Why Prices Go Up in Countries That Were Cheap

Over the holidays one uncle of mine talked wistfully of a motorcycle trip he took in Mexico “a while back” and went on about how incredibly cheap it was to eat out, swill tequila, and follow it up with a few Mexican beer chasers for a buck or two. He has lost track of time, like we often do, and is looking back at a bygone era. A time before NAFTA, before liquor conglomerates snatched up every tequila company with more than two employees, before the whole Mexican beer industry consolidated to just two companies with half-foreign ownership.

I’ve overheard the following phrase applied to places where the bargains are long gone: “It was so cheap there—you’ve gotta go check it out!”

Next time someone tells you that, be sure to ask, “When did you go?”

Ask any war vet grandpa about his weeks on leave and depending on how old he is he’ll tell you great stories about how he spent $5 on a whole weekend with a Bangkok hottie and eight bottles of Mekhong, or how he bought wine for 50 cents a gallon in Italy and you could buy four movie tickets with a Hershey’s bar. (Unfortunately, today’s troops are caught in barren lands with no booze or babes, so their “you shouldda been there” stories are gonna suck badly decades from now.)

So where am I going with all this? Well last month there were some stats in one of those 1999-2009 wrap-ups that blew my mind. This story was about rising affluence around the world. The illustration at the top of this post is internet penetration growth during the decade, with the small circles being 1999 and the large one being last year. Go check it out for a minute and look at Vietnam and India. I cropped it to just show Europe and Asia, but it’s the same dramatic explosion in countries like Mexico, Colombia, and Brazil. More knowledge, more education, more opportunity, a higher standard of living. Too bad for you, shoestring backpacker, as it means you’re no longer the only one with two pence to scratch together—or an ATM card.

But in a small column at the side in this newspaper article was something even more dramatic. Here’s the change in the portion of population in these countries with a disposable income above $10,000, in percentage points. In other words, 84.2 % more Slovakians earn at least $10k above basic living expenses over the course of a year compared to just a decade before. That’s huge.

Slovakia – 84.2%

Romania – 76.7%

Czech Republic – 75%

Hungary – 70.9%

Croatia – 68%

Poland – 56.8%

So next time someone tells you about how you can eat a five-course dinner in Eastern Europe served by guys in tuxedos while drinking two bottles of vodka and having a 20-piece orchestra play in the background for $8 apiece, you might want to ready a follow-up question. “When did you say you were there again…?”

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  1. Casse

    IN Suvlaki and Row-mania only 10 people earned more than 10 K.
    Now 80 people have risen above this threshold.
    So still almost nobody makes more than 10K.
    800 percent rise does not impress me if I do not know the starting ground.
    When very low like one in a million, 800 percent rise is a rise from nothing to still nothing.

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