Let the market set the prices!

Mar 27, 2022 Features / Columnists, Peeping Tom

Kaieteur News – Predatory pricing is on the loose. While it is understandable that the prices of imported items are going to be increased, the degree to which locally grown fruits, vegetables and poultry have increased cannot be attributed to imported inflation.
Local producers are taking advantage of the situation. They are making a killing. The prices of vegetables and fruits in the local markets have skyrocketed. And this has nothing to do with supply constraints or poor weather.
Indeed, the effects of the floods of last year have abated. The weather has been kinder to farmers over the past four months. However, what is happening is everyone is seeking to increase prices.
The logic is rational but not reasonable. The vendors are claiming that prices have risen and that farmers are asking for more money for produce. The vendors are also saying that they too have to go to the supermarket to buy imported items and as such they are forced to spend more. As such, they say they have been forced to increase their prices.
But the poor fixed income workers do not have the luxury of receiving an increased pay packet, at least not one large enough to compensate him or her for local inflation.
Neither is increased income the answer to rising prices. The more money that is pumped into the economy, the higher prices will go.
Pumping more money into the hands of consumers is not the answer to the inflation crisis. Economics 101 instructs that when a larger volume of money is chasing after the same amount of goods, the price increases.
As such, this idea by the Opposition that the government should pay every adult G$200,000 is impractical, unaffordable and will only increase inflation.
The money supply has to be kept in check otherwise inflation will escalate further. But despite justifiably rejecting the Opposition’s suggestion as a gimmick, the government is looking to create some 8,000 jobs. According to the reports by the government media, these jobs are in response to the rise in the cost-of-living.
It is a misguided measure. It will increase incomes for 8,000 workers for a short period but there will be no corresponding increase in the supply of goods in the market.
What the government needs to do is to reduce public spending. It should limit this spending down to mere essentials at this time so as to contract the amount of money in the economy, seeing that it is not going to tamper with interest rates.
Inflation is now being further aggravated by the steep rise in the price of oil. Not only do motorists have to pay more for petrol but the rise in oil prices has also caused an increase in the cost of fertilizers.
Fertilizers are used extensively in rice and sugar cultivation. Yet the yields have declined from what they were 60 years ago when fertilizers were not used extensively. Someone needs to do a study to establish whether all this is needed.
Interestingly, there are reports that the price of stock-feed has also increased. Consumers therefore, can be certain that when chicken supplies return to normalcy, that the price is going to be increased.
If indeed the price of stock-feed increases it will create problems for small chicken rearers. They are already working for slim margins. An increase in the cost of feed will wipe them out and leave consumers at the mercy of large producers.
It is these large producers who benefit the most from the bulk of the concessions which are offered to the poultry sector. These producers have not attributed the recent shortage of chicken to the rise in stock-feed. The excuse has been that the rise in demand for Christmas has led to the present shortage. This makes little sense because it takes about six weeks for chickens to mature and the shortage of chicken occurred more than six weeks after the Christmas harvest.
The government has to question whether the concessions which are being granted to the poultry sector are worth it. The government had announced that it was zero-rating taxes for the sector.
Well, it is obvious that the concessions have not prevented a shortage in chicken and rise in its price. So it is time for the government to let the market set the price for chicken. Remove the concessions and let us see whether it is not cheaper to import chicken, even with the prohibitive import taxes, than pay more than $500 per lb. for locally produced and highly subsidized chicken.
(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

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