Fluctuating

Bless you, Sec. Francisco Tiu Laurel.

The Agriculture secretary just announced his department is not at all considering imposing suggested retail prices (SRP) or price caps for rice. Some sanity appears to have descended on this matter.

A few days earlier, the DA spokesman Arnel de Mesa confidently announced SRPs for rice next week. The man was out to terrorize the market.

Laurel corrected that announcement in no uncertain terms: “We are not doing it. Prices of rice and other agricultural products in international markets like Thailand and other countries are volatile and fluctuating due to El Niño. Hence we are not suggesting to control prices at the moment.”

Last year, government imposed price caps on rice. The results were disastrous. Taxpayer money had to be shelled out to compensate small retailers who lost money because of the imposition of price caps.

The imposition of SRPs on rice would fail in the same manner. It will merely produce uncertainties in domestic rice supply as traders avoid importing the quantities we need. Rice purchased at prices higher than the SRP will be withdrawn from the market to avoid business losses. The staple commodity might have to be rationed even as we harvested an unprecedented amount this year.

You know this aphorism: If all you have is a hammer, every problem will resemble a nail.

Price control is a hammer. It is all our agriculture bureaucrats have in their toolbox after they fail to ensure supply stability.

A hammer is a blunt instrument. It cannot possibly solve all the complexities surrounding a basic and politically-charged commodity.

It is probably inevitable that rice prices will continue to rise this year. Droughts are expected. Weather conditions could be so severe crop failures might happen. With all the volatility expected, the worst any government could do is to erect a price barricade. That is like driving a nail through our own skulls.

When the braindead decision was taken last year to impose price caps on rice, a talented young economist serving as undersecretary at the DOF subtly warned everyone about the law of supply and demand. She was terminated. Morons do not have the ability to tolerate expert opinion.

Sure enough, the price caps policy failed. Rice stocks were simply reclassified to evade the caps. Price for the most edible varieties of rice simply spiked.

Imposing SRPs or outright price caps do not solve the cost-push factors driving up prices. They simply penalize people obeying the dictate of market forces. They make criminals out of the smallest traders.

If they had their way, some of our bureaucrats would probably abolish the market economy. They seem to prefer that prices be politically dictated rather than market-determined.

I have always suspected the unyielding fans of centrally-planned economies, that uniformly failed wherever attempted, are not in the rebel underground. They are deeply entrenched in the bureaucracy. They are out to inflict market failure on all of us.

The next few months could be difficult. Rice prices could climb to extreme levels should drought take its toll. We will just have to roll with it.

Things will be more difficult for the Filipino consumer specifically. This is because the cost of food production here is higher than most everywhere else.

The strategic solution is not price controls or rigid trade rules or debt-inducing subsidies. The strategic solution is a more efficient agriculture.

This is what the Department of Agriculture should be all about: promoting greater efficiency in our food production. By breaking up our farmlands into small family-sized plots, we have defied the economies of scale. We keep our agriculture trapped in subsistence mode while expecting it to keep a larger population fed. All this has done is to keep our farmers poor and our consumers burdened by high prices.

Self-sufficiency at any cost should not be the final goal of our agricultural policy. Food affordability is what will solve poverty in our society.

Our agricultural policy needs serious rethinking. The Department of Agriculture should lead in that rethinking rather than be engrossed in seeking out expedient bureaucratic solutions to food inflation.

Hard-nosed

It finally happened: Ralph Recto has been installed as Finance Secretary.

The appointment reinforces the cadre of hard-nosed pro-business policymakers in the Marcos II Cabinet. He joins the likes of Tiu-Laurel and Frederick Go in manning the parapets of the economic management team.

The Cabinet of the elder Marcos was famously staffed by people described as “technocrats.” These are people with mainly academic backgrounds shaping policy according to the best social science available.

A technocracy works best in an authoritarian setting. The experts installed in responsible positions need not worry about working the political ropes to get the best policies in place. Technocrats had the luxury of simply ignoring the politics of it all.

The Marcos II administration is by no means authoritarian. On the contrary, President BBM seems more intent on pleasing everyone on some romantic notion of “unity.” His first team of technocrats did not appear workable.

Now he has his second team of economic managers. They are composed of outstanding people with established records in the world of business and politics. They have deep roots in the corporate sector and are better poised to rally the private sector to support development goals.

Recto specifically has an exceptional record in legislating economic policy. He is better prepared to deal with the politics of getting the best fiscal policies in place.