Only under socialism is getting paid a higher wage in worthless money considered a raise. Roberto Alvarez Quiñones in Diario de Cuba
Higher salaries, worthless money?
The controversial Say’s Law, devised by the French economist Jean-Baptiste Say, proposes that supply creates its own demand, but Miguel Díaz-Canel and his Economic Minister, Alejandro Gil, argue that it is demand that creates supply.
Hence, they have decreed a rise in wages and pensions amounting to more than 7 billion pesos annually, which entails flooding the country with a wave of money, which is supposed to substantially boost demand, in order to “increase production”; absurd, but true.
If many economists think that in some respectsSay was wrong, of the two Castroist leaders mentioned, it must be said that they are truly placing the cart before the horse, because another economic law, well proven in practice, demonstrates that wages cannot be increased if there is no increase in labor productivity and in production and services.
It is simple.The increase in the amount of money in circulation raises demand and, if there is no more production, or more imports, prices skyrocket, devour wage increases, and reduce the purchasing power of money.
In Cuba the only fair and reasonable way to increase meager socialist salaries and to get the horse in front of the cart is by liberating the country’s productive forces, but the dictatorship refuses to do so. In addition, in no way can the Government obtain from the State’s productive sector the additional billions of pesos needed to pay for these salary and pension increase, which will spawn a greater budget deficit, and an increase in the national debt.
Normal countries have a monetary policy according to which central banks raise or lower interest rates to contract or increase liquidity; that is, the cashin people’s pockets, access to credit, and the money deposited in banks that their owners can withdraw at any time. They do so that there is a certain balance between supply and demand, and to keep inflation under control. This, in Cuba, is unthinkable, and it is not even known.
Economist Pedro Monreal, a resident on the island, predicts that for the second half of 2019 the salary increase will mean extra demand for food amounting to 2.55 billion pesos (CUP), which will bring about a 50% increase in the sales of food with respect to the same period in 2018. For the salary increase to not generate inflation, Cuba would have to increase its food production by 50%, or import it, but with what currency?
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