A Truss-worthy Solution ?

 A Truss-worthy Solution ?

https://lnkd.in/dAGzf__r

For suggesting this solution ( to beat Inflation and turn a vicious circle into a virtuous circle ) for turning British Economy into a Low Cost Economy, UK PM Truss might get nominated for Ig-Nobel prize

VICIOUS circle :

# DA ( Dearness Allowance ) chasing the CPI (
  Consumer Price Index )
# Which, in turn increases Manpower Cost
# Which, in turn increases Product / Services Cost
# Which, in turn increases CPI

VIRTUOUS circle :

Reduce " Cost of Inflation " by limiting " Annual Wages-Salaries
increases to 75 % of  the preceding year's GDP number

Every time he got Diwali bonus or annual salary increment, the prices in shops invariably went up !


It was , as if the Shopkeepers ( and the Manufacturers too ) , were just waiting for these announcements 


Of course , when product prices go up , the CPI goes up 


In turn , the CPI linked wages / salaries go up , raising the cost of manufacture


It is a vicious circle of prices chasing the salaries / wages !

If , somehow , those salaries / wages remained " low " at each stage of processing / manufacturing , then the final product would come out " Cheap " 


And lesser product cost would lead to a lower selling price and consequently , a smaller increase in CPI 


Smaller increase ( or no increase ? ) in CPI , would mean smaller ( or no ) rise in CPI-linked wages / salaries

No problem ! 
 
People would need to earn lesser wages / salaries , to buy that product !


There will be less demand to raise those salaries !


In 1986 , inflation climbed to 9.2 % in Australia , forcing PM , Bob Hawke to tell his countrymen :

" We have , for the time being , to accept reduced Standard of Living , and
  permanently , increased Standard of Effort "
   
In 1986 , PM Lee of Singapore was facing 0 % growth in GDP !

He ordered one year WAGE FREEZE for all employees ( government and as private sector )

He could not afford Singapore become " High Cost Economy "