‘I Don’t Buy’ Campaign Based on False Premises

EghtesadOnline: Although Iranian athletes and celebrities initiated the “I don’t buy” campaign in good faith, it is doomed because of a combination of several factors.

News ID: ۷۴۵۴۹۹

23 June 2018

This was stated by veteran businessman and former president of Iran Chamber of Commerce, Industries, Mines and Agriculture, Mohsen Jalalpour, in reference to a campaign recently launched by Iranian footballing legend Ali Karimi.

In an Instagram post last week, Karimi urged people not to buy gold, automobiles and all items, the prices of which have gone up over the past few weeks to rid the country of “middlemen and thieves”. Many athletes and celebrities have joined his campaign, reposting his message and hashtagging “I don’t buy”.

Jalalpour, however, believes that the market disruption is the upshot of flawed economic policies and not the behavior of economic operators or even speculators and profiteers, Financial Tribune reported.

A full translation of his article originally published by the Persian daily Donya-e Eqtesad follows:

1. The economic rationale behind the move [“I don’t buy” campaign] is based on false premises: It implies that the government, the parliament and other policymaking institutions have carried out their responsibilities [unerringly] and it is the “middlemen and thieves” who are to blame for the inflated prices of goods and services. There are numerous reasons to dismiss this premise. I need to remind you that working as a middleman for a deal is not a vice. Although it is not considered a virtue, the middleman’s act should not be considered synonymous with theft.

2. We have been repeating a mistake for years now. Whenever the inflation rate goes up, we urge the government to control the prices, and the government uses regulatory tools to keep the market in check. In other words, the prime culprit of this sorry state of affairs wiggles its way out of accountability and transposes itself as a plaintiff. The inflation, as we speak, is ruining social capital. [Author Lyda Hanifan refers to social capital as “tangible assets that count for most in the daily lives of people: namely goodwill, fellowship, sympathy and social intercourse among individuals and families who make up a social unit”] Everyone is looking for a guilty party. People have lost confidence in the government, which is pointing the figure at businesspeople. Social influencers assign fault to economic players while the failure to distinguish between inflation and overpricing is the mistake of both people and politicians.

3. Inflation, instability, market disruption, etc. are the results of the conduct of policymakers. But the act of overcharging the customers is different. What we are seeing today is not overpricing. It is rooted in the government’s economic policies.

4. The “I don’t buy” campaign is negligent about economic realities, including inflationary expectations. Inflationary expectations are an important determinant of actual inflation. It is defined as the rate of inflation that workers, businesses and investors think will prevail in the future, which they will factor into their decision-making. This campaign is bound to fail because it overlooks a rational behavior and seeks to counter it with an emotional reaction.

5. The “I don’t buy” campaign and other similar public movements fail to achieve their desired results—despite being launched at the right time—because they ignore the economic realities. How do you expect manufacturers to supply their products without factoring in the price hikes of raw materials and increased costs of production?

6. Currently, economic operators are worried about the looming reimposition of restrictions on their activities due to US sanctions. The “I don’t buy” campaign might play into the hands of the sanctions regime through local agents. A boycott of locally-made products would benefit cheap, low quality foreign goods.

7. The economic behavior of people cannot be engineered. We need to accept that people have the right to maximize their profits. It is also their right to enjoy good governance. Friedrich Hayek believes that the self-driven orderliness of market is the outcome of the behavior of each and every human and institutions active in the market.

This orderliness cannot be designed by people. Market instability of late is the creation of inflationary expectations and false predictions that play a role in the market based on misguided economic policies. Only reforms and rebuilding of trust with economic policies can fix the problem.

All in all, the only one who’s to blame is the policymaker who has proved to be incapable of putting the house in order. The emotional reactions are better replaced by sensible economic demands er to produce the desired results.