A basic shopping basket made by Five days would cost today 17.1% more than a year ago. Flour and cereals rise 38% from last year, bread 14.7%; to make a potato omelette you would have to pay 16.9% more for oil, an extra 22.5% for eggs and an additional 12% for potatoes compared to 2021.
The average rise in the prices of 15 basic use products that would make up a hypothetical shopping basket such as the one proposed by the Second Vice President of the Government, Yolanda Díaz, shows the significant increase.
The proposal would meet prices agreed upon with the large distributors, a measure that the economics professor at the Pablo de Olavide University, Manuel Hidalgo, warns: “Usually [la limitación de precios de los alimentos]It’s bad news.”
Díaz explained that the measure would be configured as an “agreement”, not as a legal change. According to the minister, the proposal is inspired by the basic French basket shopping bag of essentials (essential basket) which had a fixed price of €10 and was made up of products such as potatoes, carrots, oranges, among others, and which were distributed by the Carrefour chain. Nicolas Sarkozy, former president of France, took this measure to combat the effects of the high inflation rates in the French country, which were around 2% at the time.
The regulations contemplate the price cap for ordinary products and services, in the event of “absence of effective competition, serious obstacles to the functioning of the market or situations of shortages”, according to the Ministry of Agriculture.
To date, this assumption has not been applied and the regulated services and products are scarce and of a special nature, for example the rates and fees for urban public transport, special rate calls (those beginning with 118, 803, 806 and 807) or the maximum prices for university credits.
For Hidalgo, capping prices in “mature markets,” such as food, would bring negative externalities. The measure could affect the weakest links in distribution and production. Companies with financial muscle can take on reduced margins, something that many neighborhood businesses cannot match. “If you sell a loaf of bread at 1.20 and a large distributor sets the price at 0.80, people will go to the cheapest,” says Hidalgo, which would mean the bankruptcy of the small business.
During the pandemic, to the capped prices of the butane cylinder and the caps on the price of gas in the electricity bill and electricity generation, there are cases such as the limitation of 0.96 euros in April 2020 and 0 .72 at the end of the same year of masks during the pandemic.
Experts warn that the cases are different, instead of a supply shock, the increase in basic products that would enter the basket is associated with the increase in energy and fuel prices, which increase production costs and are the main responsible for inflation.
Unlike in the case of masks, for a price limitation to a basic basket to work, it should be justified “based on the rise in business profits and the lack of market competition and that is very difficult to justify in the current situation “says the economist.
In the case of the cap on gas, the economists at Caixa Research assure that price regulation, although it prevents them from increasing, produces negative externalities, such as greater electricity consumption, at a time when attempts are being made to reduce this consumption, and production more inefficient, since the production of electricity through cogeneration plants from 15% to 9%.
Other regulated price trials
care prices. The Government of Argentina agrees on the price of supermarket products at a fixed price. The consumer association Adecua ensures that the measure has given “relative” results. In addition, they denounce that minority distributors “are unable to compete.”
Rentals. Catalonia approved in 2020 a law that froze and regulated the price of rentals, reducing the average price of housing by 3%. The measure was annulled by the Constitutional Court this year for jurisdictional interference with the State.
Hungary. It has the price of six regulated commodities. Sugar (0.66 euros), wheat flour (0.51), sunflower oil (1.80), ham (3.58), chicken breast (4.03) and ultra milk pasteurized (0.69) and chicken carcasses (0.75).
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