Page Two

“Latin American officials are now warning that in country after country, falling living standards are breeding a hopelessness that is beginning to translate into ominous political decay.”​—The New York Times, November 29, 1988.

During the 1980’s, millions of people​—who were already desperately poor—​have watched inflation erode their meager earnings even further. For them, it is not merely a question of coping with the cost of living but, rather, a matter of struggling to meet the cost of survival. Have you noticed the rising prices of basic food items in your country? Does it seem as if your grocery bag gets smaller and smaller for the amount of money you spend? Then, like many other people, you know from experience that the cost of living is increasing.

Is there an answer?

Rising Prices​—The Human Cost

By Awake! correspondent in Spain

“We have stopped eating tomatoes altogether because they are so expensive. And as for fruit, I can’t remember the last time I bought some,” sighed a housewife in India.

“We cannot buy shoes or clothes,” laments a Mexican textile worker, trying to support a family of five. “Four years ago, we had less money, but everything was cheaper. Now money is no good for anything.” In his country the buying power of the peso fell 35.4 percent between 1982 and 1986.

Muhammed el-Ghani is a night watchman in Cairo, Egypt, where prices of some necessities doubled in just one 12-month period. “We live from day to day,” he explains, “and there are days when we can’t afford to eat.”

In Brazil a hapless railway-accident victim had to wait 20 years before his compensation claim was decided by the courts. He was finally awarded a monthly compensation equivalent to half the national minimum wage at the time of the accident. Because of inflation, however, this sum probably did not even cover the bus fare when he went to collect it.

Bala from Nigeria, already the father of three, passed out when he heard the news that his wife had just given birth to triplets. Despite his holding down two jobs, the family income was hardly adequate for basic needs, and food prices have continued to rise. He knows that it will be impossible to provide even the basic necessities for his children. He was ready to hand over the babies for adoption.

The details may differ, but the story is the same worldwide. The cost of living is rising relentlessly. For many, bread and milk have become a luxury, and three meals a day a rarity. A report from Nigeria states: “Bread, the hitherto staple food of most Nigerians, is being consumed only by the affluent. Rice is eaten only on festive occasions.”

Some alleviate the problem by working longer hours, but others find work difficult or even impossible to obtain. They are forced to devote each day to the unending and often fruitless task of searching for food. For them, it is not merely a question of coping with the cost of living but, rather, a matter of struggling to meet the cost of survival.

The villain in most cases is inflation, or rising prices. Wages may also go up, but they rarely keep pace with the rise in prices. Particularly hard hit are those on fixed incomes, such as the pensioners or the unemployed. In many of the less developed countries of the world, there has been a marked drop in the standard of living in recent years. On a worldwide scale it can truly be said that although the rich may be getting richer, the poor are definitely getting poorer. Is that the situation in your country?

Unrest Caused by Economic Hardship

Not surprisingly, many raise their voices in protest. For instance, impoverished teachers from the provinces of Chiapas and Oaxaca set up tents in the main square of Mexico City in hopes that their vigil would bring economic justice. “The people are being exploited,” one of them asserts. In other countries riots have broken out when prices have risen sharply.

Crime, described by some as a silent but dangerous revolution of the poor against the rich, is also mushrooming. A police seminar attributed the international wave of delinquency to the desperate economic plight of so many citizens. Economic frustrations sometimes take an ugly turn. In 1987 in two Indian villages over 50 upper-caste people were murdered by hundreds of starving peasants who felt they were being exploited by feudal higher-caste landowners.

Who Is to Blame?

In the 20th century, more wealth has been created than ever before. But paradoxically, as this century draws to a close, increasing millions are bogged down in perpetual poverty. Promises of a better tomorrow, an upturn in the economy, a decent wage for all, are all too often political pipe dreams.

Who or what is to blame? Many blame their governments. The governments for their part may blame the economic policies of other countries. The world economic order has also been strongly criticized. Evidently, the problems are complex and the solutions elusive. In the following article, we will consider just some of the fundamental causes of the cost-of-living crisis and why they are so difficult to remedy.

Why the Cost-of-Living Crisis?

FROM Belgrade to Buenos Aires, from Lagos to Lima, from Manila to Mexico City, and from Washington, D.C., to Wellington, governments struggle against inflation.

Sometimes the governments themselves are in sore financial straits. One report states that “the United States has created more debt in the last five years than in [its] entire prior history.” An African government recently had to withdraw a long-awaited wage increase. It discovered, to its embarrassment, that the Treasury did not have enough money to foot the new wage bill. Similarly, in a large Latin American country, the inflation rate was such that the government feared that by the end of 1988 it would be unable to pay the salaries of over a million civil servants.

