Curbing inflationUndoubtedly, expectations of inflation greatly influence actual inflation, posing a greater threat to our national economy than increasingly high prices. The practice of cornering and hoarding is a prime example. It is a social phenomenon when people are eager to store things and reluctant to sell their products.
The government yesterday designated iron re-bars as an item to watch against cornering and hoarding. In addition, small- and mid-sized enterprises declared that they will stop delivering iron goods to conglomerates. Unfair trade is already happening in a circulation market and is beginning to put pressure on the price index. It is imperative to block the state of inflation expectations.
If the government stands at the forefront of controlling prices for the purpose of price management, it will be a more difficult problem. Artificial price controls might contribute to stabilizing the economy on a temporary basis. But it will have a greater negative impact in the long term. A two-tier market system and black market will be formed, with prices having a sudden tendency to rise.
The government should make the utmost effort to facilitate market competition and absorb the pressure of price increases by taking bold steps for deregulation. That is the best solution to minimize the side effects and eradicate the root cause of inflation expectation.
In that regard, the Fair Trade Commission is in the limelight. The organization went astray under the Roh Moo-hyun administration, wasting its authority on “improving the governing structure of companies.” It is high time to concentrate on its own tasks, such as correcting unfair trade in the market and facilitating free competition. That is the only solution that will greatly contribute to stabilizing commodity prices.
The hikes in oil and crop prices are an external variable that we have little control over. The state of inflation expectation, however, depends on how hard the government works. If companies strive to reduce prime costs and the government works to facilitate free competition, inflation pressure will be curbed considerably.
The state of inflation expectation is something one takes precautions against. That is because it is hard to help put the economy back on track, once it is agitated. To this end, the Ministry of Strategic Planning and Finance and the Bank of Korea should spare no efforts in this regard. However, the role of the Fair Trade Commission is more important than anything else.