July 28, 2014
Controlling the controls
Until last week official denial was still the order of the day for inflation insofar as INDEC statistics bureau had not produced credible data since 2006 but the Saint Valentine’s Day admission of 3.7 percent inflation for January ending the taboo seems to have opened the flood-gates for all kinds of government policies and parliamentary bills to control prices. Not that nothing was being done to counter inflation beforehand (thus the ongoing “price watch” programme was launched on January 3) but suddenly the front is starting to look a lot broader than supermarket shelves. The remedies proposed range from the old — the revival of anti-hoarding legislation from four decades ago or the Upper House bill to impose fines ahead of any legal appeal (the subject of last Tuesday’s editorial) — to the new: AFIP tax bureau’s initiative for the online monitoring of all grain harvests while Argentina’s Securities and Exchange Commission (CNV) is returning to the public eye with talk of a crackdown on “speculators.” But overdoing the threats of fines and expropriation against companies perhaps has its dangers in an economy where supply is constantly struggling to keep up with demand — instead of multiplying the control of the effects, what state policy most needs is a clear focus which addresses the root causes of price increases.
These root causes are perhaps to be found in something whose correction would be a vindication of the free market economy as much as state intervention — namely, the monopolistic structures at various levels of price formation. In this case anti-trust action would not actually need new legislation since there has been a Law for the Defence of Competition since 1999 — it would be more a question of giving that legislation teeth in the form of effective institutional mechanisms. It has sometimes been said that if there is one thing worse than a state monopoly, it is a private monopoly because it does not even have the regard for public interest which can be the saving grace of the former — in any case it is clear that private monopolies are just as bad for a free competitive economy as excessive state dominance. Within this context, the recent moves to improve the credibility of INDEC and the Central Bank (under new leadership in the latter case) could usefully be extended to the CNV in order to fight monopolies with clearly economic rather than political criteria.
And quite apart from anything else, fighting inflation at source rather than in thousands of retail outlets will be so much simpler, if not necessarily easier.