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July 31, 2021

Marx, Emil and Lenin

Three weeks ago, in a column published by the ‘Jurnalul National’ under the title “Administered prices get the shelves empty,’ I wrote that it is inappropriate for the premier of a capitalist country to accuse private companies of raising prices without justification – the price of fuel, in this case. On the same occasion, I explained that the attempt to administer prices – the effect – without dealing with the cause – political interference upon the market – will be always doomed to fail: instead of high prices, people will have empty shelves. This is what happened in the summer of 2008, when the Health Ministry tried to freeze the prices of medicines, only to see them disappear from pharmacies.

Apparently, my words fell on deaf ears, because Emil Boc continues to play the game of ‘the right price.’ Last week, he once again said that increasing the price of fuel cannot be justified by the fiscal burden imposed by the state through the taxes charged to oil companies, based on a report made by the National Agency of Fiscal Administration (ANAF). With a threatening voice, he warned that he asked ANAF to “start general fiscal inspections in these companies, to see whether the incomes earned from the increase of fuel prices can be found in the profits of oil companies and, implicitly, in the taxes and dues paid to the state budget.” He also urged the Competition Council to run “a supplementary analysis aimed at revealing the existence of possible monopolistic practices, given the fact that all companies in this sector raised fuel prices by the same percentage, simultaneously.”

When he speaks about the request to the Competition Council, PM Boc probably means that he asked the institution to check the existence of an oligopoly (cartel), rather than a monopoly. But using the wrong term is a minor error, compared to the ridiculous accusation about fuel prices going up without justification, in a market economy where prices are a result of the offer and demand principle, as the ‘Sap­tamana Financiara’ magazine warns the premier. Unlike in the Marxist economic theory, where prices depend on production costs, in capitalism they are based on the marginal utility of the product, i.e. as much as the consumer is willing to pay for a certain product. Of course, if we want them to go down, we need a higher competition level in the oil sector, which can be achieved through an easier access on the market for newcomers. In other countries, for instance, supermarket chains have their own gas stations.
Let us explain it once again, hoping that the Marxists who call themselves Liberals will understand. The state is the only institution that lives from taxing everybody else (it expropriates 50 pc of the price of petrol, for example). In a market economy, prices are not calculated using mathematical formulas – starting from costs, the way Marx did. Instead, they are the expression of an anticipative entrepreneurial calculation, which is something essentially speculative. Cost is irrelevant and all that matters is the current situation of the market. Last, but not least, higher fuel prices are the normal result of a more expensive barrel of crude oil, which in turn is an expression of the uncontrolled money printing process which various states (including Romania) resorted to, in their desperate need for new cash.

For those who have not realised yet, the state has no mean to manage productivity (as basis for an income increase), as it can only curb consumption – which will get nobody rich. Increasing productivity is the task of free markets. They are the only chance of the poor and underprivileged to get rich. But, with politics depriving economy of an increasing amount of resources, which it diverts to the areas where it has an interest, markets get deprived of “raw materials.” Weak as they are, these markets cannot manage productivity, so there is no use wondering why we have the highest inflation rate in Europe. (‘Jurnalul National’)

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