PLEASE NOTE:

MyNews24 is a user-generated section of News24.com. The stories here come from users.

 
VANDERM
 
Comments: 4
Article views: 258
 
 
Latest Badges:

 
View all VANDERM's badges.
 

Corporate profits vs stagflation

13 July 2014, 19:00

The recent news that South Africa avoided a technical recession but most probably has gone into stagflation highlights everything that’s wrong with capitalism. Stagflation is low GDP growth coupled with high inflation and becomes impossible to manage if all the mechanisms, such as money supply and interest rates, becomes counter-productive. I might be over simplifying this article but we should always keep an open mind if we faced with big challenges.

I hear everywhere, particularly from the private sector and to a lesser degree economists that market forces should be allowed to run its course. They are of the opinion that government interference must be kept to a minimum and the forces of supply and demand should dictate the market. What they fail to tell us is the exact nature of inflation. Economists call it elasticity. When say the price of bread is increased by R1, how many consumers will stop buying bread. If after such an increase, these companies are still in profitable territory, they will again increase the price and review the consumer response. They will keep doing this for as long as they can. However, we are led to believe that input costs such as the price of petrol or PPI is driving inflation. This certainly fails the test when prices fail to come down after petrol price decreases. It is then revealed as the pursuit of maximum profit at the expense of the poor. The very same corporates that are so concerned with SA’s future.

If expansionary monetary and fiscal policy is adopted it to increase GDP growth it is anticipated that inflation will increase at some point in the future. I am of the opinion that we should not let the private sector ruin our economy in their search for maximum profits. There should be no blanket policy that we are a free market economy subject to market forces. Controls should be in place.

If the money supply is increased, and let’s say all prices are frozen at the levels they were before the increase in money supply, will the companies make more profit? Yes, since more will be sold, but at the same price provided that profit margins remains the same. This will then limit inflation and stimulate growth. The end of stagflation.

The question is what happens if we implement such measures in our economy. Will it have dire consequences because we are already at the mercy of the private sector who wants the profitable status quo to continue worldwide? Every major distributor should be required to justify any price increase and should only be allowed to increase their prices if they can prove this is due to input costs. Price increases should be proportional to input costs in an expansionary environment.  Apparently price ceilings also causes market shortages. This since supply are limited when profit are limited and demand has increased. But why? Profit margins are unchanged. Is this a theoretical argument or is there empirical studies to prove it?

I do not propose that implementing economic policy is easy nor am I claiming to know all the solutions. What I have however seen in every aspect of life is that profits is above all, even our dignity. This is not a fight against capitalism, but against greed at the expense of our future.

Marcus van der Merwe

Cape Town

Disclaimer: All articles and letters published on MyNews24 have been independently written by members of News24's community. The views of users published on News24 are therefore their own and do not necessarily represent the views of News24. News24 editors also reserve the right to edit or delete any and all comments received.
 

Read News24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
4 comments
Add your comment
Comment 0 characters remaining

Read more from our Users

Submitted by
Gabriel Wired
Religion: A gift to the Apex Crea...

Quite simply - for a while now I have been watching with interest Atheists, Agnostics and “Those of Religion” tear into each other showing little respect or sympathy for the other’s standing. Read more...

11 comments 342 views
Submitted by
Laubcher van Zyl
Betty's Bay fires

Fire has been raging in Bettys Bay in the Overstrand for more than 48 hours now Read more...

0 comments 185 views
SONA and its aftermath

I have taken somewhat disengaged view towards politics lately, but the events of last month really changed a lot in South African politics and the minds of the people.  Read more...

3 comments 181 views
Submitted by
Zamokuhle Mnisi
Bomb scare

I work at Clearwater mall we were evacuated at around 9:30 this morning due to a bomb scare apparently the are four bombs hidden inside the center. Read more...

1 comments 102 views
Submitted by
AsGodIsMyWitness
The demise of the Kruger Park

I love our natural environment. I love the bush, the animals, birds, flora we find in our country. Like so many people I visit the Kruger Park regularly and have done so for decades. Read more...

12 comments 2378 views
Submitted by
Sizwe Mda
Our Country is in jeopardy...terr...

South Africa is becoming a place of hide and seek for those who want to unleash terror attacks against innocent victims. Read more...

11 comments 325 views

Jobs in Cape Town [change area]

Property [change area]

Travel - Look, Book, Go!

Kalahari.com - shop online today

40% off top appliances!

Save 40% on the top 10 appliances on kalahari.com. While stocks last. Shop now!

Save 20% on Camping gear!

Buy 4 camping items and save 20%. While stocks last. Shop now!

Fifty Shades of Grey!

This great read will captivate you from cover to cover and leave you itching for more. Get your copy now!

20% off braai items!

Save 20% when you buy 2 braai items. While stocks last. Shop now!

30% off Pampers!

Save 30% when you buy 3 or more selected pampers products. While stocks last. Shop now!

 

services

E-mail Alerts The latest headlines in your inbox

RSS feeds News delivered really simply.

Mobile News24 on your mobile or PDA

E-mail Newsletters You choose what you want

News24 on your iPhone Get News24 headlines on your iPhone.

SMS Alerts Get breaking news stories via SMS.

Blogs Your opinion on you, me and everyone.

Calais Website keywords automated by OpenCalais.

 
Interactive Advertising Bureau
 
© 2015 24.com. All rights reserved.
There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.




Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.