Wed, Nov 07, 2007 - Page 8 News List

Editorial: High princes require new apporach

The Directorate General of Budget, Accounting and Statistics (行政院主計處) announced on Monday that the consumer price index (CPI) for last month was 109.70, the highest since October 1994. It was 5.34 percent higher than the same month last year.

Consumers have suffered from the pressure of rising prices and the Democratic Progressive Party legislative caucus has even demanded the resignation of the premier and the minister of economic affairs if the Cabinet fails to address soaring prices within a month.

Chinese Nationalist Party (KMT) presidential candidate Ma Ying-jeou (馬英九) cited president Chiang Ching-kuo (蔣經國) as an example of a leader who successfully controlled rising prices in the 1970s.

The methods used in Chiang's time, however, cannot be used today. Taiwan is a democratic country with rule of law and a free economy. In Chiang's day Taiwan was ruled by an authoritarian government and the KMT presided over a planned economy. No one dared protest against what the government said or did.

Not only is it not possible to emulate Chiang's tactics, it would be a bad idea for the government to employ administrative measures to interfere with the market. The more the government tries to change the allocation of resources, the worse the market will get. If the government is hasty in its efforts to lobby certain sectors or grant subsidies, it will use money on a few that belongs to all.

Interfering with the allocation of resources could cause even more inequality and irrationality. There are structural factors at work and the government must explain this to the public.

Otherwise, a lack of confidence can lead to interference with market mechanisms through the hoarding of goods and the manipulating of prices.

The Fair Trade Commission (公平交易委員會) investigated prices at supermarkets, but found nothing untoward because supermarkets are in a strong position to negotiate. Products at traditional markets, however, have wended a long and winding path from producers to middlemen to wholesalers and eventually to market. This creates many opportunities for exploitation along the way.

To apprehend the individuals responsible for gratuitous price hikes, the Cabinet has deployed an enormous task force including police, the Ministry of Justice Investigation Bureau, the Public Prosecutor's Office, and even the the Supreme Prosecutor's Office Special Investigation Team. While this reflects the government's determination to address the problem, high level authorities and criminal investigators are not necessarily adept at examining commodity prices.

The only means of determining the cause and identifying the individuals responsible for rising commodity prices is to follow the course of production. Only those operating within the system know the production and market environment well enough. Instead of dispatching squads of investigators, the government should encourage insiders to provide relevant information, with the Consumer Protection Commission overseeing the various inquiries.

Effectively dealing with the situation requires public vigilance so that fear sparked by the anticipation of rising prices is quelled and manipulative culprits are quickly apprehended.

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