Where Inflation Brings Us: Saramago’s Mental Asylum

26 September 2023 – Caner Gerek

One of the best novels ever written, Portuguese writer Jose Saramago’s Blindness begins interestingly enough with a person suddenly going blind while waiting by car at a traffic light. What makes the story even more interesting is the fact that unknown at the time, blindness is contagious. Other people who help or come into physical contact with this suddenly blind person also go blind after a while.

What makes this blindness agonizing is not the darkness of the environment, but the agony of seeing in white. It is a white catastrophe in which everything is seen in white. After a while, with the increase in the number of cases of blindness, things start to get serious and it is decided that all these blind people should be locked up somewhere so that they cannot harm the outside world. A mental asylum is designated by the ministry as a place to keep these people safely isolated from the outside world. Blind people who see everything in white are placed one by one in this asylum and isolated from the outside world.

In the rest of the story, these people are placed in a mental institution and try to adapt to their new life. Of course, the white disaster offers them a very difficult new life. But these blind people living under difficult conditions think that no one will want to help them anymore and try to reorganize themselves in this mental hospital. At certain intervals, these people are given food from outside. With this food, which is very inadequate, they try to fulfill their most basic needs in life, but they find it very difficult even to do that.

On the other hand, these white victims of disaster, who need someone’s help because they are suddenly blind, start to put aside helping each other and solidarity over time. The drive to prioritize their own interests will now work better than ever. The very inadequate distribution of food brings with it the fear of starvation. This fear of starvation leads to selfishness in order not to die, and some of them try to increase their own share of food (welfare) by ripping off others and confiscating their rights.

Others, struggling with the consequences of blindness, now also try to protect their own food shares against other people. Apart from the blindness, they fall into an environment where insecurity increases rapidly and isolates them. This is a mental hospital where all virtues are trampled underfoot one by one in order to survive. At one point in the novel, a blinded doctor tells his wife, “The picturesque world of the kind-hearted blind, full of pity, no longer exists; instead, there is a world of the blind that is literally rigid, ruthless, and relentless.”

In the story, there is a woman who is not affected by the contagiousness of blindness, who can see and live with the blind. But for her, rather than being an occasion of gratitude, seeing has turned into torture because of what she has seen. Inwardly ashamed, she even wished that she, too, were white blind. The situation of the citizens of Turkey reminds me of this part of Saramago’s story, part of which takes place in a mental hospital.

The Consequences of High Inflation

Turkey’s current period of high inflation is unquestionably the result of the government’s mismanagement of the country. We are experiencing high inflation as a result of the wrong policies implemented. This high inflation brings with it its own problems. One of these problems is the virtual disappearance of people’s price memory.

In gatherings, people often say that they no longer know what the price of the product they want to buy is and that they cannot make comparisons. Not only are the prices of consumer goods constantly increasing, but they are also offered at very different prices in different places. Therefore, the consumer is faced with a high number of price changes and the need to keep track of different prices in different places. Because they are exposed to so many different prices, the consumer cannot form a price or value in their minds.

However, consumers often make choices based on relative prices. By relative prices, I mean the price you are willing to pay for a product you intend to consume, compared to the price of other products, and the price you are willing to pay for the product accordingly.

For example, people might try to find out whether the price of a meal out is expensive by comparing it to the cost of cooking at home. Or when buying a fruit, they may decide to buy it because it is cheaper than the price of another fruit (relative price). However, the reference prices used to determine the relative price are no longer known. In other words, the consumer no longer knows the reference price of the meal he/she will cook at home or the price of the fruit he/she has taken as a reference. There is a complete blindness in terms of prices.

An Environment of Unknowability and Blindness

This environment of unknowing and blindness brings along opportunism. We are faced with an ever-increasing problem of opportunism. The loss of price memory paves the way for companies producing goods and services to sell products at exorbitant prices. People’s loss of price sensitivity is a great opportunity for them and many companies want to take advantage of this opportunity as much as possible. It is not possible to explain the price increase in some products by cost, inflation, exchange rate, or any other unavoidable situation that requires a price increase.

