Economics 101

The UP School of Economics does not hand out doctorate degrees as if — forgive the malapropism — sheepskin grows from trees. So Gloria Arroyo surely must know how markets function. Prices of rice are rising, clearly a signal that the supply of the commodity is getting tighter. For an empirical check on the actual supply situation, she can call on the folks at the Bureau of Agricultural Statistics to provide her the figures. That’s what these people are getting paid for.

Why is she then insisting there is no supply problem, contrary to what the principles of her discipline and the situation on the ground tell her? Well, she’s a politician. She cannot admit that something has gone wrong during her watch. Worse, she is a politician clinging to her position by her fingertips. People with nothing to eat could be the proverbial straw that would break the camel’s back.

We are, thus, being fed the bull that rice is being hoarded by speculators. Grains retailers are undergoing a new round of vetting by the National Food Authority to weed out the unscrupulous profiteers. Grains traders are about to be hit with the state’s police powers for purportedly withholding their stocks from the market.

Gloria, the holder of a PhD in Economics, should know that speculators play a vital part – and a perfectly legitimate one at that - in stabilizing supply and prices of a seasonal crop like rice. Without the speculators, the bottom of the market would fall during harvest time and prices would rise beyond the consumers’ reach during the off-harvest. The speculators pay good money for building up their inventory in the expectation of later on selling their stocks at higher prices. They, of course, run the risk of losing their shirts if they make the wrong call.

That’s Economics 101.

We don’t know how the new zarzuela, with the traders cast in the role of villains, will play to the gallery. Perhaps the consumers would turn their ire on Gloria’s bogeyman. Perhaps they would absolve her of the blame for not putting enough resources into high-yielding varieties, improved production technologies, fertilizers and irrigation. Perhaps the people would forget the P720 million fertilizer scam in 2004 and the continuing theft of money for agricultural production.

But this much we are sure of : The moro-moro will not add a single grain of rice to the national inventory. That’s also Economics 101.