Hitting prices, the social proposal of the Spanish left for the crisis

10 min read PASCUAL SERRANO 0 comments

PASCUAL SERRANO

For months, the proposals of the most left-wing sectors of the coalition government in Spain, the United We Can group, have been based on proposing price limitations for certain products and services as a way of reducing the impact of inflation on domestic economies. . Inflation around 10%, both in Spain and in the euro zone.

An example is promoting a basic food basket in supermarkets capped at a price of 30 euros. In principle, according to Vice President Yolanda Díaz, it would be to seek an agreement with large stores to put a limit on the price of certain basic products, that is, they would not be forced. For his part, the Minister of Consumption denounces that "there are distributors and supermarkets with 600 million profits that do not agree to make an effort."

Perhaps the most emblematic case is that of rentals, where the proposal to freeze and regulate prices to avoid increases It is a fundamental element in the negotiations between the two parties of the government coalition, PSOE and United We Can. At the moment, a decree law has already been approved that prevented owners from updating the rental price with inflation or the Consumer Price Index (CPI), as contracts usually include.

The project of approving legislative measures that decree price limits for products and services could be extended to electricity, telephones and who knows what other areas.

Faced with the option of capping prices, the right bases its proposals on limiting taxes, with the mantra that with fewer taxes, citizens have more money to meet their needs. But the concept of lowering or raising taxes is misleading because it depends on who is raised or lowered, and to what products. Raising the wealth tax on all those who have more than five million euros is not the same as raising VAT on bread. And if the tax cut means that the citizen must assume services that were previously public and free (some health benefits, use of motorways, nursing homes, pensions, social assistance...), you will not see that your personal economy will improve.

Given this, the institutional left is focusing its social policies on limiting or regulating prices. The doubts that arise now about these measures are several: are they effective? are they fair? are they progressive?

The first thing that draws attention is that, unlike the historical banner of the left of claiming the role of the State as a provider of goods and services, thus eliminating business profit and incorporating social prices, now it is simply stated that the private supplier forced to lower the price. This creates some uncertainties. In the first place, because it presupposes two things: the first is that the provider of the good or service earns a lot of money, and the second is that justice is that the consumer pays less for it.

Let's take the example of housing rentals. The owner can be an investment fund, or a retiree who rents their second home or a family who rents what was their first home to be able to pay the mortgage on the current home, which is larger after having children. Let us not forget that in Spain, unlike the rest of Europe, more than 75% of the population owns their home, which includes all social sectors because traditionally the purchase has been highly supported fiscally. As for the tenant, he may be a worker who barely earns the minimum wage, but he may also be the executive of a company who can afford to pay three thousand euros in rent for a luxury apartment in the center of a big city, or a couple of professionals who each earn three thousand euros a month and prefer to live for rent in a central and well-connected neighborhood.

Imposing a limitation on prices or increases according to the CPI will mean that the supposed social media would fall on a different casuistry of owners, some perhaps not well off, and benefit from these social measures to some tenants, who do not have to live in situations precarious In the case of large cities such as Madrid and Barcelona, it is argued that the rent in some neighborhoods is greater than 1.500 euros per month and, therefore, increases need to be limited. In fact, rent regulation is proposed for what are called “stressed areas”, that is, central and expensive neighborhoods. But whoever is already paying that amount to rent a house in a central neighborhood of Barcelona (which is 1,5 times the minimum wage) does not seem to be someone in great need of social protection, perhaps the one in need is the one who barely gets the 500 euros to live in the periphery. The one with the 1.500 can always go to the periphery.

Previously, the prohibition of evictions in the case of non-payment of rent was established, that is, that the owners had to accept the non-payment of rent and assume the constitutional right of their tenants to a home.

Let's look at the example of food price capping. Again you have to think about how it affects the seller and the buyer socially. Once again it is a measure that does not act selectively on the most popular sectors, the rich also buy potatoes, milk and fruit. It is like when the left criticizes the VAT reduction, remembering that it is not a progressive measure since it is the same for all, it is not more beneficial for the humble.

On the other hand, if itto (compulsory or negotiated) limit the price in large stores, the consequence is that small businesses are also forced to lower prices or they will lose market. Again, humble sectors that end up harmed.

