Combating inflation

At the beginning of next week, the Development Ministry will announce its new measures to contain prices. According to reports so far, the measures will be mostly for public consumption; they will neither stop rising prices nor punish profiteers, as the government had previously warned. Economy Minister Giorgos Alogoskoufis insists that Greece’s inflation has been imported from abroad but he fails to explain why price hikes in Greece hover at 3.9 percent when the EU average is 3.2 percent. Greek ministers are shying away from the real problem, the local and foreign oligopolies that control the domestic market. Inflation is a dodgy issue. It involves a large number of middlemen collecting levies at the expense of consumers. But the real culprits are the industrialists and the importers. Both sectors are controlled by oligopolies that fix prices and divvy up the market among themselves. The formation of price cartels goes back a long way and has taken place under the eyes of all governments. There are only two big foreign detergent manufacturers and importers, two paper industries, three or four dairy product industries, two cement industries, three or four meat importers and so on. Given the relatively small size of the Greek market, there is no room for competition. In a welcome development, however, Greek consumers have benefited from the invasion of foreign budget supermarkets. Were it not for stores like Lidl or Veropoulos, buyers would still be hostage to a small group of industries and importers who treat Greece as a colony. Let’s not fool ourselves. Inflation is not just shaped by supply and demand. It’s also affected by social and political factors as it reflects the power balance between social classes and between the state and the companies. In order to fight inflation, the government must clash with the monopolies and stop running after the poor vendors at local street markets.