Fate escape is impossible… | capital

Written by Kostas Stupas

Fate is impossible to escape from.

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 $2 million fines recently announced by the government on two inefficient multinational companies may be short-term and harmful in the long term. It is sufficient to monitor the course of the economic figures of the leading local industry in the sector in question to understand what is happening.

Business profits evaporate as raw material and energy costs fluctuate wildly, while high interest rates drive up financing costs.

“The company’s profits were also affected, in addition to the above, by the rise in the cost of borrowing as a result of continuous increases in key interest rates by central banks. Profit before taxes amounted to 2.3 million euros compared to profits of 3.3 in the first half of 2022. Profits after tax amounted to 1.7 million euros compared to 2.5 million euros in the first half of 2022…”

See: Papoutsanis: net profit of 1.7 million euros in the first half – turnover decreases by 4%

It is clear that companies in this sector are trying to adapt to the unfavorable environment that has arisen, to maintain stocks without increasing prices but also not to accumulate losses and bankruptcy…

Politicians, even before that, and since the time of Kimon Koulouris, who have waged pictorial battles against accuracy by posing for newspapers next to popularity boxes, are fighting the battle of impressions.

The “populism” of politicians who promote price controls may simply be ineffective in the short term, but is usually harmful in the long term. At a certain point, companies cannot afford to deal with losses and bankruptcy. This exacerbates the problem with shortages of goods, creating monopolistic conditions and permanent overpricing for those who manage to survive…

“A few days ago, Grant Thornton published the Greek Business Pulse survey. Here are some of the interesting facts it included:

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

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

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

Yes, some people win and win, but the problem is bigger…

The problem of rising prices is neither local nor temporary. The prices of olive oil, cocoa, rice, sugar, etc. are heading towards their highest levels in recent decades.

India, the largest rice exporter, recently decided to limit exports to cover rising domestic prices… Ominously, prices will rise further in the rest of the world and no amount of measures and fines will reverse this…

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

It is easy to calculate that in the coming months supply in the ready-to-wear sector will decrease and prices will rise proportionately, for example. In T-shirts at a value of 10 euros each and also in T-shirts at a value of 150 euros.

The world has entered a general period of appreciation for both temporary and more permanent reasons. We have carefully analyzed these matters in other articles about deglobalisation, aging populations, rising interest rates due to inflation and quantitative easing…

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

Fate is impossible to escape from.

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