Another proposal is also limit the banks mortgage prices. Surely banks shouldn't deserve any commiseration for limiting their profits, but why should only mortgage holders benefit, rich or poor, regardless of whether they're paying the mortgage on a modest home in a working-class neighborhood? or the mortgage of a luxury residence on the beach? Wouldn't it be more logical, if we were to look for a form of social action in the banks, that they return the billions of the bank bailout that we all paid in the 2008 crisis?

If you look closely, the measure of capping prices basically consists of a State that disregards the provision of the servicestart or subsidize it socially and limits itself to telling landlords and food vendors to make everything cheaper. Or that they guarantee it, as in the case of the owner who must provide housing to the tenant who cannot pay for it. In conclusion, what is being proposed is that landlords, banks or supermarkets guarantee rights to citizens that the State must guarantee.

Nor is it understood that it is exclusively designated to sectors such as housing or food. It is true that they are basic, but so are clothes, shoes, a dentist or a plumber. And there is no proposal to force them to lower prices. Let us remember that the clothing company Inditex has achieved an increase of no less than 41% in its half-year profits: 1.794 million euros. And no government seems to consider that it should limit the price of its clothes for social reasons. In fact the German housing association, given the difficulties of the tenants to meet the cost of their monthly payments, what they ask is that the price of energy be capped since, as he points out, it is the origin of the financial problems of the citizens.

We have already seen that the reasoning of the Spanish institutional left that homeowners and food distributors earn a lot of money is not so precise. In any case, what should be done in a social State would be to increase taxes on profits, in this way those who earn a lot will see their income limited for the benefit of the community and those who do not earn as much will not be harmed. In fact, the owners of rented homes enjoy a tax relief of 60% of their income, the money you earn from working is worse treated fiscally than the money you earn by renting a house.

It could be argued that, given the difficulty, impossibility or lack of audacity to establish that the State can expand its powers, perhaps limiting prices can be at least a palliative to alleviate the ravages of inflation on people with fewer resources. The problem is that, in a market economy framework, that is, if the producer is private, forcing him to lower the price by decree may not be as effective. Cuba has had the prices of many agricultural products capped for years, but what this caused is that farmers stopped being interested in increasing production or dedicating themselves to cultivating a product with a capped price, which caused shortages. If you put a limited price on potatoes, the farmer would prefer to plant onions. This is what can happen even more in capitalist countries where the producer has much more autonomy than in Cuba. The Cuban government understood that the solution to lower the price of potatoes could only be to produce more potatoes. Or that the State subsidizes the purchase by paying a certain amount to the farmer, and then it can require him to sell them below the production price.

Something similar could happen in the case of rented housing. By limiting the rental price, the landlords choose not to rent, they prefer to sell or keep the houses closed, the offer decreases and the result is the opposite of what is desired. Another option would be for the State to intervene in the market offering the service to increase supply and lower prices, for example by building or managing social housing. This is what has happened with rail transport, the company was public and has been subsidized to improve the economy of families.

In the relatively recent cases in which a progressive government decided to take measures to lower prices in countries with advanced capitalism, it was by partially or totally nationalizing a company. Bolivia did it when it nationalized the hydroelectric plants and the pension system, and Venezuela with the telephony and also a meat and rice company. France has also recently nationalized its largest electricity company. That is to say, they understood that the State does not have the capacity to dominate private prices by decree if it does not intervene in the ownership of the companies. Germany has done the same. This September it has been announced that the electricity company Uniper will be nationalized, which will be controlled in more than 99% of its shares by the German State. The acquisition will be financed by the German public bank.

Hence, the truly effective and leftist measures would be a stock of social public housing, a public bank with social mortgages and a minimum vital income that would ensure access to food. And, indeed, for that, public resources will have to be available, which would be achieved by increasing taxes on the rich, whether they are landlords, banks or supermarkets or any other productive or social sector that is having a lot of income.

The examples analyzed come from the Spanish situation, but I believe that it is a debate that will take place in other Western countries in the face of the new situation of economic crisis and the need, from the left, to think of palliative proposals for families.

The option of limiting prices without touching the system or expanding the powers of the State is a mistake, it can be unfair as we have seen and, above all, it is not from the left. The State cannot refrain from providing services and rights and present as social the obligation of companies and individuals to do so. It's like saying that bakeries should give out bread, private hospitals should treat the sick for free, and homeowners accept that they don't pay their rent. The Left is a State that produces bread for all, that develops public health and provides housing.