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Baffled by the appeasement policy of western
establishments in their desperate attempt to stop
the then hard-hearted but up-coming Adolph Hitler,
Great Britain’s Winston Churchill commented that
their action or rather inaction was “a riddle
wrapped with a mystery in an enigma”. Since then,
the saying has become an expression for everything
and anything one cannot understand.
I have never come across a phenomena more befitting
of Churchill’s saying than Yohannes Woldegeberiel’s
Viewpoint published last week in this
newspaper headlined, “Emulation of Edier and Eqube
Not the Best for Consumer Cooperatives”, [Volume 8
Number 414 April 6, 2008].
Yohannes said “. . . Liku’s commentary was a mere
endorsement of Prime Minister Meles Zenawi’s
statement, with some puzzling explanation and
justification for the causes of the sudden but
easily aborted distortion of prices on edible salt.”
He did not mention what puzzled him in the
commentary but in his own hypnotized and
contradictory looking glass he went on immediately
in the following paragraph saying despite the Prime
Minister’s interest in the popular format of
Edier and Equibe, I protested consumer
cooperatives shall be modeled in their format.
What is wrong in endorsing the Prime Minister if and
when he is right?
Looking at the available evidences, by piecing
together what has happened in the economy, what
government officials said and did not say, what
others have said and what the actual reality shows,
there is inflation in the country and consumers are
hit hard by it. But what I tried to demonstrate with
my edible salt and price distortion conundrum was
that there may be other reasons for the inflation
than what has been popularly outlined as major
causes. As the salt debacle proved it to all of us;
the information gap between consumers and retailers
is just one, albeit it is predominant.
I hope and trust my gut-reaction that the ironing
out of consumer policies and the formation of
consumer associations would help much in this
regard. However, it would not be of much help if it
is going to be modeled in the popular Edier
and Eqube format because the gap in
information cannot be gauged for reason of
constrained capacity. For the Eqube and
Edire format is not well regulated on a
transparent basis, there is a high probability of
propensity for running in to the risk of having sham
associations which may restrain trade by forming
collusion with predatory sellers. And that would be
roasting consumers over a slow fire.
I submit this is a crunch time in the market. One of
the functions of a government is to intervene and
correct market failure, preferably before it happens
and certainly when it happens. The government would
always have some exceptional prerogative and powers
- droit du seigneur - a king’s ancient right
to do with his subjects what he will - of which none
of them are akin to any kind of association. It
would be beneficial to all if it uses them to
stabilize the market with an efficient allocation of
resources and in the time duration required.
Instead, the government is shying away from doing
that for reasons of politics, limiting itself only
at playing around on the mechanisms of monetary and
fiscal measures. It seems to me it does not like to
be blamed for distorting the market and even when it
recommends the formation of consumer associations,
it wantes them to be seen as free from its hands.
That may be the correct approach in an ideal world,
but it will not put food on the table in the real
world.
Moreover, fiscal and monetary policy instruments
would take a longer time to have their positive
effect on the market. Direct intervention
accomplishes the intended result with a much lower
and quicker period of time. Thus, if I have anything
to recommend as a solution for the pitfall, all I
say is that the government should grab the market
by the horns and wrestle it to the ground; twisting
it as much as possible to fit it to the purpose
wanted but without breaking it down. I hope Yohannes
understands this is metaphorically speaking.
Short of directly intervening in the market,
nevertheless, the government must involve itself by
providing policies and legislations for forming
consumer associations, and provide a guideline on
how they should operate.
Yohannes failed to get a grip on this point on two
counts: He thinks that there are enough and
pertinent legislations on the matter. I beg to
differ. No need mentioning here that it was just
because the provisions of the Civil Code were
incompatible with the complicated business of
consumer protection that we needed to have another
proclamation on the establishment of cooperatives.
Otherwise, what is it good for having a pile of laws
on a single matter?
The proclamation Yohannes was referring to falls
short of his verbiage. A legislation I am arguing
for is the one that administers matters of restraint
of trade, cartels, collusions, vertical or
horizontal arrangements, mergers, liquidations and
acquisitions from the perspective of consumer
associations and protection. They are a whole lot of
corporate governance matters.
However, I would not hesitate to call one a day
dreamer if he or she thinks the problem associated
with consumer protection would just go away for the
simple reason that we have got consumer
associations’ establishment proclamation or some
sort. We need to give the background legal
arrangements on how they are going to operate.
Let me raise some quintessential queries as
on-the-cuff shots. Would the up-coming consumer
associations be permitted to buy and sell only from
and to a particular group? Can they jump traditional
dealers and buy the goods they need directly from
producers? If that happens, what would be the fate
of the duly licensed and tax paying businesses in
the market? Can these proposed consumer associations
hoard goods for the rainy day? If they do, how could
they be different from the conventional sellers who
hoard their goods with a hope to raise the price in
the future? Does the fact that one is doing it to
lower the price and the other is to hype it up make
any difference?
It is not only hording with a view to price-hike but
also hoarding with a predatory intention to reduce
price beyond its marginal production level that
amounts to a crime. Where is the law Yohannes said
he has it dealing about theses and other relevant
issues?
The other count Yohannes failed to notice is what
consumer associations are. There are two kinds:
Those that deal with a bread-and -butter issues. The
second ones are bodies that fight on issues of
quality of life concerns. If I may say, the first
ones talk about economic matters and the second ones
deal only on value issues.
Question of demanding bread on a reasonable price is
an economic matter but talking about the quality of
the bread, its size or even its color is a value
perspective. The first kinds of associations are
agents in the market participating in the actual
dealing either as buyers or sellers. The second ones
do not involve in the market directly per se but
tries to get what they are demanding by way of
advocacy. We are dealing with the first kinds of
associations on our case. They are supposed to
actively participate in the market and in doing so
surely need some regulation to govern their
behavior. Any failing in so doing is just flying in
the face of established practice.
Says Yohannes: “I had hoped, and was even certain,
to get some legal propositions or mechanisms in
halting the painful . . . price hike . . .”
I am sorry; from Adam Smith to the ordinary
economist of my generation, no one would count that
a price hike be eliminated by some legal
propositions or mechanisms. If that could have been
possible, no lawyer would have been left unemployed.
The trouble is in the nature of economics, too.
Economics as a subject offers different forms of
production from the artificially crafted free
competition to the really likelihood of a monopoly
and oligopoly. But it has nothing to say when it
comes to an arena of a just distribution of what is
produced. The winner takes it all; unless of course
the state intervenes.
State intervention is what I was recommending and
that was what Yohannes was up against.
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