Tax, no legislation

No definition better fits what an inflation process means than that of Nobel Prize winner Milton Friedman: “Inflation is a tax without legislation.” In short, the sustained increase in consumer prices is a tax on your salary, which nobody determined, but rather results from a maladjustment in the economy. After almost 20 years and thanks to dollarization, we Ecuadorians have become accustomed to living without the shocks of a sudden and substantial change in almost all the most frequent consumer products. However, today Ecuador is suffering from an inflationary process that indicates that this year the rate will exceed five percent. The most important causes are the pandemic that increased the costs of maritime and air transport and the Russian invasion of Ukraine that triggered fuel prices, including oil, which in turn has an impact on a fuel price that is released in our country, such as Super gasoline and the largest subsidy that the State must pay for fuels that maintain the subsidy, such as diesel (which in one year has risen 92 percent worldwide), Extra gasoline and the gas. In addition, the dollarized economy is also impacted by inflation in the US economy, which in April is projected at 8.3 percent, the highest in 40 years, although it is projected to decline due to the increase in interest rates. All the above factors are external, but in terms of local inflation, we must add the increase of 25 dollars to the minimum wage decreed at the beginning of this year by the government of President Lasso, an increase of 10.1 percent, compared to inflation of 1.94 percent from 2021.

However, the technical explanations in no way satisfy the Ecuadorian. Nor does it mean that, compared to Chile, Peru and Colombia, Ecuador has lower inflation rates in almost all categories or that in social networks the comparisons that are made are not comparable or that those who are in political campaigns distort them even more. . It matters that, when going to the market, prices are higher, especially in foods such as oils and fats (five percent), flour (seven percent), beans (14 percent), to name some basic products in the family basket. Anxiety also, that the reactivation of employment or the creation of new jobs is still a pipe dream. In addition, the tax reform, approved by the Ministry of Law, weighs heavily, which hit the middle classes with higher taxes without these being remunerated in moderately efficient public services. This has influenced the drop in the evaluation of President Lasso.

According to the Secretary of the Public Administration, Iván Correa, this year the fiscal disorder has been put in order, and next year social programs will begin to be implemented to satisfy the most pressing demands. Citizens hope so, because for now there are no certainties in employment, security, health, or being able to purchase basic products at reasonable prices. And those who suffer most from inflation are the poorest sectors and the middle class impoverished by the pandemic. In an emergency chain, combating inflation also becomes a priority.

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Tax, no legislation