Inflation, Households and Wages
Some of us need to be the wicker man, I guess. In my case, mine is to rise above the banal and bring about -or at least, give the impression to do so- some rigorous pieces on subjects I can be of contribution. Does it sound bombastic a bit? yes I does.
Inflation. A friend joked about me being a left-wing monetarist, it might have to do with the cheer contradiction this description embodies. and I could as well be so; Save for income inequality and unemployment, inflation is one essential variable I believe to be harmful and of no great use -under certain set of conditions- to an economy. I cannot emphasise enough the need to keep at low level.
Morocco has got over inflationist policies -through painful and yet to be proven necessary- process and the annual inflation target of the BAM is getting more and more steady. I referred to the problem in controlling core inflation and losing focus on the volatile one in a previous post, now I shall devote this piece to the broad parameters that influence it in Morocco; My primary findings support the fact that the level of wages in Morocco, especially the minimum wage, bears little influence on the present inflation –contrary to what people from the employers’ union CGEM claim. The main course remains our -shall we say structural, inflation.
Over the last quarter, the Central Bank pointed out the downward trend inflation is following during Q1 2010: “Les données du mois d’août 2010 relatives à l’indice des prix à la consommation (IPC) confirment la faiblesse des tensions inflationnistes […]. En glissement mensuel, l’IPC a enregistré une hausse de 0,9% après les baisses consécutives de -1% et -0,6% observées durant les deux derniers mois.” It is good news, although it can get confusing when one gets into details: “En glissement annuel, l’inflation a connu un ralentissement, revenant de 1,1% en juillet à 0,6% en août, en raison du niveau relativement élevé des prix à la consommation en août 2009, lui même imputable à l’envolée des prix des produits alimentaires volatils. Abstraction faite des produits alimentaires exclus et réglementés, l’inflation sous-jacente s’est établie à 0,4%, niveau quasi-inchangé depuis mai dernier.” Things are not as straightforward as they seem to be. To be frank, this deflationist trend, while it can be of unarguable benefits to the consumer welfare as well as to the whole economy, shades great concerns about Morocco’s future economic stability. I’ll elaborate on that later on.
First, a formal definition of inflation. Olivier Blanchard in his much interesting textbook ‘Macroeconomics‘ (not to be confused with the much challenging Lecture Notes in Macroeconomics co-written with Stanley Fisher) described inflation as: “the sustained rise in the general level of prices in the economy- called the price level. The inflation rate is [therefore] the rate at which the price level increases”. the standard index used for inflation computation is the Consumer Price Index. the Haut Commissariat au Plan (HCP) produces a very comprehensive documentation on how and why this index is used. It is essential to understand how the CPI is computed, because it is the important step to understand how inflation behaves, especially in Morocco, and why core vs volatile inflation differences are so important. Also, I wanted to discuss some interesting paper I read on unconventional monetarist policies in times of recession or contraction. The St-Louis Federal reserve produced an interesting research on the matter. On second thoughts, let’s leave it till next post.

Inflation Breakdown per group of goods: consumption goods like food are experiencing a higher than average inflation compared to the rest of index components
According to the HCP, the Consumer Price Index: “L’indice des prix à la consommation (Base 100 : 2006) mesure le niveau et l’évolution des prix de détail […] Le panier de l’indice contient 478 articles et 1067 variétés de produits représentant la majorité des articles consommés par la population urbaine. Ces articles sont classés en 12 divisions et 41 groupes.
Les pondérations de l’année de base ont été calculées à partir des données provenant de l’enquête de consommation de 2000–2001 et actualisées sur la base des résultats de l’enquête sur le niveau de vie réalisée en 2006–2007. Elles représentent la structure des dépenses de consommation des ménages urbains. Les prix sont relevés à l’aide d’une enquête permanente dans 17 des principales villes représentant les 16 régions du Royaume […] La formule de calcul de l’indice est celle de « Laspeyres en chaîne ». Cette formule offre la possibilité d’actualiser en continu le panier et les coefficients de pondération. Elle permet aussi de résoudre les problèmes induits par les produits saisonniers. Signalons que les indices publiés sont des indices bruts, c’est–à–dire non corrigés des variations saisonnières.”
