Prices, stand! How to promote inflation correctly

Today, before our eyes and, one might say, in our pockets a very indicative story is developing about how not to regulate prices.

President and Rules

This story began recently, in December 2020, when President Vladimir Putin drew the attention of the government to the fact that very strongly in 2020, prices for sugar and sunflower oil rose. The government quickly responded to a remark and began to restore order. Of course, government members knew that they have current rules for regulating prices in situations that require state intervention to curb price bursts. The corresponding document was approved by Decree No. 530 of July 15, 2010. The “Rules ...” said that the maximum permissible retail prices for food products are set by the government for a period of not more than 90 calendar days, if within 30 calendar consecutive days on the territory of a separate constituent entity of the federation the prices will be 30% or more.

However, the December situation with sugar did not fit into these rules. And what to do? The president ordered.

The president, apparently, did not dare to say that, according to the current order, the maximum prices for sugar and sunflower oil were not supposed to be supplied, because we do not fall under the criteria. Or maybe they said that we certainly do not know this. But we know what we did. And they did badly.

Special agreements were signed between the Ministry of Agriculture, the Ministry of Industry and Trade, industry associations, manufacturers of goods and retail chains. With these agreements, the price of sugar was recorded at a level of not higher than 36 rubles per kilogram for wholesalers and 46 rubles for retail buyers. According to sunflower oil, prices were limited by 95 and 110 rubles per liter, respectively. Agreements should have been valid until April 1, 2021. The current order was thrown back, the rules were changed after the agreements were signed. Not only that the agreements themselves turned out to be “crooked” and problems began with their execution, but in general, this decision launched the flywheel of inflation promotion.

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