ECONOMY

Profiteer witch-hunting conceals the government’s responsiblities for inflation

The recent attempts of the Development Ministry to combat price rises by reviving administrative measures instituted in the early post-World War II period, when profiteering and black marketeering proliferated, are far from having the desired tranquilizing effect on the market. Instead, they are expected to create additional problems that will undermine more than 20 years of efforts toward bringing mechanisms in line with more developed partners in the European Union and the dictates of the free market economy. Beyond that, the outdated methods of policing the market are bound to kill any effort to attract new investment and foreign capital that would improve competitiveness and create new jobs. The Federation of Greek Industries’ (SEV) recently enunciated position that no firm is obliged to justify its pricing policy – and, I would add, its related future intentions – is harsh but realistic. No serious entrepreneurial activity can be based on profiteering and the deception of consumers. On the contrary, modern management aims to achieve low costs, high quality and competitive prices. Even refreshers in schools of economics know that in an economy that is part of a wider community of nations, government intervention in market mechanisms are inappropriate, and that fighting inflation (particularly its hard core) requires a lot of work and consistency in the exercise of the overall economic policy – elements that bear no relation to ministers’ often shrill threats that they will «smash» the profiteers. A cool-headed and objective analysis of the factors that raise the cost of goods and services to consumers would show that the main culprit is the State itself, via its pricing policies of public utilities and monopolies, its heavy direct and indirect taxation, its costly, anachronistic and discouraging bureaucracy, the waste of resources, and its inability to combat the underground economy and corruption. Given such factors, it is unfair to blame the country’s business community for not being competitive enough, for not investing enough and for profiteering. The retail sector should not be confused with illegal and street vendors; established and recognized businesses only put their prices up when they cannot control costs, or when such rises are absolutely necessary for their survival, and always within the framework allowed by competition regulations. It may be worth recalling a theory – now considered obsolete in terms of today’s economic realities, but always a classic in certain periods of economic crisis and inflationary pressures – by celebrated US economist John Kenneth Galbraith, which adopts as socially necessary the balanced fluctuation of prices and incomes. Greece’s relatively high inflation rate is hardly surprising in view of the lack of a consistent policy supporting productivity and competitiveness through incentives to business. Instead of such a policy, the government attributes unfavorable economic data to unjustified price rises by producers and to excessive pay claims by workers. This is usually a technocratic argument, used to rebuff attempts to recover the loss of purchasing power by the social group worst-placed to do so. Price rises are also evident in other eurozone members, but earnings there cushion them much better. A number of statistical analyses put the average Greek wage today at slightly less than the average in the rest of the European Union, while consumer price inflation in Greece is about twice as high. Galbraith’s theory would still seem relevant when responsibility for the effects of inflation is unfairly placed at the doorstep of those who sustain them. (1) Stavros Tsoukantas is former general director of the Ministry of Trade (now part of the Development Ministry).