There is nothing to be added- in facts I tried to get the a shorter definition, but that one looks perfect and just fine. It is tedious indeed, but I cannot stress enough how important it is to understand how the index is computed in order to grasp the full implications of any changes in inflation rate over the last quarter as well as the last years; The HCP uploaded an interesting presentation some while ago about how the new index is computed. I went a bit ahead of myself: the HCP produced a new index in 2006 as base year. the index under-weights some specific goods because the 2000-2001 survey proved Moroccan household spend less, compared to the previous census’ results on these same goods. Moroccan households spend less in food and tobacco, clothing, small equipment household goods and miscellaneous services.They do however spend more on housing, transport, communications, education and to a smaller extent, health expenditure. We will notice that this relatively sizeable shift in consumption pattern can explain, up to a point, part of the low inflation the Moroccan economy generates. Because patterns of consumption changed, there is less strain on specifically volatile price goods and as such, less pressure on the core inflation and the global inflation, though in different respective magnitudes.

Price elasticity of foods and related goods is still very sensitive in Morocco. the negative sign on the B column shows it to be a vital good. Yet inflation breakdown points out to food goods as the most volatile component
There’s also a price effect that is difficult to capture here: although Moroccan household devote a little above 41% of their income to food and related goods in 2007 (compared to about 45% in 1998), there is little said on the extent of substitution effects, on prices or on quantities. In facts, an HCP study shows than prices are at an actual higher level when base year is set to 1989 (Prices have double since -September 2009). Was 1989 a particularly inflationist year? not much, about 3% -much less compared to the average of the past 5 years-. Did GDP increase by that much on the 1989-2009 period? certainly not (its grew an average of 3% in real terms, that is a total increase of 84%, comparatively lower to the overall inflation of 102% on the same period of time), effectively meaning that the real wages of households -relative to food and food-related goods- have been worse-off over the period. I am a bit drifting from the subject here, though not entirely, as we do now understand why and how inflation is so low in Morocco: the base year has been recomputed to 2006 with a lower weight base for the highly volatile and highly inflation-sensitive food category. But then again the central bank focuses on core inflation, which is not as volatile as overall inflation, but still is over-priced compared to the previous index computation. Why would the HCP go through these changes? partly because household behaviour changed. consumption shifts gradually from foods and peripherals to other. The results of it were shown in a study that proved price elasticity changed overtime in Moroccan households, but certainly not enough to aver that Moroccan standards of livings have improved. Or rather, that the improvement is following a steady way. It is not, as it is notoriously known that vital consumption goods’ prices are the most volatile components of the general consumption price index, and even though the index has been rebalanced in 2006-2007, the effective inflation since the late 80’s is still high. This state of high if not volatile inflation does not do great good for the Moroccan consumer -which happens to be the average Moroccan household-. And one should credit the central banks efforts to muscle out the inflation. But this is not enough. Inflation in financial and monetary spheres is one thing, inflation in the grocery market is another. All in all, Morocco is not a bit facing deflation, nor is it getting near zero inflation; quite simply, it experiences a stabilization in its price level. stabilization means inflation grows at a lower rate compared to the 80’s and 90’s, but still is quite high and, more disturbing, quite volatile.
What about wage-driven inflation? CGEM bosses argued some while ago about the need for a different way for computing the minimal wage. The idea is sound indeed, as the setting is entirely discretionary -compared to how an economy is doing -, the proposed policy is poisonous: in 2005, the textile sector pushed for a regional SMIG (minimum wage) in order to bolster their competitiveness, and some employers would like that to be extended to a sector minimum wage. The latter is economically sound -labour marginal productivity differs from one business to the other- but it does not take into account the overall welfare, which is worth some distortions in wage settings. That is of course another subject I hope I will deal with some other time. The idea behind the quiet clamour as it were of employers for minimum wage reform is that it hurts competitiveness -and, quite indirectly, that it boosts inflation a bit. Something we know not to be true. Indeed, the 2010 BAM report displayed a nice chart that does contradict the previous statement:

Real Minimum Wage increases by Lump intervals, but gradually decreases to its original level if not below
Under the initial predictions set, real minimum wage should be increasing (as indeed it is expected to pay workers a wage above the marginal productivity of labour), while the graph shows a remarkable quasi-linearity compared to the lump-like nominal wage. If anything, the real wage is not a cause of inflation, and its downward trend is definitely an effect of inflation. One has to point out the increasing gap between real and nominal wage, due to the inflation effect. The immediate effect of inflation on real wage is even more important when one takes into account the fact it kept a quasi-linear profile over the years.
