As the government succumbs to the electoral pressure of this year, the post-electoral bill increases, turning 2025 into a comparable challenge, according to some analysts, to 2010, another year that imposed severe corrections after the excesses of 2008 and 2009.
To mark politically, the government introduces distortions in the economy, all stimulating aversion to profit, thus undermining the motivation for development.
Communist Ghosts - Speculation and Mercury
First came the agitation of the speculator ghost who would unjustifiably raise prices and establish an unjustifiably high margin. No one has managed to explain how to measure a justified margin, what speculation consists of in a free economy? What is the justified price, who sets it? In communism, the answer was simple: mercury. And it was one of the reasons for the shortages back then.
Next came the capping of the price of basic products, which did not have any significant beneficial results, regardless of the triumphant messages from the Victoria Palace.
Initially agreed upon for the short term, it became chronic, and retailers took measures accordingly. The most banal was the waterbed effect. Forced to cap the commercial margin in one area, resulting in a price decrease of 8-23%, as claimed by the Minister of Agriculture, for a few products, they increased it in another area. They lowered the price of milk and flour, and raised it for detergents.
How Will Romanian Small Producers Be Destroyed
Now they want to hit populist with an even more extensive measure: capping the commercial margin at 20% for all Romanian foods. Although the Minister of Agriculture announces that the decision is already practically made and the draft of the ordinance is almost finalized, processors and retailers will only be called for consultations on June 11 and 12. It is hard to understand why they are being called.
From the start, the notion of a Romanian product is difficult to define. The minister says that by Romanian products, he means products processed in Romania, even if they are made from 100% imported ingredients.
"The measure is an aberration and violates economic laws. The vast majority of processed products in Romania, dairy and deli meats, come with imported goods, which have a different margin. How do you calculate it?" says Prof. Dr. Mircea Coșea for spotmedia.ro.
We have no indication that the ministry has conducted an impact study of the measure, much more extensive than the one that targeted a few basic food products until now.
What could happen has been explained by almost all industry associations in the media, because they have not yet been officially consulted, as well as by economists.
First and foremost, of course, the accentuation of the waterbed effect, thus substantial price increases for other products.
The impact on inflation, says Prof. Dr. Bogdan Glăvan for spotmedia.ro, "will be zero. Inflation will follow its slightly downward course anyway, but the government will attribute the decrease in inflation to this measure, especially if it is legislated quickly, before the summer season, when fresh foods are already getting cheaper. Exactly the same thing happened last year."
Then, Romanian products could become increasingly scarce on store shelves - the feared delisting.
"Hypermarkets will become more reluctant to list new Romanian products, manufactured by small producers, which already bring them small sales.
Thus, the law serves the major Romanian producers, protecting them from the competition of small Romanian producers. It has nothing to do with imports; here it is evident that the law itself stimulates imports.
We understand that the ministry intends to impose sanctions for delistings. It is naive. A retailer who does not want a product on their shelf has plenty of methods to sabotage it until they eliminate it. As the quantities contracted for each product are strictly at the discretion of each merchant. And how will you force them to introduce new Romanian products?
So, as Prof. Coșea points out, some products may disappear. "You cannot impose an unlimited measure on a foreign-owned hypermarket to reduce profit. They will no longer sell these goods."
So instead of being helped, Romanian producers, especially the smallest ones, could be disadvantaged.
"There will be all kinds of medium-term effects that cannot be stopped. Profit cannot be limited because someone wants it. This is the market economy; the margin is ultimately included in profit, either it will be redistributed to other products, or certain products will be abandoned," concludes Prof. Coșea.
Margaret Thatcher's Lesson
Nowhere has the mercury solution yielded results. Hungary also tried it, and the result was staggering inflation, shortages, and Romanian hypermarkets' parking lots near the border filled with cars from Hungary coming to us for supplies.
"If you try to buck the markets, the markets will buck you," said former British Prime Minister Margaret Thatcher. In other words, if you try to defy the market economy, it will defeat you. This is exactly what the Ciolacu government is preparing to do.
The market will always react to aberrant measures because its laws are like the law of gravity. The apple falls from the top down, regardless of how many emergency ordinances a government issues to reverse the direction.
What people should understand, no matter how tempting the capping measures may seem and no matter how much the unjustified price refrain is sung, is that in a free economy, the price is at the meeting point between demand and supply. Any intervention generates distortions that ultimately every citizen pays for excessively.
And inflation is always generated by the government, which only benefits from it.