In the current economic environment, everyone is trying to survive, and in doing so, it has turned into a story of blind people in a mental institution trying to get more food than others while struggling with blindness and increasing selfishness. Where the pie is not growing and there is not enough, people are trying to rise to the surface by stepping on each other in a way that shrinks the share of others.

We see this blind life not only in abnormal price increases. In the chaos of the struggle for survival, the quality of the product is declining day by day. While the price used to serve as a signal for production, this signal no longer exists, and where the price does not signal, neither product quality nor problems in production can be detected; this is another form of blindness.

Again, some companies try to take advantage of this blindness as much as possible. For example, eating out is more risky for health than ever before, and people’s complaints about it are increasing every day. The quality problem is not only in eating out, there is a problem in almost every product, but it is difficult to diagnose. The decline in the purchasing power of society is an opportunity for some or formula for survival in this blind environment. For consumers, the decline in product quality and the decline in quality of life is a growing problem.

The Reality of Mafiaization

We see mafias everywhere, like in a mental hospital. Although this is not the first time, it is not something we have encountered so often. We come across this mafiaization in a team of a few people raiding a nut shop, in the increasing drug mafia, in giving way in traffic, in arguments between landlords and tenants.

Landlords who take a few people with them and inflict violence on their tenants or threaten them with violence have become commonplace. In most of the tenant-landlord arguments we see on social media or TV channels, the landlords are actually ordinary people. They are not fabulously wealthy. But they want to take advantage of the increase in asset prices and take advantage of the opportunity and rent a house at a much higher price. Because they are also struggling with the difficulties of this period of high inflation.

So, in fact, the whole society here is part of a white catastrophe, and in a situation where everyone is blinded, and they are trying to rise up by stepping on others. We have to watch with concern such an environment of ever-increasing violence. Maybe relatively very few people become victims of violence. But many people’s quality of life and peace of mind are diminished due to the fear of violence. And it is often the most vulnerable who are most affected by this violence: the poor, women, and minority groups. Alongside a growing affordability problem, a growing problem of social unrest has developed rapidly. We are all very unhappy. Because the way to survive as people who cannot see the way forward with high inflation is to try to pull others down.

What About the Free Market?

Most of what I have described above, of course, takes place in a free market. If the prices are exorbitant or if the landlords try to rent out their houses at higher prices, these are events that take place in the free market. If there are opportunists who keep the prices high, there is also no demand for the product from them. No one is obliged to buy products at those prices (with the exception of housing).

But the free market is not the problem here. Or the solution is not to intervene in market prices. The problem here is actually the failure of the free market to function well with high inflation as a result of interventions in the economy. In other words, we are not getting the results promised by the free market.

First of all, the price mechanism is not working properly. The signaling mechanism of the price I mentioned above has been lost. On the one hand, this leads to consumers making mistakes in their choices and lower productivity. On the other hand, on the producers’ side, the lack of knowledge of relative prices poses a major problem in their decisions on which products to produce and which products to invest in.

In particular, the difficulty in determining relative prices in agricultural production creates problems in making the right production decision. When there is a problem in the production of a product, we can detect it from price movements. However, if all prices are moving upwards, we will not be able to make this determination and thus solve the production problem of that product.

On the other hand, firms are losing the ability to compete with each other on the basis of productivity. Because with such rapid price increases, productivity ceases to be a differentiating factor in competition, and companies that should disappear can continue to exist in the form of zombie companies. Failure to increase productivity negatively affects both producers and consumers.

At the root of the problem is the emergence of a situation that can be called market sloppiness in an interest rate environment that remains low against inflation. We feel the lack of the disciplining feature of the interest rate instrument in the pricing that we revolt against. For this, we are waiting for the interest rate to get back to where it should be, and we see that a positive and important step has been taken in this direction in the latest Central Bank decision.

However, we will be on a long and not-easy journey. Because the fight against high inflation is a process that takes a long time. As legendary FED Chairman Paul Volcker once said, “Inflation is like toothpaste. Once it’s out of the tube, it’s hard to get it back in.” Until inflation is brought down with the right interest rate policy, we will unfortunately continue to be among the blind trying to survive by stepping on each other in a mental hospital, and among people who live in the agony of seeing while living with the blind, even though they are not infected with blindness.