Price increases reflect relative scarcities

Dear Editor,

In December 2010, the New Guyana Marketing Corporation, in response to “hoarding” by greedy shopkeepers, set up a number of distribution points for sugar and rice as part of the Ministry of Agriculture’s “anti-price gouging” exercise.  In September 2011, we are told that these ‘bad‘ people are again hoarding sugar, creating an artificial shortage on the market.

Of course what happened in December 2010 was that the demand for rice and sugar had increased because Christmas was in the air.  As supply did not increase, price simply had to rise.  In September 2011 GuySuCo itself revealed that it had “decided to slash by half, quotas to local suppliers in order to meet the European Union demands.”  The domestic supply of sugar therefore decreased, and hence price increased. As a result, the quantity traded would decrease as well and so, much to the annoyance of GuySuCo, the distributors wouldn’t even have to consider dipping into their stocks as it had expected them to.

What is the common theme that connects hoarding, price gouging, greedy distributors, GuySuCo and more generally the big wigs in the agriculture sector?  And what informs the thinking of these blokes?  Lord Keynes famously said that “The ideas of economists and political philosophers… are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”  But it cannot be a case of practical men following some defunct economist because even a defunct economist would recognise when markets are working well to ration goods.  Indeed, no one with an understanding of basic economics would trot out the hoarding line when changes in demand and supply cause prices to increase, properly reflecting relative scarcities.

No wonder that the industry that employs the largest workforce, occupies large swathes of the most productive agricultural land and has the newest, biggest and most expensive factory in the country – no wonder that it yet cannot produce a paltry 300,000 tonnes of sugar in a year!

Yours faithfully,
Thomas B Singh

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