Ever hear of the Big Mac Index? It’s a simplistic comparison to see how much purchasing power a certain country’s currency has over another. It was created by the Economist in the 1980s.
Bear in mind that it is quite simplistic, but that is exactly the point as to why it is so important.
But I have to make this clear because there are those of you out there who see yourselves as ‘purists’ and ‘intellectuals’ who are going to attack this as being inaccurate.
Go to a McDonald’s anywhere in Malaysia and the price of a Big Mac would be the same (except if you go to an airport or Genting Highlands!) which is around RM12. Now compare that with the price of a Big Mac in the United States which is US$3.99 (around RM17). This would mean that the ringgit is 29 percent undervalued relative to the US dollar.
What this means is that we Malaysians who earn in ringgit will be able to buy fewer things in the United States or any other country because our currency is undervalued.
So, we will feel the pinch if we are in the US or anywhere else because the purchasing power of our money after we exchange it will not be very high.
Goods price hikes
Now prices of vegetables and other essential goods have spiked up tremendously in the past few days as reported in the media. According to the Consumer Association of Penang (CAP), the price of some vegetables has gone up by even 200 percent.
According to CAP president Mohideen Abdul Kader, cauliflower has increased from RM7 to RM16, broccoli from RM8 to RM20, sawi from RM5 to RM8 and choy sum from RM3 to RM9.
Apparently, Malaysia does not produce enough vegetables locally to support the population’s demand. So, the country imports almost two-thirds of the vegetables it consumes.
With the economy in Malaysia getting from bad to worse, no thanks to the Covid-19 pandemic, and some might even claim through an underperforming government that is mismanaging the pandemic and the economy, Malaysians are suffering.
The authorities have given all sorts of explanations as to why the price is getting so high. Those that have been reported in the media include the weather situation causing flooding and landslides which is hampering the delivery services of vegetables, the hike in the price of fertilisers and pesticides (of which many are imported) and also the possibility that middlemen in the supply chain are increasing the prices.
These explanations by the authorities could be true or could be assumptions. But, similarly, with the Big Mac Index, the total accuracy of the explanation is beside the point.
The actual point is that prices of essential food items have increased tremendously and the people who are making the same amount of money or even worse, are now making less money or no money at all because of the pandemic are now facing a crisis.
It’s good if the people can understand why the price hikes are happening. It’s good if the people can understand economics and see the reasoning behind the worsening economy.
But the point still is that the people are suffering, and they can’t do anything about it. And when they can’t do anything about it, they expect the government who is in charge of their welfare to do something.
The dissatisfaction of a people against their government can be caused by many things. It could be corruption, it could be nonsensical statements made in Parliament, it could be just plain inefficiency in governing.
But nothing makes people more dissatisfied than when the situation in a country starts to affect their ability to put food on the table.
As far as the common folk is concerned, something has to be done to curb the price hikes. Something must be done so that food becomes affordable and we won’t find it a burden to feed our families. It is not enough to say that the price hike is temporary.
Temporary as it is, it is still a burden currently. It is not enough to say that they are monitoring the situation. Simply monitoring does not bring the prices down.
The government needs to take the right action to ensure that food security in Malaysia is stable and that everyone can feed their families. This is the most basic thing that needs to be provided by a government.
Nothing else can be achieved if the people are worried about how they are going to put food on the table without having to resort to desperation.
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