Stopping the sinister wage-inflation cycle will be offset by the construction of 4 million housing / previous government investment in the economy

According to the economic correspondent of Fars News Agency, one of the shumsMost The economic phenomena that have gripped many countries and put unprecedented livelihoods on the people living in these areas are called the spiral of wages and inflation.

In such an economic situation, the general inflation rate causes the public purchasing power of the society, especially the wage earners, to decrease significantly for various reasons. In other words, in such a case, the accumulation of inflation was more than the increase in wages, and this creates a serious gap between prices and wages. Naturally, the first thing that comes to the mind of a policymaker in such a situation is to close the gap created by increasing wages, but this action can be considered as the beginning of a rupture of the economic system.

An analysis of the reason for this indicates that the increase in wages, especially in government institutions and employees of this sector of the economy, must be financed from a budget that we do not have in return for income to pay for the increase in wages. This causes the budget to face a deficit, and this imbalance is accompanied by the creation of money and an increase in liquidity without enlarging the country’s economic cake, and again leads to inflation. In other words, the increase in wages this time ends up in the source of inflation and a wage-inflation spiral is formed, a vicious cycle that puts unprecedented pressure on people, especially the low-income groups, and can ground any economy.

The sinister wage cycle – inflation and the collapse of the Venezuelan economy

One of the clearest examples of the formation of the inflation wage cycle arose in Venezuela. The ominous cycle that caused the Venezuelan economy to grapple with unprecedented hyperinflation. Accordingly, a country with oil resources experienced inflation of 3 million percent in September 2020, while Venezuela’s spot inflation in January 2017 was about 19 percent, which in the following months reached 42, 66 and 92 percent, respectively.

To better understand the impact of the sinister cycle of wages and inflation, it should be said that according to surveys in 1999, the price level in Iran has increased 11 times in the last 10 years and 530 thousand times in Venezuela. In 10 years, the value of Iran’s currency has decreased from about one thousand tomans to 25 thousand tomans against one dollar, but the value of Venezuelan currency has decreased from 2 bolivars against one dollar to 4 billion and 100 million bolivars against one dollar. As a result Cloud inflation, More than 10% of the country’s population fled to other countries.

“Excessively high wages will plunge the country into a worse inflation cycle and create a wage-inflation matrix similar to Venezuela,” said Arash Alavian, an economics expert, pointing to the dangers of the wage cycle and inflation.

The expression of such a difficult situation suggests that the vicious cycle of wage inflation can pave the way for the free fall of an economy and create a wide-ranging livelihood. With this interpretation, not all regions of the world and different governments are always involved in the wage cycle of inflation, and some countries, on the eve of entering the cycle of wage and inflation, have saved themselves from the danger of collapse by policy-making during the economy.

* Express a successful experience for an economic leap

World War II, as well as China’s civil war in the mid-twentieth century, led to widespread migration to Hong Kong کنک And the formation of economic crisis and inflation in this country, so that the population of the regiment Kong From 900,000 in 1945 to 2.3 million in 1949.

Government Regiment Kong In the face of this phenomenon, at first he did not react and the famous policy of this country called “لسه “Far” means let it fix itself. In the meantime, a large fire broke out in the area کیپمی At Christmas 1953, the homelessness of 50,000 people made it more difficult to run the country and pave the way for a change of government.

Creating severe shocks in the regiment’s economy Kong, Could have been accompanied by a similar approach to Venezuela and increased wages to cover costs, but the Hong Kong government took a different approach and not only did not fall into the sinister cycle of wages and inflation, but also paved the way for the country’s economic prosperity.

Instead of increasing wage earners, the Hong Kong people focused on the household budget and identified the largest part of the budget, the need for housing. Subsequently, the government of the regiment Kong The policy of providing shelter to the people of this country was put on the agenda in order to eliminate the major part of their expenses by reducing the cost of housing and to provide a way out of the economic crisis without increasing wages.

Economic policies of the regiment Kong During this period, under the heading of 2 strategies, “builder-centered” and “applicant Axis »پی‌Was taken. These solutions continued in the form of measures such as land supply and housing construction facilities along with not receiving tolls from housing builders. As a result of these measures, a large part of the household budget was eliminated and the gap caused by inflation was reduced.

* The clerical government placed the country on the edge of the Abyss of Abyssinia

According to Fars, the ill-considered and reckless actions of the previous government in the country caused the country to be in a bad economic situation. In the last 2 years, a severe budget deficit was experienced in the country, and the amount of this budget imbalance this year is estimated at about 400,000 billion tomans, equivalent to one third of this year’s budget and almost the entire budget of the last 3 years.

In such a situation, the government’s budget and planning organization, Tadbir and Omid, regardless of the ominous effects of the wage cycle and inflation, began to increase payments to various strata covered by the government and practically paved the way for the intensification of the budget deficit in the thirteenth government. An action that had a strong political flavor and was done in order to implement the scorched earth policy.

The unruly increase in wages and the escalation of the country’s budget imbalance in the Rouhani government put the country on the brink of the Abyss. In the meantime, the election of the 13th government could have been a continuation of the previous government, ie fueling the wage cycle of inflation, or using the positive experiences of other countries according to the household expenditure basket in this sector to cover the gap between spending and general inflation.

* 50% of non-food expenses of urban households are related to housing

According to the latest statistics provided by the Statistics Center in 1399, the housing sector accounts for the largest share of the costs of an urban household and 50% of non-food costs of an urban household in Iran are related to housing costs. This is while in 1398, 48% of the mentioned statistics are related to the costs of this sector.

In the country’s villages, housing is the largest share of housing more than other parts of rural household expenditures, and 32% of the total basket in 1399 is allocated to housing.

* The big step of the main government towards economic prosperity

According to these statistics, relying on the policy of land supply and housing construction in order to make low-income households homeowners can eliminate this cost from their shoulders and reduce the purchasing power gap without entering the ominous cycle of wages and inflation. Let the people and the market be created and let the country return to health from the edge of the minefield laid by the previous government.

In this regard, Muhammad حمیدزاده, Economic expert believes: « With a little simplification, meeting the housing needs of an urban household represents a 50 percent increase in their income, and this can pave the way for economic prosperity without putting pressure on the government budget.»

Under these circumstances, it seems that the thirteenth government, which has come to the fore with the slogan of building 4 million houses in 4 years, intends to repeat the Venezuelan mistakes of the previous government by focusing on the basic supply.Most The needs of the country’s households should cover the gap between purchasing power and inflation and follow the experience of successful countries in this field.

end of Message/