Five-year plans, devaluations, wage freezes, price controls, and other economic remedies are heralded. But the problems are complex and the solutions elusive. To illustrate the difficulties, Awake! here outlines just some of the basic causes of the cost-of-living crisis.

The Fragile International Economic System

Global interdependence. As one international financier explained: “The world is one. Our economy is global. . . . The idea that a solution can be unilateral in a global economy is nonsense.” For example, a recession in Western countries is soon transmitted to poorer countries, who find that there is no longer a demand for their products. Likewise, a rise in interest rates in the United States means that Latin American and African nations will have more problems paying the interest charges on their debts. Generally speaking, the poorer the country, the less influence it has on the overall economic climate, but the more vulnerable it is to unfavorable economic winds.

The fluctuations in stock-market prices highlight the shaky nature of the world economy, as well as its interdependence. Investors were so nervous about economic prospects, that dismal U.S. trade figures for August 1987 and possibly an indiscreet remark by a treasury official were said to be enough to trigger a worldwide market crash in October 1987.

The severe debt problem of the United States, together with the inability or unwillingness of the major economic powers to coordinate economic policy, make it unlikely that confidence will be restored promptly. Referring to this situation, economist Stephen Marris warned: “We are in a mess. There is no easy way out.”

Price fluctuations. In recent years there have been dramatic price fluctuations in oil, metals, and other basic commodities. The sudden hike in oil prices in the 1970’s caused widespread inflation and sparked a world economic recession. Third World countries not producing oil were particularly hard hit.

In the 1980’s there has been a slump in the price of most commodities. This has severely hampered the economies of poorer countries whose exports consist mainly of such products. Countries such as Mexico and Nigeria, who rely heavily on oil exports, have also experienced a sharp decline in living standards due to falling oil prices. Such price fluctuations can sink the soundest economic planning.

Shortsighted Government Spending

Military spending. The total global military spending for 1987 is estimated at about a trillion dollars. This is equivalent to about $1.8 million a minute! Not only rich countries squander money on armaments; some of the poorest countries of the world have planned a 10 percent yearly increase in defense spending.

Economist John K. Galbraith, explaining the social and economic effect of Third World military spending, said: “Those who pay for these armaments are the poorest of the poor. They are bought at the expense of non-military investment destined to improve the cost of living, at the expense of bread itself.”

“White-elephant” projects. It is said that a king of Siam used to give a white elephant to courtiers whom he disliked. Since the animal was considered holy, it could not be made to work. Thus its upkeep would bring financial ruin to the unfortunate recipient of the gift. In recent years Western nations have inadvertently played the role of the king of Siam. Their aid programs have financed grandiose technological projects that recipient nations have been unable to keep in repair.

These expensive, impractical “white elephants” litter the economic landscape of poorer countries: luxurious airports from which planes only rarely depart, a state-of-the-art bakery that can’t produce bread for lack of flour, a gigantic cement factory that constantly breaks down for lack of maintenance.

Sometimes governments of the Third World have saddled themselves with enormous debts due to lavish spending on extravagant projects such as hydroelectric schemes, nuclear power plants, or even new capital cities.

Population Growth

In many countries of the world, the rapid population growth contributes to a lower standard of living. Housing, jobs, schools, and even food production just can’t keep pace with the ever-increasing demand. Mexico, for example, because of its burgeoning population, needs to create one million jobs a year just to keep its unemployment rate from rising. In many African countries the rapidly growing population​—made worse by a migration to the cities—​has led to a tripling of food imports and has contributed to the decline in living standards during the last decade. Some despairing fathers, unable to find jobs and provide for their large families, have just deserted them or have even committed suicide.

Inherent Weaknesses in the System

Unpredictable market forces. Economic forecasting is a notoriously inexact science. The problem is that even in advanced economies it is difficult for experts to know exactly what is happening, while in Third World economies​—where specific data is unavailable—​it is practically impossible. And even if economists could agree on the exact nature of the problems, they would doubtless prescribe different solutions, according to their own political or social viewpoints. To complicate matters further, the politicians, who make the final decisions, tend to heed only the economic advice that they find palatable.

Regarding the United States, former U.S. secretary of commerce Peter Peterson explained: “At bottom, our problems are not economic. Rather, we are stymied by our lack of political consensus. We do not even agree on the nature of our economic difficulties.”

