Proof that inflation leads to violence

Written by Ciaran Ryan. Posted in Journalism

inflationNEW research appears to show a direct link between inflation and South Africa’s social violence. In the months before the Marikana massacre, in which more than 30 miners died, there was a spike in nondiscretionary inflation — the inflation the poor experience — from 3% to more than 10%. The same is true of the xenophobic attacks in 2008. Just before these attacks, nondiscretionary inflation surged to 20%. The recent violence in Sasolburg was also preceded by an acceleration in inflation.

Chris Becker, an economist with ETM Analytics, which produced the research, says SA could be headed for a world of trouble based on recent trends in the inflation rate experienced by the poor.

The consumer price index (CPI) averaged 5,6% last year, while average nondiscretionary inflation was 6,1%, spiking to 10,3% in October. The difference between the two inflation rates may appear marginal, but it is the volatility of nondiscretionary inflation that seems to be causing the trouble.

Nondiscretionary inflation hits the poor hardest. It is more volatile than the CPI, which is smoothed by the inclusion of items such as mortgage and technology costs. Taking these discretionary or luxury costs out of the calculation, ETM came up with what it calls nondiscretionary inflation.

 

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Ciaran Ryan

The Writer's Room is a curated by Ciaran Ryan, who has written on South African affairs for Sunday Times, Mail & Guardian, Financial Mail, Finweek, Noseweek, The Daily Telegraph, Forbes, USA Today, Acts Online and Lewrockwell.com, among others. In between he manages a gold mining operation in Ghana, and previously worked in Congo. Most of his time is spent in the lovely city of Joburg.