His Majesty’s Nihilist Blog Government
A quick and dirty post. Nothing serious, just a little joke that got out of hands (mine, to be precise) Notice: this is a purely fictional post. the objective is to push around a witty banter with the nihilist lot of the Blogoma.
“Late this morning, His Majesty the King Mohamed VI has asked M Org, Larbi, to form in His name a nihilist government and subsequently lead the newly elected parliament following the constitutional reform. The government has the crucial task of making sure the democratic process is genuinely carried out and ensure every Moroccan citizen enjoy their rights responsibly, the Larbi Government has the equally important objective to put together policies that ensure Morocco to be a genuine constitutional democratic parliamentary monarchy. The designate Prime Minister presented the Head of State with the following list, and it has been accepted. These are the members of the inner cabinet, other junior postings are to be published later in the week.
Prime Minister:
M. Org, Larbi, as a veteran blogger, was naturally offered the much prized Prime Ministerial office; His leadership, self-assurance in times of crisis as well as his coolness and constant nihilist stand qualify him to lead the government team into sucess. He will however have a hard time in coordinating the departments, as his colleagues have their own policies, and make sure in the process their policies are well carried out despite joint opposition from the grimaseekers national front and the reactionaries too.
Finance Minister:
Anas Alaoui was in pole position for a senior cabinet postings, and is effectively the deputy prime minister. He succeed in securing the Finance portfolio, a department that fits with his good record in economic policies. Because of the delicate balance in parliament, difficulties will arise when he will present and vote the Budget, where the opposition will not allow his policies to go through.
Interior and Local Governement Minister:
Cercle des Jeunes Débiles Marocains. While many qualified Abou Lahab as upstart, his efforts in order to get a senior posting were rewarded, by getting the high-profile interior department, thanks to his brilliant Prison Offshore policy, as well as his deep knowledge of Moroccan state of mind. all of which are going to be come in handy later on. However, he will need to deal with the recent death of a Moroccan citizen in a police station, and in the process, re-brand the Police’s image among Moroccan citizens. (they also have the task to launch a website and submit a decent logo for the department)
Religious Affairs and Habous Minister: The Moroccan Girl. The posting came as surprise as to allocate a female minister to a very special department, but she can handle her portfolio quite well. She might however need to take on the reactionary Ulemas that control effectively her department.
Justice Minister: Ibnkafka
An obvious choice and not subject to debate. The most respected and rigourous Moroccan jurist on probation will face the garguantuan task to make sure the judiciary is effectively independent and fair.
Government Secretary: Shiftybox
She will make sure everyone toes the line; Her heydays of feminine and individual militancy will be helpful for her to make sure the governement sticks to the policies they were elected upon.
Youth and Sports Minister: Le Mythe
Back from the wilderness, Le Mythe has been given the junior portfolio of Youth and Sports thanks to his involvement in these activities, but he can pull off a good result when he puts his mind to it
Culture and Arts Minister: Agharass
A gifted artist, he was given a portfolio he will excel in. He has the important task of changing the whole cultural paradigm and push for a larger and more diverse Moroccan culture. He will also make sure that Art is accessible to everyone, according to the government policy
Communications and New Technologies Minister: Hisham Almiraat
There is still considerable doubt about him cumulating Health portfolio too. His constant stand of Bloggers’ liberty of speech, as well as his considerable knowledge in Web 2.0 made him the ideal man for the job.
Education, Research and High Education: B. Sahib, PhD
The portfolio was originally offered to Lbadikho, the most Left-wing member of the establishment and a scientific of high standards, but he eventually turned it down on the ground he could not conciliate his research and government job. The department was forthwith given to B.S. PhD, in a recognition for his unique investigation methods and his quality papers. He is expected to follow closely the government policy in renovating scientific research in Morocco and give it a boost in international standards.
Foreign Affairs and International Cooperation: Reda.
