Food prices and bread the devil kneads

Paolo Kernahan

THE Prime Minister either doesn't understand the impact of economic forces on businesses or doesn't care – or both.

Following decreases in flour prices, the PM criticised bakeries and doubles vendors for failing to make commensurate adjustments.

PM Rowley aimed at businesses that are minnows in the wider private-sector ecosystem – operators with modest revenues who are more subject to the shifting sands of the local and global economic landscape than many of the larger, profit-boasting behemoths that escaped Dr Rowley's knee-jerk vituperations.

I occasionally buy breakfast at a popular neighbourhood mom-and-pop eatery – Flavour Kitchen. Their profit margins hover right above operating costs. Whenever they're forced to tweak their pricing they do so almost apologetically. Can you imagine explaining why you're increasing the cost of a sada and bhaigan from $10 to $12?

The folks at Flavour Kitchen say they often hold their hand on raising prices, as they're conscious of what their clientele can afford. These are the "vampiric" businesses broad-brushed by the PM in his off-the-cuff Facebook post.

A world away from Flavour Kitchen, National Flour Mills and Nutrimix announced that owing to falling international grain prices and shipping costs, certain brands of flour were being reduced by ten-13 per cent.

Jumping on this news like butter on hot hops, the PM noted that some businesses were quick to increase the costs of their goods to keep pace with rising prices but are reticent in going in the opposite direction when prices fall.

Dr Rowley's intemperate, one-dimensional remark cavorted in popular stereotypes of greedy vendors and small businesses trying to get one over on penurious citizens. There is an inescapable political element to the Prime Minister's reckless, almost naive take on food pricing. In an election season during which the ruling party is increasingly unpopular as a second disastrous term grinds on, culprits must be found to share the blame for difficulties shouldered by the population.

It's far better for this administration if members of the public sees their suffering as the product of predatory businesses rather than good old-fashioned economic mismanagement and government-approved incompetence. Better the shady business owner than an unimaginative, clueless government incapable of achieving economic diversification and equality of opportunity for all.

The PM could have met with representative groups of doubles vendors and bakeries. A sit-down might have allowed them to explain why a moderate downward shift in the price of flour isn't enough to trigger a price reduction on their end of the value chain.

If after consultation Dr Rowley wasn't convinced of their sincerity, then few could fault him for slating the prices of doubles and bread.

That sort of thinking, however, rarely falls in line with divide-and-conquer political strategy.

What's interesting is that in the statement issued by Nutrimix there was this gem: "Locally, we have experienced increased foreign exchange costs (including US dollars), insurance, transportation, security and wages. These factors have collectively inhibited us from reducing our prices by a greater amount."

The same conditions described in that proviso are experienced by every business operating in this country. Larger businesses, like the ones ignored by the PM in his divisive broadside, are better equipped to endure those conditions than the mafioso doubles vendors and bakeries of Dr Rowley's restive imagination.

There was something else missed by the PM's Facebook post – price reductions on flour don't apply to the larger sizes: the ones used by bakeries and doubles vendors. So Dr Rowley's dig at them appears to have been a case of premature emasculation.

Additionally, what the PM seems not to understand is that the economy and private sector are swayed by a multitude of forces. Even with a substantial drop in freight costs – from US$13,000 to US$3,000 per container – owing to increased delays at customs (which are by design), any savings accrued by importers in freight are frittered away on demurrage charges.

Now I'm the last person to put my head on a block for any private business. Is price-gouging happening out there? Absolutely!

What we need here, though, is a more nuanced view of the market forces affecting prices faced by consumers.

This government needs you to believe the soaring costs that keep you from getting out from under are the workings of a coven of avaricious business conspirators.

If you, as the consumer, eat the bread that the devil kneads, you'll find yourself malnourished and misinformed.