Controlling rice prices
Economists generally frown on price controls since they believe price controls often lead to unpalatable consequences like supply shortages.
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Economists generally frown on price controls since they believe price controls often lead to unpalatable consequences like supply shortages.
Clearly, the Marcos government's move to set a price ceiling on rice is a political decision.
Seeing it then as a political judgment — that it is, as one economist put it, a "direct political remedy" to a political problem — helps to make sense of the surprising directive to control rice prices.
The political problem at stake here is the fact that rice is essentially a political commodity.
Rice is as political as it can get. Filipinos, as the common wisdom goes, can sacrifice other types of food but never can they sacrifice rice.
Subsequently, staving off the "alarming increases in the retail price" of rice tells us that this government is trying to do something politically dramatic against the all-true political fear that uncontrolled rice prices will inevitably cause civil discontent and unrest, particularly among the restless Metro Manila poor.
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Metro Manila's issue with soaring rice prices is "the real problem," says the Chief Executive.
Anyway, is setting the price ceiling at P41 per kilo for regular milled rice and P45 per kilo for well-milled rice feasible?
Economists generally frown on price controls since they believe price controls often lead to unpalatable consequences like supply shortages.
Economists also warn price controls create black markets for price-controlled goods which often leads to much higher prices and the corruption of officials in charge of procuring, controlling, and distributing such goods.
As such, economists argue that price restrictions and other possible administrative measures can only be used as an immediate response to emergencies and should be replaced by other economic measures as soon as possible.
But while the concerns of economists aren't unfounded, this government has obviously set aside those concerns, leaving us with no other conclusion but that this government foresees a looming crisis.
So, is there a looming crisis? There probably is.
At this point, surging rice prices have come at a time when other serious issues are buffeting the economy.
Global oil prices are rising, making fuel more expensive these past weeks. The value of the peso is also weakening.
Needless to say, both rising fuel prices and the peso losing its value directly impact rice prices and rice supplies.
Accordingly, this government seems to believe it is better to deal with rising rice prices now rather than later when fuel prices and the weakening peso will end up as excuses to further push rice prices up, and in its wake, trigger civil unrest.
Such a pronounced maneuver, however, is hobbled by the uncomfortable question of whether the country will have enough rice stocks in the coming months to weather any shortages.
The Marcos government assures us the country has adequate rice stocks. Yet, at the same time, the government says it will import massive amounts of rice to dampen rising prices and augment stocks.
The government's import tact, however, is tied down by the Rice Tariffication Law.
The government cannot actually import rice but can only negotiate with other countries to make them sell rice through private importers.
In fact, under normal circumstances, the National Food Authority cannot directly secure rice supplies. The NFA can only buy rice if the government declares a state of emergency or calamity.
Should there be shortages, this government will inevitably have to declare a rice emergency and take over rice importations.
In the meantime, however, the Marcos government, like previous governments, wants it known that price control is also a tool to prevent the "widespread practice of illegal price manipulation, such as hoarding by opportunistic traders and collusion among industry cartels in light of the lean season."
Characteristically, such concerns have since been backed up with high-profile raids of rice warehouses and official directives to government agencies concerned "to make sure the prices stay within the prescribed limits."
Now, as to whether all those above considerations justify a price ceiling on rice, we have no choice but to judge carefully. The political stakes are high enough.