His career as a diplomat outside Morocco and in countries that are not part of the ‘classic’ Moroccan network are going to be very valuable in the government’s foreign policy
Energy and Mining Minister: Kingstoune
As a wealthy tycoon, Kingstoune is likely to put to good use his considerable network and contacts for Morocco in order to design the optimal energy policy for the century.
Health Minister: Dr H. Makaynach
Because M. Almiraat has been given the Communications portfolio, Dr Makaynach volunteered for the delicate task of reforming the national health service, against the trade-unions and the private hospitals lobby. A difficult task that he is willing to take on.
Transports Minister: Spyjones
Although he has little experience and is the younger member of the cabinet, his outstanding knowledge will more than make up for it and help bring about a solution to the problem of high death tolls in Moroccan highways.
Agriculture Minister: Fhamator
Another surprise, as Fhamator was supposed to get a more important portfolio. But because he withdrew from front-line nihilism for a long time, he was not the first choice for the Prime Minister, although his deep knowledge of Moroccan society will be put to good use in reforming the present plethoric real estate jurisdiction
Families and Solidarity Minister: Moom Light
Her close involvement with European models of society and individual liberties will help her in making real the government’s commitment to bring about civil partnership, de-penalisation of homosexuality and pre-marital sex. She and the Cabinet secretary (Mrs Shiftybox) will make sure the government sticks to the agenda on civil and individual liberties.
Labour and Employement Minister: Mounir Bensalah
Mr Bensalah, a veteran human-rights activist with high-level connection trade unions, will bring his considerable knowledge and personality in making sure all social partners agree to government policies.
The government has been therefore been formed, and was given a positive vote of confidence from Parliament subsequently. The author wants to thank Agharass for his idea (which was merely put into shape). The author is expecting the Prime Minister and the King’s consent to present him with the Governorship of Bank Al Maghrib. The Author also apologizes he favoured bloggers at the expenses of others but that was a bit of a spur-of-the-moment kind of idea, so please, don’t look hurt 🙂
The Side Show of A Side Show
Three main courses for current Moroccan news: Ould Salma, reportedly released from his Polisario jail, Nichane newspaper that went under and finally Fodail Aberkane, an individual killed in a Police station. Mainstream and Blogoma are all over it, so I thought I could add my voice to the herd too. No harm done.
First, Mustapha Salma Ould Sidi Mouloud. It is great to get all misty eyes and all fired up over his misfortunes, and in a way, it would be fair game because last year at the same time, Morocco was down the international gutter because of its behaviour towards pro-independence Sahrawi activist Aminatou Haidar. The tide has since then changed slightly to Morocco’s favour, but overall it does not further our claims, nor does it bring about a final settlement to the present unfortunate situation. I don’t know about my fellow bloggers, but when I watch Moroccan television, or read some of the MAP news agency about the “القضية الوطنية”, the National Issue n°1 as it were, I have the uncomfortable feeling the propaganda is targeted towards the domestic audience.
And what bombastic propaganda that was! Following our forensic experts like M. Nini, we are about to go to war with Algeria (or even Spain) and within a week our soldiers would be sipping tea at Tindouf. All of that while the truth is carefully toned down (there was little publicity about the negotiation rounds that took February 2010), Moroccan officials are in direct negotiations with the Polisario, and matters that occasionally arise are used by each side to put pressure on the other and get the maximum concession out of it.
There is nothing in it for the interest of the common Moroccan or the Sahrawi in Tindouf. As for Ould Salma, he gambled on international support, whether he lost or won is still a matter of debate. Bottom line is, let’s not get too excited and heated up for this.

Ould Salma, former Polisario top raking Police officer, jailed after expressing favourable views on Morocco's autonomy plan
This is merely international politics, a sideshow to cover up for politics that matters. Another sideshow is Nichane newspaper that (finally) shuts down (and up in the process). It is always sad to witness another newspaper shutting down in Morocco; This particular case however is not the result of direct oppression, and one can certainly assert that freedom of speech does not shrink further because of that.
A business has been closed down, but the journalists can still write articles. Nichane, just like its French-speaking sister newspaper TelQuel, and the late Le Journal are not what one can describe as all-out opposition newspapers.
