OFFLINE: Eco 101 for dummies

It is beyond irritating when government officials issue statements or set policies that defy the simplest of rules of economics.

I do not present myself as an economist, but I like to think that I have sufficient common sense to understand what is rational and what is pure bunk.

In our beloved motherland, ordinary Filipinos such as yours truly have been shocked at the illogical prices of onions in the market, be it wet market, corner talipapa, or mega supermarket.

Last week, red onions were retailing at P720 per kilo or roughly $13. White onions were selling for slightly less.

Throughout the rest of Asia, however, the very same onions of whatever color have been selling and continue to sell below P100/kilo, or less than $2. This is also true in most parts of the world, even in countries that do not grow onions.

Someone most certainly made a killing in distributing the key cooking ingredient, and it’s not the market vendors. It’s not even the supermarkets, as all retailers get their stock from traders who dictate how much they sell the product that most Filipino kitchens cannot do without.

Fact is, onions are just one product that those shadowy traders control, cartel-style. It’s not that they do not follow the law of supply and demand, it’s precisely because they determine what supply reaches the market, where the demand is constant.

This week, a congressman who is a noted economist said that a ‘Chinese mafia’ was behind the soaring prices of onions.

Perhaps he is correct, but for many years, even decades, it was a group of Chinoy – Chinese Filipino – traders who had near total control of not just onions, but practically all key agriculture products, ranging from sugar to garlic to carrots to any and all vegetables that are commonly used by Filipino housewives and househusbands who cook.

So if Chinese businessmen from the People’s Republic came in and took over the racket, it is fair to presume that they did so in partnership with the Chinoy traders of years and decades past.

It’s not just onions either, although it is now the product of the month that earns the traders hundreds of millions.

Recall that a little more than a month ago, the price of refined sugar had zoomed to around P100 per kilo, or close to double its usual price.

The government tried to intercede by asking the big retailers to release their stored stocks and bring down the price by 20 to 25 percent.

It worked, but only for the shortest of periods. Then prices began to creep up when no one was looking.

It is not only this government, but every government that seems to constantly fall into the trap set by the cartel or mafia or whatever it is that you want to call them.

The Chinoy traders of the past may have been replaced by Chinese “businessmen” of today, but the modus hasn’t changed. They buy from Filipino farmers, store their purchases in warehouses, cause an artificial shortage by not releasing those stocks when needed, then make huge profits when they see that the artificially bloated prices have reached their peak.

Last week, the government announced that prices of onions would be forcibly reduced to P250 per kilo by Friday, or the day before New Year’s Eve.

This week, guess what happened.

Answer: nothing.

Prices may have gone down slightly, but nowhere near the announced new price of P250.

Market vendors stated the obvious. How on earth could they sell onions at P250 a kilo when they buy what they sell from traders at double that amount?

Feedback from the field reporters of the news organization where I work said that at best, some retailers were selling at P650 per kilo, or even P600 to their suki or regular clients.

Meanwhile, the government ended up embarrassed yet again, which further eroded their credibility with the people.

To repeat once more for the second time around again – that’s me trying but failing to inject some humor on the current sad situation – there is no way that the government can dictate how much certain products can sell, not when traders control how those products enter the market.

Free market economy, some will call it, but this is pure bull.

Here’s a little story. Some decades ago, my in-laws had several stalls in a public market in the capital city of Manila, and they were all earning good money selling essentials like groceries, rice, salt, and garlic.

One of those in-laws told me that a bigtime trader had approached her offering to supply garlic, which had started disappearing from the market. That trader said he had not one, not two, but three warehouses full of the most important ingredient in stir frying most anything, but especially the daily breakfast staple of fried rice.

She only ordered a small volume, but still earned enough as the prices had skyrocketed at the time. When the other market vendors learned that she had somehow gotten a reliable supplier, they too joined the bandwagon, selling garlic at double to triple its usual price.

So today’s onion shortage is no different. It was artificially induced, and the government was helpless in trying to stop the artificial shortage.

So is there a solution to this recurring problem?

There probably is, but it’s not clear if any administration of the country has the political will to take the necessary action. It has to begin with the government itself going head-to-head against the traders. It should buy from the farmers and distribute the same immediately.

It remains a mystery why all other countries in the region are able to guarantee that their people get the products they need at the right prices, meaning affordable to all.

Instead, we have had one billionaire senator saying she can live without onions, while another government executive said we should use less.

Their solution is no solution at all, huh?

I am willing to bet that in the years to come, artificial shortages of select products will continue. The people will complain, and the government will take crackpot measures to solve what is essentially a non-problem.

So why not solve it at the source, I wonder. Stop the traders from causing artificial shortages.

Now why hasn’t anyone thought of this before? Perhaps they did but didn’t pursue it because those evil traders padded the pockets of some officials, who then said that government should never compete with the private sector.