Unenlightened selfishness. Each country tends to pursue its own sovereign interests regardless of the effect on others. Economic aid, for example, may be in the form of sophisticated military equipment, sent to a country that cannot even feed all its citizens. Evidently, the donor country’s motives are economic or political rather than humanitarian. Tariff barriers put up by rich industrial countries to protect their own producers hamper the efforts of poorer countries to sell even basic commodities.

Underdeveloped countries criticize international banking institutions for being concerned only about prompt interest repayments. Some projects have to be abandoned for lack of financial backing, simply because they will not produce quick returns for the lender. The high interest rates that these debtor nations now have to pay are mainly due to profligate spending by other nations much wealthier than they are. President Alfonsín of Argentina pointed out that in five years Latin America has sent to the United States and Europe the monetary equivalent of two Marshall Plans.a The region, however, is more deeply in debt than ever.

Corruption and greed. Presidents of some African and Asian countries have been accused of embezzling billions of dollars. Police chiefs and prominent business officials in Latin America have also been implicated in multimillion-dollar frauds. These huge amounts of money are usually siphoned off programs intended to improve the lot of the ordinary people. Endemic corruption at all levels seriously undermines the economies of countless nations, placing an added financial burden on the impoverished majority who have to subsidize it.

Cynical commercial greed also contributes to the cost-of-living crisis. The aggressive marketing techniques of multinational tobacco companies, for example, have succeeded in persuading millions of poverty-stricken people to spend what little cash they have on cigarettes. In some developing lands, health-threatening, high-tar cigarettes are widely distributed, and most customers are unaware of the health hazard. Valuable agricultural land has been turned over to tobacco cultivation due to the lure of vital foreign exchange, which often does not materialize. Meanwhile smoking-related diseases increase at a par with the rising cost of living.

This brief review of the reasons behind the cost-of-living crisis suffices to show the daunting challenge facing governments who strive to better the economic plight of their citizens. President Mitterrand of France, speaking at an economic forum, complained about a “world that constantly moves the carpet under your feet, pulling it out and threatening to trip you up.” Statesmen and economists of the Third World know from bitter experience exactly what he means.

Does that mean that there is no hope for economic recovery? Is the world economy incapable of providing a decent living for all mankind? The following article will answer these questions.

[Footnotes]

[Box on page 8]

The Debt Problem

National Debt

In many lands government expenditure greatly exceeds income. The extensive borrowing that this policy requires leads over the years to the accumulation of an enormous budget deficit, sometimes called the national debt. Repayment of this debt, together with interest, forces the government to keep on borrowing, which pushes up interest rates and fuels inflation. Furthermore, as Time magazine explained, governments are loath to reduce spending because “voters, being human, want more benefits and fewer taxes, and politicians, being politicians, respond to the [voters’ wishes].” Thus, the day of reckoning is postponed, and meanwhile the cost of living goes up.

International Debt

For a variety of reasons, some countries import more goods and services than they export, resulting in a balance of trade deficit. The shortfall has to be paid for in currency that is acceptable to other nations, usually in dollars or other strong currencies. This money must be either drawn from the reserves or borrowed from other countries. If the country’s reserves fall dangerously low and loans are not forthcoming, import restrictions may have to be introduced or the currency devalued. Both these measures cause a sharp rise in the price of imported goods, many of which may well be necessities for industry and consumer alike.

Third World countries particularly have balance of trade problems because, in almost every case, the value of the goods they export has dropped dramatically. For example, in 1960 a ton of coffee could buy 37 tons of fertilizer, whereas in 1982 it could buy only 16 tons. Similar figures could be given for cocoa, tea, cotton, copper, tin, and other primary products that are the main exports of less developed countries. Largely as a result of these adverse terms of trade, over which they have little control, by 1987 developing countries owed a staggering $1,000 billion. This millstone round their necks gravely hinders economic recovery and even threatens the stability of some governments.

The New York Times recently commented: “The single issue that unites Latin America is debt . . . This problem is held responsible by governments for their crumbling popularity and is seen as the key political variable affecting their immediate future.”

[Map on page 7]

(For fully formatted text, see publication)

World Inflation Rates 1980-85

(Based on El Mundo en Cifras, published by The Economist)

■ 0 to 15%

■ 15 to 30%

■ 30 to 100%

■ over 100%

■ figures not available

What Hope for Economic Recovery?

During the reign of Louis XVI of France, his queen, Marie Antoinette, reportedly once asked the royal finance minister: “What will you do about the deficit, Monsieur le Ministre?” His reply: “Nothing, Madame. It is too serious.”