Their founders (Ahmed Réda Benchemsi and Aboubakr Jamaï for Le Journal) are not firebrand dissidents. Both come from quite wealthy backgrounds (Ulad Jamaï are a wealthy family that long served at Imperial court and Benchemsi is related to a former Governor), and if their newspapers close down, they are not going to starve or go on the dole.
In fact, the terms of debate are wrongly defined: the central issue here is not the gagging of freedom of press, it is merely the closing down of a business.
Both Le Journal and Nichane were compelled to close down because of the direct cause of financial difficulties: the first had unpaid social securities contributions, and the second for the lack of advertisement support. Both closed down because they were short of money.

One can cast doubts on whether both newspapers were ill-managed but the fact remains that both newspapers were first and foremost businesses that were profitable at a time, but eventually reached an unbearable level of losses and had to withdraw. As journalists, their founders could always open up a collective blog, or set up another newspaper, their freedom of speech is not endangered.
Their freedom was endangered when they published dissident articles, but not this time with Nichane, nor with Le Journal in February 2010.One can reasonably argue that this seems to be the new strategy censors are pursuing to gag dissidents, and they deserve solidarity but only up to a point.
Journalists in Morocco put themselves in a bit of a spot: right from the start -say the early 90’s- independent journalists hammered a dangerous message on their readers; politicians are all alike, corrupt, opportunists and weak. The message was so well conveyed -and confirmed by unfortunate examples– that in a way, journalists became politicians themselves. No one can deny that Rachid Nini, Ahmed Reda Benchemsi or Jamaï senior and many others do not have their own respective agenda, whether as a reactionary, an anti-islamist or a constitutional reformer
Rachid Nini: Die Nachtrichten Führer
. Independent journalists are the new politicians in Morocco. They do however, fit admirably the cruel yet strikingly in Baldwin’s apophthegm: “Power without responsibility, the prerogative of Harlots through out the ages”.
Power because they do have considerable amount of influence (Nini as a Populist, ARB and Jamai as intellengtsia favourite writers ) but they are answerable to nobody. The other behemoth player is the Makhzen, who occasionally play them off each others, or crush them whenever it is necessary to remind them, and the public that they set up the rules and there are things not to be trifled with.
It is all good to worry about freedom of speech, but one has to keep in mind the wider picture speaks better. It is, quite simply, a storm in a weak tea-cup. Now, do we need to worry about Nichane or independent newspapers in Morocco? Frankly, who cares? the days of militant and impoverished -yet high-standards- journalism in Morocco are over (Mohamed Belhassan El ouazzani was not expecting journalism in Morocco to stoop so low in the business race); we are talking business, and in such matters, there are no good guys and bad guys, only big bucks.
I was amazed to the strength of international media coverage (old farts stick together, don’t they?) as though corporatist solidarity allows journalists to pose as victims (and they certainly are, to an extent) but not in a manner such as the ordinary citizens of Ben Smim for instance.

37 years old Fodail Aberkane. An anonymous victim of Police brutality
The last piece was left so on purpose, because it is much more important; The first one does not affect us directly as citizens, but merely concerns an unnecessary nationalistic pride we can do without.
The second one is just a matter of money and would-be journalists. The last is about how random and hazardous it is to walk in a police station and walk out of it unharmed and more importantly, alive. I needn’t bore you with details because others have spoken quite eloquently about it. It is as though a brutal reminder was sent to all would-be dissidents that the old institutions are still there, and that at any time, one can meet his maker (and Orangina bottle down their bottom in the process) in a nasty dark little room, downstairs one’s very local police station. Suffice it to remember than, in a Morocco so full of new things and so resolute in its democratic process and open-mindedness, the murder of Fodail Aberkane remains a blot that has never been addressed.
One would certainly say: well, it just happened once, and if it was not for a life, it is no big deal. A reasoning ab absurdo would prove it to be otherwise: assuming what happened in Salé police station was merely a security cock-up, why didn’t the interior ministry suspend the policemen and launch an inquiry on the matter? Don’t they realise that what happened is a disgrace to the uniform of Moroccan police; (the satirical Young Retarded Moroccan Society published a very moving piece about it)
On that melodramatic tone, I wish you all a good week end.
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