Sari-Sari Store Economics — Margaret Thatcher and Inflation in the Philippine Market

After watching The Iron Lady, I noticed Margaret Thatcher's keen observance of change in prices of common household commodities. She proudly points out the price of butter to his critical colleagues and also got annoyed when she saw the price of milk when she was older and already out of her political power. Many  criticized her obsession with prices. It's because she's a grocer's daughter, they joked around.

The Iron Lady Trailer

And precisely that experience of having worked for her family's small business that gave her the insight of appreciating capitalism. His father was actually a statesman as well who seemed to be a staunch fiscal conservative. Her strict observance of prices came from the fact that she was a monetarist, a position advocated by libertarians like Milton Friedman who believed that the government may have the power to control inflation. Her passion for cutting spending and privatization roots from her influence from the works of F.A. Hayek and other classical liberals. I even remember in the PBS documentary Commanding Heights they showed that Thatcher and Hayek exchanged letters. 

Aside from being really hardcore like being able to dine with high officials of the Soviet Union (who then dubbed her the name "The Iron Lady") or tearing down the Berlin wall, what really stood out the most for me was her obsession with prices. I do not agree with many of her policies including monetarism or her fetish for war and militarism but I loved the fact that she had her finger on the pulse of the market—an important quality a poltician should have, I believe.

I remember in one of the debates during the 2010 Philippine presidential elections, candidate Jamby Madrigal was asked the price of galunggong (common fish in the Philippines) to which she humorously replied she wouldn't know because she is a vegetarian. Now I realize that it was such an important question. Inflation is one of the most important issues in politics and knowing prices of the typical daily commodities that the people buy is most definitely significant.

I remember when I lived in my house in Laguna for back when I was still in college, I really learned a lot about managing my budget for my daily needs. Many times I would buy my own food from the sari-sari store (a very common small time convenient store managed by families in their very own homes). Almost every place here has sari-sari store and this is mostly where many consumers would buy different things they need. If you've ever been to small barios, sari-sari stores are the more common venue for trade.

Changes in prices really affected me most especially since I had a very limited budget (granting that my mother already pays for my tuition, lodging; all in spite of my disdain for contemporary schooling—quality education takes time!). And when you're in college, you need a lot of budget allocated for booze and leisure, right? So when the price of daily needs like water or rice increase, for example, I might either have to cut on leisure expenditure or eat cheaper alternatives.

Tindahan ni Aling Nena by Eraserheads

But then that's just me. I was a lucky middle class kid in college who's blessed with a hardworking mom. All I worried about was having to drink less booze. But how about those aren't as fortunate as me? You can only imagine how inflation affects them. Ang presyo ng bigas (the price of rice). Cooking oil, milk for the baby, tuition for the kids, water and electric bills. These are all very important to them and has a drastic effect on their lives. I feel that it is irresponsible for statesmen to ignore it or not be aware of it.

It makes you reflect more on the red tapes on small businesses, huh? Should sari-sari stores need to have the redundant permits like barangay permit, mayor's permit, DTI business permit, BIR license, and the many different taxes? It sounds ridiculous, doesn't it? It's funny though that technically most sari-sari stores are black market. Those people who are just trying to earn an honest living through voluntary exchange should ideally have to go through most of the red tapes. This is discouraging for small businesses and entrepreneurship in general. Most of all, it increases costs therefore increases prices. This goes out across the board for all business and the economy. 

Inflation is actually a direct result of increasing the money supply. Money isn't actually backed by any commodity like gold as everyone seems to believe up to now. We leave it up to the discretion of bureaucrats  in the central bank to decide the value of fiat currency or paper money. And inevitably, the value of paper money goes down when the supply increases therefore lowering the purchasing power of the money thus contributing to inflation.

Ron Paul asks FED chairman Bernanke if he does his own groceries
Recently congressman Ron Paul, in spite of his busy campaign, went back to DC to once again be very critical of the Federal Reserve (video above). It's funny how he asks in the first part if Bernanke does his own grocery shopping. It's so related to everything I'm talking about right now. Aside from that, he talks about how investing in precious metals like silver can preserve the value of money. 

You see not all libertarians believe in the monetarist position like Margaret Thatcher. Some believe that money shouldn't be valued at the discretion of bureaucrats and instead be backed by a commodity, like gold for example, something that the market has dictated for centuries. 

At first glance, I know it might sound preposterous for many, the idea of going back to the gold standard. The concept though is that it doesn't have to be gold. It's just that the market dictates it and not the supposed expertise of bureaucrats. And no, Ron Paul doesn't want to instantly abolish fiat currency and central banking, he just wants, aside from wanting to audit the Federal Reserve, to be able have competing currencies. Competition will decide what is really a more effective means of preserving the value of one's earnings. This is an idea Hayek advocated, if I remember correctly, and so I do find it weird that Thatcher favored a different policy.

I guess one good indicator of who makes more sense is how back when Ron Paul and many others in the Austrian School of Economics like Peter Schiff were predicting the housing bubble and the recession, people like Bernanke, the keynesians, the monetarists: none of them listened. They totally marginalized those who were predicting the recession, some even finding their claims laughable. A simple search in YouTube of "Peter Schiff was right" or "Bernanke was wrong" are evidences of who had the right economic policies. Surely I should save the topic of Ron Paul's predictions for some another post.

One thing I love about libertarians in general, in spite of the differences in views as I have shown, is that they really have a grasp on simple commonsense economics as compared to the fancy macroeconomics of Keynesianism. The assumption of being smart enough to manage the economy, to always be acting in the public interest, to decide on arbitrary values, all of it is the pretense of knowledge.

Monetary policy is a key issue that decides the fate of our prosperity. Let us keep in mind that the power to devalue the money of people is theft. No small group of people, no matter their expertise, should ever have such a grand power. 

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