Destiny escape impossible… | Capital

Destiny escape impossible… | Capital
Destiny escape impossible… | Capital

By Kostas Stoupas

Destiny is impossible to escape…

One of the core beliefs of this column is that the safest ally of the common man, the consumer and those with entrepreneurial ambitions is the market.

That’s why every time I read about price controls and warnings to companies not to raise prices I become very skeptical.

From this point of view I believe that the fines of 2 million recently announced by the government to two multinationals and ineffective may prove to be short-term and harmful in the long-term. It is enough to observe the course of the economic figures of the domestic industry that leads in the relevant sector to understand what is happening.

Business profits are evaporating as raw material and energy costs fluctuate wildly, while high interest rates drive up finance costs.

“The Company’s profits, in addition to the above, were also affected by the increased cost of borrowing as a result of the continuous increases in the basic interest rates by the central banks. The profits before taxes amounted to 2.3 million euros, compared to profits of 3.3 in A’ H1 2022. Profit after tax amounted to €1.7 million compared to €2.5 million in H1 2022…”

See: Papoutsanis: Net profit €1.7m in the first half – Turnover down 4%

It is obvious that the companies in the sector are trying to cope with the unfavorable environment that has been created, to keep the shares without increasing the prices but also not to accumulate losses and go bankrupt…

Politicians, even earlier and from the time of Kimon Koulouris who fought graphic battles against accuracy by being photographed for the newspapers next to the crates of the popular, fight for the battle of impressions.

The “populism” of politicians who tout price controls may in the short run be simply ineffective but in the long run usually prove harmful. At a certain point, businesses can’t bear to work with losses and go under. This exacerbates the problem with shortages of goods and the creation of monopolistic conditions and permanent overpricing of those who manage to survive…

“A few days ago Grant Thornton published the “Greek Business Pulse” survey. Some of the interesting facts it had are the following:

About 6 out of 10 entrepreneurs, who participated in the survey, expect an increase in production costs, while 2 out of 10 of them state that the increase in costs will exceed 10%.

According to the survey, about 80% of companies, which expect an increase in production costs, intend to incorporate the charge into the final product prices. That is, it intends to proceed with corrective price increases, in order to preserve its profit margins.

However, part of the companies (about 20%), who do not expect an increase in production costs, intend to increase prices. This is a move aimed at restoring/expanding profit margins. Finally, there is a roughly 10% of businesses, which expect a reduction in production costs. Of these, only 50% intend to reduce prices…”.

Yes, some are profiting and profiting, but the problem is bigger…

The problem of rising prices is neither topical nor temporary. The price of olive oil, cocoa, rice, sugar, etc. are moving towards the highest levels of the last decades.

Recently India which is the largest exporter of rice has decided to curb exports to cover domestic price appreciation… Fatefully the prices will rise more in the rest of the world and no amount of measures and fines are going to reverse this…

In the last days e.g. in distant Bangladesh, large demonstrations and violent incidents take place. Bangladesh is the garment factory of the planet. Tens of millions of workers are on strike demanding a tripling of their meager (by our standards) wages from 70 euros a month to 190. About 300 factories are closed for weeks and another 50 will be delayed in opening because they have been set on fire.

It is easy to calculate that in the coming months the supply in the ready-to-wear sector will decrease and the prices will rise proportionally so e.g. in the t-shirts of 10 euros a piece as well as in those of 150.

The world has entered a more general period of appreciation due to both temporary and more permanent causes. We have analyzed these thoroughly in other articles on deglobalization, demographic aging, rising interest rates due to inflation and quantitative easing…

I realize that the forces shaping prices are greater than the power of politicians (let alone the government of a small country). But let’s not make things worse…

Destiny is impossible to escape…

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The article is in Greek

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