The rise in prices this year has been staggering. And the most expensive products.
Commodity prices continue to rise. Inflation is accelerating around the world. But what could be easier in dealing with rising prices? That’s right – take and freeze them! Such a solution is often proposed by people far from economics, but not alien to politicians. They want to freeze prices for food, medicines, and hotels during the holiday season. “Komsomolskaya Pravda” decided to find out whether this is possible and where it will lead.
THOUSANDS OF SELLERS AND MILLIONS OF GOODS
It was good in Soviet times. Prices are the same everywhere, salaries are the same. Stability. True, there were flaws in this idyll. The goods in the stores were of the same type and not always of high quality. And it was not enough to save up for Zhiguli. The car had to wait for several years or be knocked out by pull. At the same time, retail prices for everything were determined not by the market, but by the ubiquitous State Planning Committee. In every sense, this is the last century, experts say.
– The price of any product or service is the result of a balance between supply and demand. In urgent cases, the state can apply administrative measures to fix prices, but this is possible only for a very short time. Otherwise, there may be a shortage of goods, loss of competitiveness of such products, even a black market, – explained to “KP” in the press service of the Central Bank.
Moreover, it is not at all clear at what level to freeze prices.
– If, hypothetically, prices are fixed at too high a level, enterprises receive excess profits. If it is too low, business ceases to be attractive, enterprises close or go into the shadows, there is a deficit, says Oleg Moskvitin, Deputy Director of the Institute for Competition Policy and Market Regulation at the Higher School of Economics.
Another difficulty is a large number of motley sellers and a huge range of products. There are hundreds of thousands of retail outlets in Russia. Each store has its own economy – depending on the region, rental cost and other nuances. There are even more goods. What is the fair price for these cucumbers? And for others? Which is for the supermarket and which is for the market vegetable store? Which one is in summer and which one is in winter?
So it turns out that nothing better than market pricing has not yet been invented. But what if inflation goes off scale and sellers start to abuse it?
THERE IS DEMAND, BUT NO OFFER
The rise in prices this year has been staggering. And the most expensive products. Even the global index shows an increase of over 30%. At the same time, the Russian authorities this spring fixed prices for sugar and sunflower oil. But it only helped for a while. And only in large retail chains with which the state has agreed. Durable goods (cars, apartments, household appliances) are also getting more expensive. And not only because of the dollar exchange rate.
– The pandemic has disrupted the chains of production and transportation of goods. It is on the production side that the most serious problems are now. Carmakers suspend conveyors due to a lack of microchips, the same problems are faced by manufacturers of household appliances and electronics, pharmaceutical companies are experiencing a shortage of drug components. In addition, people no longer want to spend money on services, but prefer to buy goods. The combination of strong demand and restrictions on the supply side generates high inflation, – say the press service of the Central Bank.
At the same time, seeing how quickly prices rise, people and businesses begin to behave irrationally. They see inflated prices, but they buy anyway. Because they are afraid that tomorrow the prices will be even higher. And sellers see that buyers are willing to pay any price, and they take advantage of this by continuing to increase it.
Seeing how quickly prices rise, people and businesses begin to behave irrationally. They see inflated prices, but they buy anyway.
ECONOMIC STOP CRANE
According to experts, in order to overcome inflation, it is necessary to act in a comprehensive manner. Here are the basic guidelines.
1. Develop competition
The more producers and sellers there are, the lower prices for consumers will be.
“This is a key, truly economic factor in keeping prices down. The development of competition is the task of all authorities, says Oleg Moskvitin.
In other words, you need to make life as easy as possible for everyone who wants to do business. Reduce taxes and remove administrative barriers. To be so. I saw a line in a coffee shop – a month later I put another one next to it. I wanted to find a repair team, and all the good specialists were scheduled for a month in advance – I organized a construction company. If you can’t find a rare product at an affordable price, you found a manufacturer in China and began to sell it via the Internet.
2. Raise rates
The Central Bank has already begun to influence demand. The key rate, on which the rates in banks depend, has grown by one and a half times – from 4.25% to 6.75% per annum. In such conditions, it becomes more profitable to save money and postpone purchases for the future than to buy something on credit.
3. Help only those in need
Price fixing is the same savings. If you buy sugar not for 60, but for 50 rubles, a dozen will remain in your wallet. But this can harm the farmer, sugar producer, wholesaler or supermarket. After all, someone in this chain will have to work at a loss. And most likely – to the weakest and most defenseless. In this case, it is easier not to fix prices (which is almost impossible anyway), but to give an additional ten to a needy consumer.
– The most effective support mechanism is targeted social assistance. When determining the amount of such assistance, the current level of market prices for basic food sets and essential goods is taken into account, the Central Bank explains.
4. Increase the population
Production and supply are influenced by the size of the labor force. If there is no one to work in the country or the qualifications of these people are lame, prices will be high, and the quality of goods and services will be mediocre. There should be competition in the labor market as well. The state is already working in this regard. Supporting families with children has become one of the top priorities in social policy. At the same time, the pandemic worsened the situation – there were fewer migrants, and two hundred thousand Russians died from covid. Many are of working age.
5. Control over monopolies
The “invisible hand of the market” is good. But you can’t let it go either way. Any business strives for monopoly as the easiest way to extract excess profits. And the stronger the company, the easier it is for it to crush small competitors. In Russia, the work of corporations is monitored by the Federal Antimonopoly Service. Last week, she threatened two major retail chains with fines. And they immediately lowered the prices of some goods. So the mechanism is working.