ECONOMY

Oligopolies prefer status quo to upsetting smaller competitors

For many years our economy has learned to live with a paradox: The consumer price index shows one of the highest rises in the eurozone even as the economy does not register a particularly vigorous growth rate. This divergence cannot be explained by the rise in oil prices alone. The Greek economy may be more dependent on oil than others are, but it also shows a rise in so-called core inflation, which does not include oil and products that fluctuate in price, such as fruit and vegetables. This core inflation is also above the eurozone average. At times different explanations have been offered, such as the significant increase in demand for bank loans, although this is not sufficient either. Credit may have expanded, but loans as a percentage of people’s income are, again, considerably lower than the eurozone average. Amazingly, many products in Greece are more expensive than in the rest of Europe, even though these are the same products made in the same factories of multinational companies. Most of them shut their plants in Greece in the last decade due to high production costs and now claim that transport expenses are massive in order to sell their products at higher prices here. It is not only the multinationals that resort to excuses. Domestic companies do, too. Dairy firm Delta’s chairman, Dimitris Daskalopoulos, recently gave the press a full list of reasons explaining why milk is pricier here than in other countries. Milk production units in Greece are smaller (with an average of 25 cows) compared to those in Europe, which average around 100 cows. EU regulations allegedly favor the northern countries giving higher prices to Greek farmers. Animal food is expensive, and the country’s geography means milk collection and distribution is costly. All of this is true. Also true is that a significant part of low-income workers’ salaries goes for everyday needs. To find the true causes we must look at the current business model. Most local and international companies pass all costs on to consumers. In some cases these costs are real, but in others, high prices generate easy profits. They can afford to charge them since the market is structured as an oligopoly. A few companies have substantial slices of the market and have no reason to compete in pricing; They compete only in marketing. They prefer to coexist with smaller companies that have higher costs, rather than making their life harder. On the other hand, governments do not seem prepared to intervene, including the current one. Milk is a typical example. Following press reports that the product is more expensive in Greece, the Development Ministry held a large meeting. Milk producers and industrialists were invited, but such a meeting could only result in further price rises, as neither of these two groups would have any reason to cut their prices. They will do so only if forced by intense competition, higher imports and the entry of new products into the market. Yet nobody intends to force them. Consumers will just pay more money for their milk.