What makes the chicken go?

September 27th, 2013 § 0

Ayam

Here’s a typical economic news in the media. This one talks about the price for whole chicken that’s been inching up for some time. A chicken seller in Bandung, West Java, offers his opinion.

"Price had actually started to come down last week to Rp30,000, but now as we’re approaching the Idul Adha (day of sacrifice) holiday it’s going up again."…

He said that increases like this are the result of manipulation by wholesalers.

In a socialistic culture, big business is always the suspect of every crime. Prices go up? It’s the wholesalers. Prices collapse? The speculators are to blame. Prices aren’t moving? Why, its because the wicked big players are fixing them.

Now prices for everything have been generally on the rise for quite a while in Rupiah terms. That’s largely due to the inflation ‘imported’ from the US with the Federal Reserve undertaking their unprecedented monetary stimulus called QE. Recently, foreign money has been flowing out due to rising interest rates in developed countries. On top of that, the government also reduced fuel subsidy this year, which exacerbated domestic inflation.

Another reason is the government’s misguided move last year to cut beef imports as part of their goal of self-sufficiency in beef. The drastic cut led to acute shortage, sending beef price to the sky and causing households to cut down on beef and opt for the next best thing, chicken. Even more amazingly, the government’s solution is not to admit that they were wrong and stop meddling with the beef trade, but to try to buy up land in Australia and tell one of the state-owned companies to operate a big-ass cattle ranch down there.

Now as the Idul Adha approaches, cattle and goat raisers are setting aside a significant portion of their animals for fattening to make them available for the day of sacrifice. This is causing even more shortage in animal protein options for consumers during these days, and the price of chicken surely has to go up to reflect that scarcity.

All these reasons should be enough to explain the rising price of chicken. But of course, it’s a more difficult story to tell than just blaming everything on some nefarious fat men controlling everything from behind the curtain.

Stories like these are always more compelling emotionally when you also describe the plight of the consumers, like the next person quoted, who buys whole chicken for her restaurant.

…That’s why Lia is hoping that the government take action to control the price of chicken.

"Last I knew the price was Rp30,000 per kilogram, but it’s gone up now."

Of course most consumers probably aren’t aware that it’s the government’s action that caused the whole thing in the first place, but they should be. Whenever there’s some imbalance in an economic situation, the first thing is to ask what the government has been up to in that sector.

But of course, that rarely happens.

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