Comment: Bulgarian politicians serve up populism in price control proposals

Written by on November 1, 2018 in Perspectives - Comments Off on Comment: Bulgarian politicians serve up populism in price control proposals

Do Bulgarian politicians take their cues from the communist past or the European future or, more precisely, the future European Parliament elections?

The question is raised as the country’s politicians appear to hark back to the command-economy interventions of the discredited past – the communist past, that is – to address rising cost-of-living in an economy that has become inflationary.

This is not to lack sympathy with the plight of Bulgarians, who live in what wire service hacks are wont to repeat is the European Union’s poorest country.

Prices rises matter in this country’s households; every stotinka counts; though perhaps less so in the households of MPs and those who hold more rarified public offices, to whom taxpayers are involuntarily generous. But for the politicians, the currency is votes, and the commodity in this case, is the price of bread, to say nothing of other foods.

Bread is central to Bulgarian personal and political existence. Even in the politest households, the practice of swabbing food with a morsel of bread is commonplace. In politics, more than one Bulgarian government has paid the price, in the past 25 years, of increased cost-of-living. That has tended to happen in the colder months, and to coin a phrase, winter is coming.

Mindful of the latter, it seems that Bulgarian politicians revert to that mindset of the past. That which is inconvenient must be controlled, even if it is a matter of market forces.

This past summer, there were unseasonal rains, which hampered wheat crops and thus have resulted in increased bread prices. Increased oil prices on world markets too have had an effect on cost of living.

The responses? Consider the most recent one, reported in the Bulgarian-language media on November 1, the tabling by the VMRO party of amendments to the Consumer Protection Act that, if approved, would introduce price caps on a number of basic food products.

The VMRO is headed by Krassimir Karakachanov, one of the four deputy prime ministers in the current coalition government and one of three co-leaders of the United Patriots, the grouping of nationalist and far-right parties that is the minority partner in government.

The proposed amendments envisage that “in the presence of critical social and economic circumstances” that the Economy Minister, acting on a proposal by the Social Policy Minister, may within 12 months set a maximum mark-up on basic goods.

These goods would be defined in law, with the draft version including bread, yoghurt, fresh milk, cow cheese, cow butter, Vitosha yellow cheese, chicken and pork, eggs, flour and cooking oil from Bulgarian producers, which “according to the Social Policy Ministry are vital for the households with the lowest incomes”.

Those tabling the bill say that they gathered information from meetings with manufacturers, consumer organisations and state institutions, concluding that retailers were marking up goods to an unfair extent.

The VMRO backers of the bill argue that the possible price caps would have no major impact on the profits of retailers, as these products account for only one per cent of their turnovers. However, consumers would be protected, they says, against the “excessive profits of traders”.

Leaving aside that phrasing about “critical social and economic circumstances” – some historians, economists and armchair pundits wont to shout at the screen during television news bulletins might argue that history is an unrelenting continuum of such circumstances – it is striking to consider how some politicians see extremely direct intervention in the economy as the solution to ills.

Including politicians who spent their youth in Bulgaria’s “socialist” economy, or perhaps because they did. Perhaps they do indeed value the free market and do indeed have at least some rudimentary understanding of (non-Marxist) economics; perhaps they rely instead on the hope that their actual and potential electorate has no such assets. Would it to be too unkind to suggest that the best way to startle a sleeping politician would be to creep up and sharply whisper: “bread riots!”

Karakachanov’s VMRO is not alone in suggesting interventions. The Bulgarian Socialist Party, lineal successor to the Bulgarian Communist Party, has suggested cutting value-added tax on bread from 20 per cent to five per cent.

Under current BSP leader Kornelia Ninova, the socialists would like to see this amendment voted in Budget 2019, to be considered in November by Parliament. The BSP proposal would, of course, have less of an impact on retailers, ironic considering that in past years, the BSP has come up with proposals hostile to retailers, including one that would have forced them to prioritise the sale of Bulgarian products – in direct contravention of EU rules.

The obvious shortcoming in the BSP proposal (while it would not be without precedent in other countries, where basic foodstuffs attract low or zero rates of VAT) is that no detail was offered on the fiscal impact, which one might think was rather important. The same Ninova said that were it in government now, the BSP would be handing out all sorts of goodies, including vastly-expanded heating assistance during the winter. It was unclear how this largesse would be funded, but that is the vice of opposition; the voodoo of promises without the virtue of reality.

The BSP, by the way, would also want measures against “speculation” though such measures were not defined. Evil speculators? No wonder every day we read commentaries about the return of the rhetoric of the first half of the 20th century.

One nationalist minority party and the main opposition socialist party are not the only interventionists. In contemporary politics that is essentially a competition among populisms with scant regard to ideological shade or debate on policy options based on provable facts, the government itself got into the game.

(Did someone whisper “bread riots!“? Did someone, after a day in the corridors of power or parts nearby, see that scene in Doctor Zhivago in which the Tsarist police bend from their horses to slice open the grain sacks with their swords, thus siding with the angry mob? By the way, it’s November; has the bread price actually gone up that much?)

As in September, when Ninova was burbling about cutting VAT on basics, the government – in the person of Agriculture Minister Roumen Porozhanov – was telling anyone who cared to listen that he had been given assurances from major retailers that they would forego their profit margins on the prices of bread, charging only a mark-up to cover rejects and the costs directly related to selling in the supermarkets.

Porozhanov did note, however, that an agreement could not be signed on this with the major retailers; that, he said, would constitute a cartel. Credit for understanding at least that. As for cutting the VAT rate on bread, well, that was a matter for the Finance Ministry, he said.

On October 28, at a special sitting, Bulgaria’s Cabinet approved the Budget 2019 bill proposed by the Finance Ministry which was, not surprisingly, silent on the topic of tinkering with VAT on basics.

Humankind, it has been said elsewhere, cannot live by bread alone. There are also things such as petrol. Just recently, though they garnered no great interest barring from the media desperate for a story on a quiet weekend, motorists in various towns held protests against increased fuel prices. What do they want? State intervention to push down prices.

It may be easy to dismiss all of this as attempted pressure from the street and as the facile responses from politicians desperate for the votes that fill their tables and fuel their lifestyles. But in Bulgaria, the country will vote twice next year, in May in European Parliament elections and in autumn to elect mayors and municipal councillors.

In an age of post-truth, of populism, and in some quarters of a nostalgia for the certainties of the state-interventionist past, it is hardly likely that half-baked schemes about bread and other basics will go away; like scare stories about migrants and other fuels for the furnaces of emotion, they are going to grow, not diminish. It is a troubling and unhelpful mindset; one that cannot cope with whatever “critical social and economic circumstances” that ultimately, it may aggravate, not ameliorate.

(Photo: kidmissile/flickr.com)

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About the Author

Clive Leviev-Sawyer is the Publisher and Editor-in-Chief of The Sofia Globe. He is the author of the book Bulgaria: Politics and Protests in the 21st Century (Riva Publishers, 2015), and co-author of the book Bulgarian Jews: Living History (The Organization of the Jews in Bulgaria 'Shalom', 2018). He is also the author of Power: A Political Novel, available via amazon.com