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China Times: Specter of price McCarthyism overshadowing Taiwan

2012/06/24 18:20:55

A nationwide campaign against whoever hikes consumer prices is being carried out in Taiwan. Almost all government agencies and sectors of society are hounding shop owners who dare to raise the prices of their products and services.

We have to ask: Does this nearly perverse "price McCarthyism" make sense?

It is easy to understand why people hate price hikes so much: prices of almost everything have been rising, but their salaries and wages have not.

We cannot forget, however, that one of the most important foundations for Taiwan's economy is its free market mechanism, based on which businesses can create and sell any product they think will attract consumers.

The prices for the products or services of these innovative and well-managed companies are mostly set by the market, as are their profit margins.

With this in mind, we believe the current "united campaign" by society to ferret out "price raisers" cannot be supported morally or theoretically.

To be more blunt, this is no different from making a mess of things, and it is the government that is taking the lead in making the mess.

It is the government's duty to create market order and to ensure that business contracts are carried out honestly. It is not the government's job to maintain so-called reasonable price levels because it has no means of deciding what constitutes "reasonable levels" of consumer prices.

The government is also not in a position to estimate what the private sector thinks are "reasonable price levels." For instance, Apple's profit margins for its iPads are up to 50 percent while other manufacturers of similar products take a maximum of 10 percent.

This is simply how the market economy works. If you have good technology, strong innovation and efficient marketing channels, you can earn high profits, as consumers are the final judges of your products.

What the government can do to "stabilize" consumer prices is, for instance, to release stored vegetables after typhoons hit to help stamp out price gouging.

We're not advocating the classic laissez-faire market system. We are aware of the weaknesses of the market mechanism and we understand the necessity for the government to intervene.

But the government must get involved when such "external costs" as pollution and damage to the environment cannot be reflected in the price-setting mechanism.

This cannot be equated, however, with the government playing the role of "price arbitrator."

Therefore, it is high time that the consumer price "witch hunters" in Taiwan stopped making a mess of things. (Editorial abstract -- June 24, 2012)

(By S.C. Chang)
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