Politicians and statesmen are all unanimously urging people to stay calm, as we are witnessing a rise in the prices of some goods.
One says he will keep the price of bread unchanged, the other says he will reinstate rationing, one orders prices to get lower and the other labels price hikes as foreign conspiracy.
The incumbent office-holders are blaming former office-holders; at the end of the day, the blame rests with the people, not the economic realities. What is behind such a view toward prices is the belief that a successful government is one that can keep the prices low and goods plentiful, Ali Dadpay, an economist, prefaced his article for the Persian economic daily Donya-e-Eqtesad with this note. A translation of the text follows:
The understanding of how prices function in an economy is always missing in politicians’ discourse. At present, everyone knows that economic resources are limited. The bakers bake a certain quantity of breads, the production of cars is limited and so is the number of homes; you can’t increase bread output with the wave of a magic wand.
Flour, electricity and water are all limited. In our politicized, state-owned economy, the government always sets the quota of products people can have. The government determines at what price people can get a few packets of pasta. However, the consumer does not make decisions based on government policies but as per his own taste and income. The problem is that thanks to government interference, manipulated prices do not contain accurate information.
The change in macroeconomic conditions and people’s financial vulnerability have resulted from policymakers’ denial of economic realities and the permanent depletion of resources
What we are witnessing these days, from the overnight surge in prices to runaway inflation and rents, are all the result of assessing the success of a government based on the cheapness and abundance of products.
Economic policymakers have slaughtered Iranian households with inflation and scarcity through manipulation of prices under the pretext of supporting consumers. Neither the smuggling of goods to neighboring countries nor the crowds at border markets, where Iraqi citizens can get what they need at a much cheaper price than in their own country, is new.
The blame game of officials is not new, either. All governments are equally to blame for their perception of the economy and the basis of their economic policymaking. The change in macroeconomic conditions and people’s financial vulnerability have resulted from policymakers’ denial of economic realities and the permanent depletion of resources.
That is not the whole story. In economics, there is a relationship between wages and the value of production; wages in a competitive market are equal to the value of production that the worker adds to total production and, of course, this value is equal to or greater than his wages.
Policymakers who manipulate prices also manipulate wages. There is no longer a relationship between wages and the value of the products. If you don’t believe what I say, you may ask automotive industry workers about how much they have gained from manufacturing multimillion-rial cars. Flat price policies and promises made about the decline in prices have guaranteed that workers get a low income.
No matter what the officials say, the Iranian consumer knows that a sudden rise in prices is a periodic event, and not an unexpected one. I wish the authorities would hold themselves accountable for once and reflect on how they have made Iranians poorer under the pretext of keeping prices low.
Isn’t it time authorities accept economic realities and pay for their mistakes? Low-income people need to have opportunities to increase their incomes. They don’t want guarantees on low prices that will be offset by inflation.
