One really must be careful when using the words “control” and “prices” in one sentence in Bulgaria. One must be twice as careful if the person saying the words occupies a high profile public post. Bulgaria has more than enough experience with “price control”, the consequences of the 45-years spent under communism and its planned economy are still visible.
That is why the idea of Economy and Energy Minister Petar Dimitrov about the state calculating the prices of food commodities met such strong resistance from all parties involved.
Dimitrov was wise enough to say that his idea was not about the state controlling and defining prices but simply calculating them in a way to prevent speculation by retailers. The surprise came from Dimitrov’s superior, Prime Minister Sergei Stanishev, who, in an attempt to back the idea, told reporters that there was “nothing wrong with the state wanting to control the prices to prevent speculative actions and this was not a revival of socialism”.
Falling into his own trap, Stanishev now cannot escape from people making comparisons between his Bulgarian Socialist Party (BSP) and its predecessor, the Bulgarian Communist Party, which ruled Bulgaria between 1944 and 1989.
Dimitrov’s sole idea, however, remains the main point of interest. In general there is nothing wrong with a government trying to prevent speculative pricing, especially in a situation when prices are rising rapidly and this directly affects the budgets of every Bulgarian family. However, Dimitrov’s idea has several weak points that were immediately listed by professional producers’ organisations.
According to Dimitrov, every Monday, a list of the prices of 15 food products would be published online and consumers could compare their prices with the prices they see in the large retail chains or their local grocery stores.
Quite reasonably, professional organisation argue that by doing this once a week Dimitrov’s idea will have no point because in terms of food products calculating the price can be very dynamic. One of the main arguments against the idea is that the prices the ministry will calculate will not include the expenses a trader has to cover after he buys the product off the wholesale market. However, the biggest argument against Dimitrov’s idea is that Bulgaria has a functioning market economy that follows the principles of an open and free market. This is a market where something costs exactly the amount people are prepared to pay for it.
Of course, when some traders are looking for fast money and speculate with prices, there has to be some mechanism against that.
However, if there is a strong demand for something, then it is only natural for it to cost more. One economist argues that the information about the “real prices” of products by itself will not make traders sell cheaper if demand is strong and supply is insufficient.
On the other hand, the people who are affected the most by the price hike in food commodities are usually people with less financial capabilities, which, in Bulgaria’s case, means pensioners. Logically, publishing the information online will mean that this information will be available to people with access to the internet.
Which asks the question: how will the information reach the people affected the most by the price hike, such as pensioners, for example, who traditionally form the majority of BSP hard-core supporters? Because for now this is what could be seen as the reason for Dimitrov’s idea. It has come at a time when the BSP is trying to take care of its hard-core supporters. And what better way to do that than demonstrating a will to “control” prices to their lowest level?
The grounds for Dimitrov’s initiative can be seen in the words of BSP Sofia municipal councillor Anton Koutev. On August 28, Koutev said that the BSP was turning around its policy for the remaining two years of the Government’s term. “We will concentrate on two sectors: education and pensioners,” Koutev said. It seems with the “calculated prices” pensioners have been taken care of. Next on the agenda is education.
