Why is everything so G*ddamn expensive

By: Joy R. Tanoni

Edited by: Fiorina Siamir

Inflation has been set to deflate in 2024, but the number on every price tag continuously reached the highest and highest. With inflation taking its break, the blame is lost. So, what’s the cause of all these marked-up prices?

What are fiscal policies, and what do they have to do with rising prices?

Fiscal policies refer to using the government’s money and tax policies to influence economic conditions within the country. Many countries implemented fiscal policies during the pandemic, as the demand for goods and services excluding basic needs experienced high deficiency. Two fiscal policies are implemented depending on the situation: expansionary or contractionary.

Expansionary fiscal policies are used during economic downturns (eg. pandemics) or moments of global uncertainty (eg. wars/conflicts). Governments in these moments tend to combine tax cuts and higher spending within their countries. The logic behind expansionary is simply the idea that people paying lower taxes leads to people having more income, which will then increase demands, fueling companies/corporations to hire more and leading to less unemployment. Some governments have also started public service projects to provide more job opportunities for the population.

The second type of fiscal policy, which is rarely used and highly not favored, is contractionary fiscal policy. Due to mounting inflation or expansionary fiscal policy symptoms, contractionary policy may be essential to repair the economy. The government will increase taxes, reduce public spending, and cut public sector pay or jobs. This policy is rarely used, as the expansionary fiscal policy is quite popular, especially during the pandemic.

So, how do fiscal policies make everything so expensive?

The fiscal policy withdrawal. For about 2 years, fiscal policies in the form of tax cuts and support from the government to citizens were strong in many countries (G20 countries especially). When the pandemic calmed down, many governments started to withdraw these huge fiscal policies. Just like letting go of an addiction, withdrawal is never easy, in this case, countries are experiencing a vast withdrawal where taxes are at a regular rate, some higher, like in Singapore (1% tax increase in 2024).

With withdrawal being implemented, corporations and companies must be able to cover the costs of this withdrawal, resulting in our daily needs and a rise in prices. While not everyone feels the price rising, many families, especially from lower-income backgrounds, report the challenge of being able to afford food daily. Many of these families use most of their money for food on the table. With prices of ingredients and meals rising, a higher portion of their income goes to food, leaving almost no room for other costs such as rent, maintenance, kids, and other necessities.

Wages at an all-time high

Things are getting more and more expensive with every day that passes: a latte you used to get for $4 is now $12, a small meal you got for $15 is now $22, and so on. While minimum wages have increased over the years due to high inflation rates, they are still getting higher after the pandemic. Both minimum wages and the price of goods and services rise together due to corporate and government reasons. Before the withdrawal of fiscal companies, governments noticed that unemployment rates were still very high, and for governments to govern “correctly”, they must find ways to fix issues like these.

The solution implemented by many countries is higher wages. Governments envision that higher wages would result in more people being attracted to work jobs and have employees within each company to be retained.

Now, prices rising, like the $12 latte mentioned before, is the cost of compensation of time and money from recruiting and training workers and the tax increase from the withdrawal of fiscal policies. The government and corporations both have to find a way to generate a better system, the government needs to find solutions to help the economy, while corporations have to follow the solutions and still make enough profit. Consumers will often notice both of them doing their jobs, consumers will have to put up with both the price increase and higher tax rates.

Geopolitical Events Affecting The Global Economy

Geopolitical events have had a bad year so far, with a war in Ukraine, a conflict between Israel and Hamas in the Middle East, Elections in 64 countries, and other events that have and will significantly affect the global economy.

Oil prices have historically surged many times during and after conflicts in major oil-producing nations. Not all the time, the global economy and financial markets are affected by conflicts unless other regions or countries get involved or if the conflicts seem to look unending, which raises people’s uncertainty. As of now, though, the escalation of the Israel and Hamas conflict, which has other countries involved (through support) has led countries like the UK and US to relocate economic activity and newly sourcing and manufacturing products from different countries. When there’s a change in source and manufacturing, prices will certainly not be the same, resulting in unpredictable oil and gas prices.

Human Greed

As mentioned above, there are many explanations for why prices have risen so much, but perhaps one huge cause is human greed. A Small business owner, Nick Rosolino, expressed his frustration to CNN after hearing big corporations taking in fat profits while he struggles to break even on cost and price to satisfy customers. CNN has also reported that in 2023, Profit margins for many companies were higher than ever, even before the pandemic.

Companies control their costs and increase profit margins by reducing the sizes of their products or increasing prices; either way, consumers will end up spending a lot more than they used to, and customers put up with this because “corporations have the power to raise prices without losing customers because they face so little competition,” according to The Guardian.

These events can directly and indirectly affect the global economy through financial, trade, and commodity price channels. In the trading aspect, restrictions have been increased due to tensions between countries disrupting the trade flows and supply chains of countries that are not even involved. Restrictions of trading result in markups and shortages, meaning high prices and high demand. The most affected are vital resources such as gas and oil. Over the past few years, gas rates have skipped many steps up, and just recently, many Asian countries have reported a price increase for oil. In some countries, like Indonesia, oil prices doubled, with each person having a limit of buying 1 or 2 bottles/bags of oil.

Clear evidence of this is in grocery stores (particularly in the USA). Grocery prices have increased so much because only four companies control 85% of meat and poultry processing. Other than that, one corporation sets the cost of the seed corn in the United States, and two giant firms control consumer staples.

When there is little to no competition, and you are the biggest fish in the sea, it’s easy to control the price or size you’re selling a product for, as consumers will spend as much as they have to as some products are a necessity. However, a corporation’s selfishness leads to many lives getting hurt, especially those who desperately need necessities to survive another day, week, or month. While many people have reported and addressed their concerns, the voices are not enough to be heard or to stop corporations from continuously fattening their profits more and more.

What can we do?

As it’s been years since the pandemic, we simply can’t expect prices to decline significantly. There could be possibilities of prices decreasing little by little if conflicts are resolved, or fiscal policy withdrawal would become normalized resulting in improving economies, but these are things we cannot be sure of. The best advice said by many reporters, economic experts, and others is to save up and be smart with spending money, like using special cards or rewards when buying groceries, filling up your car with gas and even buying meals or making a lot more money (which will come by default due to wage increases) to be able to afford the new prices of things. Still, since the economy is said to get better, things we consider expensive now will slowly become normal to us as the economy is improving for many countries due to the cooldown of inflation.