PRICE CONTROL ON RICE: THE GOOD, THE BAD, AND THE UGLY

 

“I eat the same foods almost every day. I have my favorites like Filipino beef broth, chicken soup with lots and lots of rice.” - Manny Pacquiao

Manny’s words reflect the deep attachment of Filipinos to rice. Rice is not just a staple food, but also a symbol of culture, identity, and history. Rice is not just a commodity, but also a right, a value, and a responsibility. Rice is not just something we eat, but also something we cherish, respect, and fight for.

To illustrate this point, let me share with you a hypothetical story of Juan, which could be yours too, a typical Filipino farmer who lives in a small village in Nueva Ecija. Juan’s family has been growing rice for generations. They have a small plot of land where they plant rice twice a year. They also raise some chickens and pigs for food. They are poor, but they are proud of their work and their heritage.

Juan and his family eat rice every day, three times a day. They eat it with fish, vegetables, meat, or eggs. They season it with salt, soy sauce, vinegar, or chili. They use their hands, spoons, or forks to eat it. They cook it plain, fried, boiled, or steamed. They have it in different shapes, sizes, and colors. They prepare it in different dishes, such as arroz caldo, lugaw, or champorado. They enjoy it on different occasions, such as birthdays, weddings, or fiestas. They consume it in different ways, such as sharing, thanking, or offering.

Juan and his family cherish rice as a gift from God and nature. They respect rice as a precious and sacred resource. They fight for rice as a right and a value. They fight for rice against the forces that threaten to take it away from them: the climate change that causes droughts or floods; the population growth that increases the demand or consumption; the land conversion that reduces the supply or availability; the corruption and mismanagement that affect the policies or programs; the price control that distorts the market or creates problems.

This story shows how important rice is for Filipinos like Juan and his family. However, rice is also a scarce and volatile resource that is subject to various challenges and crises. The rice crisis has affected the availability, affordability, and quality of rice in the country, as well as the welfare and living standards of the people.

PRICE CONTROL

To address the rice crisis, the government has implemented various policies and interventions like importing rice. One of the most controversial and complex interventions is price control.

Recently, President Bongbong Marcos, through Executive Order 39, approved the recommendation to set price ceilings nationwide on rice – P41 for regular milled and P45 for well-milled rice. This move has sparked mixed reactions from various stakeholders, such as consumers, producers, traders, economists, lawyers, politicians, and activists. Some have praised the price control as a positive and necessary measure to stabilize the economy and society. Others have criticized the price control as a harmful measure.

Let me present the good, the bad, and the ugly consequences of price control on rice prices amid the rice crisis in our country.

THE GOOD

Prevents Inflation

Price control can stabilize the general level of prices in the economy by preventing excessive increases in prices. It will maintain the purchasing power of money and avoid fluctuations in economic activity.

Ensures Rice Affordability and Accessibility

Price control can make rice more affordable and accessible for low-income consumers who spend a large portion of their income on food. This will improve their food security and nutrition.

Reduces income inequality

Price control can reduce income inequality by redistributing income from producers or traders to consumers or workers. This can improve the welfare and living standards of the people.

THE BAD

Creates Shortages.

Price control – a price ceiling below the free-market price -- causes buyers to demand more than they wanted at the free-market price and sellers to sell less than they wanted to sell at the free-market price. The result – a shortage.

Distorts Market Signals and Incentives.

Prices are an indicator of underlying economic phenomena – supply and demand. Prices are determined by supply, which reflects costs of production, and demand, which reflects buyers’ preferences and incomes.

Reduces Profitability and Competitiveness of Local Farmers and Traders

Price control will hurt small local traders who are at the receiving end of rice and farmgate prices due to costlier production inputs. It will lead to the influx of imported rice detrimental to the local farmers.

Increases Government Spending and Intervention

Price control can increase government spending by subsidizing the producers or importers of rice to compensate for their losses or costs due to price control. On top of that, price control can also increase government intervention by enforcing or regulating compliance with price control through inspections, sanctions, or rules.

THE UGLY

Creates Black Markets or Illegal Activities

Price control can create a black market or Illegal activities in the economy by encouraging corruption, crime, and tax evasion among consumers, producers, traders, or officials.

Interferes with Other Markets or Policies

Price control can interfere with other markets or policies that are related to rice or food security by creating distortions, inefficiencies, or conflicts among them. This can affect the coherence and effectiveness of the government’s overall economic strategy and vision.

Long-term or Irreversible Impacts Outweigh Short-term Benefits

Price control can have long-term or irreversible impacts that may outweigh its short-term benefits and damage or deplete the natural, human, and social capital of the economy and society.

Generate Public Resistance or Dissatisfaction

Price control can spark off public resistance or dissatisfaction by provoking protests, riots, or violence among consumers, producers, traders, or activists.

This can threaten the peace and stability in the country.

ALARM BELL

The following is an excerpt from Nick V. Quijano’s column “Surging rice prices” in the Daily Tribune, which sounds the alarm about the political implications of the rice crisis:

“Rising rice prices and shortages are about to bite this administration in the ass. No alarmist embellishment here. In fact, a very ugly political picture is right here before us.

“In our part of the world, rice is a critical political commodity and there is but one simple political rule: Make sure the masses have enough rice to eat if a country wants to maintain its social and political stability.”

Quijano’s warning echoes the main argument of a study by Sergei Guriev and Daniel Treisman titled “How Modern Dictators Survive: An Informational Theory of the New Authoritarianism”. The study claims that “incompetent dictators can survive” by investing in state propaganda that portrays them as competent, co-opting the elite and the media, and endearing themselves with the military to avoid coups, “as long as economic shocks (like ‘surging rice prices’) are not too large.”

In other words, the economic shocks must not be too large to be tolerated by our people, otherwise, they might result in our leader suffering the same fate as Marie Antoinette, who famously said, “Let them eat cake” when she learned that the peasants had no bread. This phrase reflects the princess’ indifference and contempt for the starving peasants’ plight.

Let me conclude this article with a story snippet reported by Rappler about the indigenous people who look at toxic yams as rice prices continue to soar. “Kayos,” a toxic wild yam, serves as a lifesaver and last-resort staple when food is scarce in some highland communities in Sarangani.

“If only copra can be eaten…With copra so cheap, it is difficult for us to afford rice… Perhaps what was promised to go down was the copra price, not that of rice” [at P20/kilo, has turned out to be a joke], they said. “Worse comes to worst, there is wild yam and it is free.”

The story of the indigenous people who are resorting to toxic yams due to soaring rice prices is a heartbreaking and alarming example of how the rice crisis affects the most vulnerable and marginalized sectors of society.

Price control on rice prices is not a magic bullet that can fix the problem. It is a double-edged sword that can cut both ways. It is a matter of choice that we have to make wisely.

Content put together in collaboration with Microsoft Bing AI-powered co-pilot

Head photo courtesy of Philippine Star

Video clips courtesy of YouTube