ALTHOUGH times have changed, this particular philosophy still appears to be in vogue. Statesmen and economists alike lament the huge international debt, the grave economic imbalance between rich and poor countries, and the abject poverty in so many countries. But little if anything is done​—the problems are too serious. Does this make economic sense?

The word “economics” comes from the Greek word oikonomos, which means a steward or house manager. World economics is basically the study of how the world’s “house” is managed. How is it being managed?

To illustrate, let us imagine the earth as a neighborhood, and the individual nations as neighbors. One of the wealthiest neighbors is a compulsive spender and owes money to nearly everyone, but as he is their best client, his creditors are reluctant to press for repayment. Some of the poorer families are so deeply in debt that they have to borrow money just to pay the high interest rates on their loans. Meanwhile, the father of the most destitute family in the area has just treated himself and his friends to a lavish celebration meal, although several of his children are starving.

The richer families eat very well and end up throwing a lot of food in the garbage can. They spend more on their pets than the poorer families can afford to spend on their children. From time to time they have neighborhood meetings to talk about all the problems in the area, but nothing seems to get done. Tension is growing between the rich families and the poor. Obviously, something is fundamentally wrong with the way this neighborhood is managed.

Someone to Manage the Global Economy

Good management cannot be divorced from morality. As we have seen, selfishness and greed on a national, corporate, and individual level contribute significantly to the cost-of-living crisis, especially in poorer countries. Economic injustice is really just one reflection of an unjust system of things.

Admittedly, there are no easy solutions. The problems are too immense to be tackled by one country, and no international body exists with the necessary power to deal with them. In addition, world leaders are criticized for lacking the political will to come to grips with them.

Nevertheless, history describes one ruler who was especially concerned about the plight of the economically downtrodden. He enacted specific laws to protect them and provide for them.

This ruler was the one who liberated the Israelites from Egypt some 3,500 years ago and who fed them miraculously with manna during their 40-year trek through the wilderness. This invisible king made sure that everyone had enough.​—Exodus 16:18; compare 2 Corinthians 8:15.

Later, when the Israelites arrived in the Promised Land, God-given laws protected the needy. Interest-free loans were provided to those who had fallen on hard times. The poor could glean the fields, the orchards, and the vineyards. And the owners had to leave something for the gleaners. Furthermore, God commanded the wealthier Israelites to ‘open up their hand generously to the afflicted in the land.’​—Deuteronomy 15:7-11.

God managed the household of Israel in such a way that all the nation could prosper, provided they obeyed his instructions. His representatives, such as King Solomon, were required to imitate God’s example. Regarding Solomon, the psalmist writes: “He will defend the poorest, he will save the children of those in need . . . He will free the poor man who calls to him, and those who need help, he will have pity on the poor and feeble, . . . their lives will be precious in his sight.”​—Psalm 72:4, 12-14, The Jerusalem Bible.

Nevertheless, God later predicted in his Word that there would arise an acute cost-of-living crisis. Describing the harsh economic realities that would eventually plague mankind, the Bible foretold: “A whole day’s wage for a loaf of bread.” (Revelation 6:6, Weymouth, Fifth Edition) Today, this is precisely the situation for many of the world’s poor. A whole day’s income does not even cover the cost of a single meal.

A Real Economic Recovery in Sight

The only solution to this deplorable state of affairs was highlighted by Nobel prize winner Willy Brandt. He said: “There must be a growing realization that poor and rich countries . . . are tied together by their common interest in survival, and that solutions will only be achieved by adopting a farsighted and worldwide approach.”

That is precisely what God himself has in mind, a farsighted and worldwide approach. Unlike human rulers, God has both the will and the way to bring about a worldwide economic recovery.

In that same prophecy about economic hardship, he referred to the ruler that he has appointed, a ruler capable of remedying the situation. He is described as being seated upon a “white” horse and also as one who would ‘go forth conquering.’ This is none other than Jesus Christ, who will shortly ‘conquer’ in order to extend God’s Kingdom rule as the sole government over mankind. This Kingdom, in the hands of Jesus Christ, is God’s way of solving, among other things, the cost-of-living crisis.​—Revelation 6:2; compare Daniel 2:44.

Under this Kingdom rule, referred to in Isaiah’s prophecy as “new heavens,” God promises: “They shall not toil in vain or raise children for misfortune.” “My servants shall eat . . . ; my servants shall drink . . . ; my servants shall rejoice.”​—Isaiah 65:13, 14, 17, 23, The New English Bible.

Millions who today toil in vain can take heart from these words. In God’s new world, their children will not be deprived of basic needs due to the misfortune of economic hardship. Concern about the cost of living will be replaced by delight in the joy of living.