The many types of inflation
Greece is certainly grappling with greedflation, as exemplified by the exorbitant price of infant formula. The same multinational companies charge Greeks three times more than shoppers in Sweden for the exact same product.
To be sure, greed is an inherent flaw of capitalism, pervasive across diverse societies. When given the opportunity to sell something at triple the price, few would settle for double. A question is why this practice is so prevalent in Greece and not in other European countries. Ultimately, we possess similar regulatory tools, and in our case, they have proven effective.
Βeyond the inflation driven by corporate greed, there is also inflation spurred by consumer indifference
The Competition Commission, which unveiled the significant price disparities, levied a fine of €3,304,110 in 2019, specifically over the price of infant formula. Whether the company actually paid the fine or used legal maneuvers to avoid or reduce it remains unknown. What is evident, however, is that this penalty did not impact its market standing. The news failed to sufficiently upset consumers to the point where they would boycott the products of that specific company, impacting not only formula but all of its products, so as to stop that practice.
Hence, beyond the inflation driven by corporate greed, there is also inflation spurred by consumer indifference. This is able to persist as “the state, through benefits (commonly known here as ‘passes’) and salary increases, seeks to rectify market distortions” (Kathimerini, 13/01/2024). Easily earned profits effortlessly find their way into the pockets of opportunists. During the exuberant decade of 2000-2010, we deviated from fundamental economic principles. Rather than diminishing demand, the escalation of product prices paradoxically stimulated it. This behavior, reminiscent of the nouveau riche, exacted a high cost from our society.
It’s not just the inflation of greed and indifference. The latest Eurostat data showed that Greece has the second-highest (after Malta) food inflation in the euro area. In fact, the greatest price discrepancies concern products in which Greece has relative sufficiency. A characteristic example is that the price of seed oils fell by 20% in Europe and 18% in Greece, while the price of olive oil rose by 54%(!) in Greece and 50% on average in the eurozone. Cheese increased by 9.1% in Greece, compared to 1.1% in the eurozone, and eggs by 4%, compared to 0.4%. The price of poultry decreased in Europe by 0.3% and increased by 4.3% in Greece. Fruits, which are our strong export card, increased by 14.1% in Greece compared to 9.1% in the eurozone. These differences are likely due to the structure of production and trade of products in our country. It is, we would say, a “low productivity inflation.”
Small units, which dominate the Greek economy, do not have economies of scale to reduce costs as much as possible. They are also more vulnerable to disruptions in the economic environment. Every adverse development affects not only the business but also the entrepreneur’s household, as they operate from a single fund. This delays their ability to absorb shocks. Lacking expertise and/or capital for rapid production restructuring, along with their low productivity, they directly pass any external burden onto the consumer. Thus, the phenomenon of prices rapidly increasing and being slow to decrease emerges. The same occurs in the trade of products. Intermediaries exist everywhere, but their large size abroad makes profitability feasible with a much lower profit margin than in Greece.
We find ourselves in an era of polycrisis, exacerbated by the fact that the structure of Greek production and the Greek market create perfect storms. Substantial changes are imperative as more crises loom on the horizon.
