not crumbled under high inflation do in fact make inflation even stickier. The autonomy of central banks is therefore extremely important since they use interest rates as a weapon against the demand-increasing policies of the governments crafted out of political concerns.
Make no mistake: central banks and governments in countries where the rule of law exists are in agreement most of the time. Economic growth and low inflation are natural results, not the promises of an election campaign. Not only monetary policy but also fiscal policy comes into play in the combat against inflation. If one policy is too tight and the other is too loose, this would lead to severe disruptions over the medium term. Since democracy requires reconciliation and understanding, in developed countries, the fight against economic troubles is carried out within the coordination of the relevant institutions.
“The Fight Against Inflation Must Continue”
When economic activity increases more than expected while combating inflation, wise leaders do not say:
“That’s great! We are killing two birds with one stone!”
On the contrary, they start having concerns about whether the implemented policies have been hardly reducing the effective demand and inflation will most likely continue to rise. To prevent their concerns from becoming significant problems, they instantly introduce strong measures to keep the inflation low and GDP growth at ideal levels, instead of a rapidly growing economy under high inflation. Through experience, leaders can perfect their ability to devise and implement such effective measures. For example, a goal scored by the weaker team early in a match is often not a good sign. Most of the time, this weaker team, intoxicated by early success, gets defeated by their opponents. Another example would be relying too much on your skills as a driver and driving on snow and icy roads without using winter tyres. Further examples may include passing a hot drink or soup over the heads of your children, leaving valuables near the sink, or trying to repair electrical or plumbing issues without proper knowledge.
Perhaps the perfect example was a slogan I read on a bumper sticker which said, “He loved to overtake, RIP !”. People who love doing dangerous and risky things tend to believe that luck will always be on their side. For this reason, they ignore others’ warnings. But oftentimes they endanger not only their own life but also the lives of others.