The theme of inflation continues to be actual. Yesterday during the consultation on the economic policy President Serzh Sargsyan specifically spoke about inflation and formation of prices in Armenia.
He phrased the question quite categorically, “The government and the CB should understand that by the end of the year we should have at least a 50% reduction of inflation than what we had last year and this target is always going to be in the center of my attention.” He mentioned this and added that he wished to see a more coordinated work and even bold and untraditional steps. Shortly said, a card blanche was given and it was assigned to use all the possible means to prevent inflation. Most probably the president has given this card blanche much sooner than yesterday. Without this card blanche the government would hardly had initiated the change connected with the reduction of prices. Let us remember that on Thursday the government approved reforming the law on Trade and Services and the law on Administrative Violations, which anticipates that the government will have the power to interfere in the formation of prices and prevention of inflation of stapled goods if the inflation reaches 30% or more percent within a month. The suggested revision stipulates that the government has a power in these cases to set a preventative low retail prices for select consumption goods in order to stabilize the market for a term of 90 days. Prime Minister Tigran Sargsyan mentioned that the legislation has not had such a provision up until lately but the necessity of that is clearly visible. As it was expected, there was no lack of criticizers of this initiative. The opponents first of all mention that the impermissibility of the decision should stem first of all from the principles of market economy. It means that they leave aside the lamentable situation of the Armenian economy and bring up the philosophy that the market itself determines prices. This is a fair attitude and philosophy as Armenia has declared itself as a market economy and Prime Minister Tigran Sargsyan is considered a holder of western liberal values. Indeed, the job of the opposition is to criticize. Of course, criticism is made to attract the electorate and convincing them that the government is wrong. However, concretely in this case the criticism may serve on behalf of the government. The thing is that the majority of the society doesn’t care much whether there is market economy or not. They care about not staying hungry. And it’s totally normal. And in the aspect of normal life they compare the current “capitalism” with yesterday’s “communism.” It turns out that yesterday was better. It is not excluded that many people may become thrilled about the behavior of the President to the members of the government without assuming that all that is merely PR. Let us clarify why. Judging from the speeches made days ago, this legislative initiative of the government is directed first of all against the appetite of greedy businessmen. For example, one week ago the chair of the NA Standing Committee on Financial and Budgetary Issues Gagik Minasyan spoke about this initiative by saying, “This pertains to the goods, which are in unfair competition. There are speculators, who implement their price policy without basing on the rules of the market.” He also added that the goal of the law is to “restrain the insatiable aspiration of certain businessmen to become too rich.” The wish is good but… meaningless. Let’s start from the fact that during one month very few goods increase their prices by 30%. According to the data of the National Statistical Service compared to January in February of the current year only carrot price had increased by 30,9%. The January chronics is more opulent. Compared to the previous month cabbage price has increased by 52,9%, tomato price – 35,4%, cucumber – 35,4%, green opinions – 43,8%, green pepper – 46,2%, fish sig – 65%, apple – 55%. According to the official statistics compared to October in November chanakh cheese price has increased by 30,6%. Let us try to imagine what would happen in the case of chanakh sellers if the government came up with this initiative in the beginning of the last year. Nothing would happen because… in that case, prior to the adoption of the law by the National Assembly, chanakh would increase not by 30,6% but by 29%. Simply said, the increase would go gradually. They’d wait several days and then increase the price. The best example is the egg – 65-70%. But it happened not immediately but step by step. In the beginning it grew by 10%, then by 20% and so on. But the problem is not this either. At last if the government wished it could easily shut down all the unjust routes. The main issue comes to one main question. Why is it possible that in a country with a market economy it becomes possible for certain speculators to raise prices of goods? Because the thing is that the prices relate to stapled goods and not let’s say to gas. Stapled goods are food items. And the food market in any more or less developed country of the world is the most competitive because it doesn’t require huge investment because it doesn’t require great investments. The field is open and many players can enter the market. Simply said, if we are a normal market economy, have laws, institutes then there is no need of such a regulation in our country. Let us bring a picturesque example. Let’s assume Armenia is really a market economy with a competitive economy (as they claim) and conditionally I import to Armenia a pear stem, the price of a kilogram for me makes 1 dollar. Let’s assume that this pear stem is a stapled good (because the initiative relates to stapled goods). As I am a monopolist I can sell it at 5 USD and receive super profits. But this may last very short because at least several hundred of people may inquire where the pear stem is coming from. So 10 out of these 100 people will start to import pear stems themselves and will sell it at 4 USD to attract more consumers. I will also have to decrease the price maybe more than them. The process will last as long as the limits of price decrease will run out. As a result we will have a price a little more than 1 USD. It will be a reasonable price and no one will ever need to set a “price ceiling.” The market will take away my super profits and will divide it among the other participants of the market. This is a simple thing – market economy and the alphabet of development of competition in the market. It can be no other way in developing countries if we are speaking about food. But in Armenia it may happen and it happens. In current Armenia as the sole importer of pear stem and monopolist I will use all my levers not to allow anyone else import step pear in this country and become a competitor for me. First I will try to scare them with my “bog-necked” bodyguards. If it doesn’t work out the presumptuous customs service will conduct the clearance of my competitors’ goods with several times more payments. And if this doesn’t work either than officials from the tax service and various supervising bodies will visit my competitor every day. They will collect a lot of money and ultimately make him insolvent. They may even judge him filing a criminal case against him because I am not just a random person. I have a monopolist of pear stem importation. I have great links with the “elite” and they are going to forgive me everything. Because the system is so and no bodies and structures can ever prevent me from doing so. No matter how much they speak about inflation, no matter how often IMF, World Bank and why not the officials of my county speak about the need of fighting monopolies and oligarchs I can be calm and can continue receiving super profits. Because as our officials says the fight against oligopolies doesn’t imply fight against oligarchs. That is the reason why we are saying that the above-mentioned initiative will not work in Armenia. There will neither be use nor harm from it. There will be use only when each person becomes able to do business freely without fearing and looking for a “roof”, without corruption and bribery. In other words, it will only happen when we start to have a normal, healthy country with a healthy economy. If the grounds are loose the above-mentioned initiative and similar ones will not change anything. But when they speak too much about the initiative of the government and there is no use from that it is already called PR. That is what we had to prove.