2023-05-17 00:21:59
Wednesday, May 17, 2023, 00:21
“The wolf is coming! The wolf is coming!’ And the wolf has already arrived”. With this expression, the economist Santiago Niño Becerra underlines the consequences that the drought will have on the shopping basket without giving truce to the inflationary scenario that we have been experiencing since the war broke out in Ukraine.
On this occasion, Niño Becerra relies on a report published by ‘Business Insider Spain’ in which María Cruz Díaz Álvarez, an agronomist belonging to the Spanish Institute of Engineering and president of ANIA (National Association of Agricultural Engineers), and Fernando Castelló -Sirvent, economist, university professor and doctor from the University of Valencia, analyze in which products we could perceive in the first place the next price increases? According to these experts, cereal (and its derivatives, such as flour and bread), fruit (especially those that are out of season), but yogurt, cheese, milk, eggs and pork or chicken because the drought also affects the livestock industry.
While these experts underline the need to “rethink the way we consume”, Niño Becerra’s message through his Twitter profile joins the warning that he already launched in January about the possibility that we are facing the so-called ‘ Giffen Effect’, collected by Alfred Marshall in his ‘Principles of Economics’ (1890). «We imagine that inflation continues and the catalog of these goods increases. Due to their own category, these goods are mostly consumed by low and low middle incomes, so their demand will continue and may even increase because these goods are affordable for these incomes”, he points out after announcing the reduction in VAT on certain foods.
«If, for whatever reasons, there were reductions in the supply of such goods while their demand is maintained or even grows, their price would increase above the VAT reductions or eliminations that were applied. Robert Giffen (1837-1910) studied that although the price of certain basic goods: bread, potatoes… increased, their demand could grow because they continued to be more affordable than other goods for low incomes. Are we in a Giffen scenario?
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