ON ECONOMIC AND MORAL ASPECTS OF THE BREAD QUESTION

The wave of bread price increases that has swept over the Ukrainian regions and reached Kyiv, as well as the ensuing events in the capital, give a certain cause for reflection.

Indeed, the price of bread, like that of any other item, cannot be lower than the cost to make it, otherwise production would simply rack up losses. We could agree to this if this equally applied to the value of labor, which also increases proportionally to price hikes on food. However, while prices are rising, wages remain at the previous level. This aggravates the imbalance between supply and solvent demand, which automatically leads to output reduction. And we have seen this picture for eight years already.

Proceeding from the premise that income equals the mathematical result of price-by-sales multiplication, our economists think, for some reason, that, while the price increases, the latter multiplier will not change and the income will thus go up. But this holds good when demand exceeds supply, i.e., when the population has extra money to spend on buying goods. But if this money is not there, this either alters the structure of expenses (in this case, the consumption of other varieties of goods diminishes to keep the consumption of bread intact) or reduces consumption of the product that has gone up in price. Kyivans began to buy less bread, which has caused its daily output to drop by almost a third.

We should also touch on the causes for the price hike. The public at large is stubbornly spreading rumors, already made public at a rally outside the Kyiv Town Hall, about a speculative grain deal. Rumor has it that grain market operators bought out several million tons of wheat from agricultural producers last fall and sold it (to be more exact, documented this as a sale) abroad at the price of $60 a ton. Then they bought (or documented this as a purchase) grain abroad, but for $160 a ton. Moreover, the grain in fact remained within the limits of Ukraine in the hands of the same owners. The executive power ought to carefully look into this and either refute these rumors or take the appropriate measures.

This is also necessary from the moral angle of the bread problem. History testifies that profiteering on bread has been considered a grave crime in many countries irrespective of the social system, for this could trigger a stormy negative reaction in society. In this country, however, liberalization in the economic sphere has reached a level such that the state simply refuses to regulate the grain market, thus contributing to speculation. At first, the state, brandishing market slogans, stopped subsidizing the production of bread, although many countries of the world have preserved these subsidies. Then the practice of centralized purchases of grain for national needs, above all, for public nourishment, was abandoned. To keep on the price of bread steady until the next harvest, it was sufficient to purchase 5 million tons of grain at the same price of $60 per ton. They say there was no money. But there were no obstacles to floating the so-called governmental bread loan, and I am sure the absolute majority of our population would have accepted and supported it. Instead, the State Reserves Committee, having bought the grain for UAH 380-420 per ton, is now selling it at a far higher price, putting this down to the impossibility to set a price lower than that on the stock exchange.

Under these conditions, the grain market has been distorted, finally resulting in the bread price hike. It will be impossible to put things straight before the new harvest, but this year’s lessons must without fail be taken into account in the future.