Labour minister Yiannis Panayiotou never ceases to amaze with his economic thinking. On Tuesday morning, speaking on CyBC radio, he described the increases of about five per cent in the price of cement as “unprecedented, unjustified and profit motivated.” We do not know where the minister learned his economics – he is too young to have studied at a Soviet university – but he does not seem to be aware of the basic workings of a market economy for which the profit motive is the driving force.
For the labour minister, a business seeking to maximise its profit is acting in an irresponsible way. Has nobody informed him that businesses which consistently fail to make a profit usually close down and that the profit motive is the reason for the growth and prosperity in the capitalist West? In the command economies of the Eastern Bloc state businesses had no interest in profit, which meant there was no competition and living standards never improved. Is this how Panayiotou wants the Cyprus economy to operate?
The ministry, he said, was in contact with building contractors and the technical chamber Etek, in order to intervene in the matter. “Cases of profit-seeking cannot pass unnoticed,” he declared, claiming that the state needed to offer protection to consumers and businesspeople as a whole. What was Panayiotou implying? That the state should dictate the level of profit a business can make or perhaps he is considering outlawing the pursuit of profit altogether, as a way of protecting consumers and building contractors.
He could also stop the forces of demand and supply determining prices and fix prices by ministerial decree. He stated on Tuesday that “the increase in the price of cement was not justified in any case.” Why was it not justified? The modification of the collective agreement in the cement manufacturing sector, after an extended industrial dispute, increased the production costs by less than one per cent, claimed Panayiotou saying that the pay increases were given because of the increase in the cost of living for workers.
He then made the staggering assertion that nowhere was there any provision for the passing on of the limited pay increases to the cost of the final product. Of course, the increased labour cost was going to push up the price of the final product. This is what happens in the capitalist system which we still have in Cyprus – when production costs increase, a company usually increases the price of its products because its primary objective is to make a profit for its capitalist owners. And no minister has the authority to tell a business how much profit it should make.
The government did everything in its power last month to prevent the passing of the law that would have taxed the windfall profits of the banks. This was because it accepted that in a market economy the state cannot increase taxation on private businesses when it makes a big profit. Panayiotou is going against this policy by wanting to dictate the price manufacturers charge for cement, because he disapproves of them maximising profit.
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