Hungarian Prime Minister Viktor Orbán’s government is once again bucking free-market orthodoxy and working to tame the often deleterious aspects of capitalism when the occasion rises, this time with food price caps once again coming into effect.
“Food pricing, which represents a huge extra profit for food retail companies, must be kept within reasonable limits, and the 10 percent margin stop announced by Prime Minister Orbán can be a good tool for this,” said Talabér Krisztián, an economic analyst at the Nézőpont Institute, on the M1 Aktuális channel on Tuesday, reports Magyar Nemzet.
Krisztián said that in Hungary, food retail companies were working with huge profits, with margins of up to 80 percent for certain products — meat, milk, yogurt, eggs — meaning that the selling price was 80 percent higher than the purchase price, giving them massive extra profits on these products.
According to him, this was a profit-seeking behavior resembling “wild capitalism,” with food retail chains abusing their virtual monopoly position over consumers.
“The government said that this is the time to intervene in the operations of companies because this pricing is outrageous on the part of multinationals,” he emphasized.
The analyst clearly stated that inflation is caused by the “shameless” profiteering and huge profit appetite of food retail chains, and it is the consumers, the Hungarian people, who suffer from this.
Krisztián Talabér reminded: “The margin freeze ordered by the government will cap the difference between the purchase and selling prices at 10 percent for about 30 products. The measure will come into effect on March 17, i.e., next Monday, and will initially be in effect until May 31,” he said.
Instead of traditional price caps, which often involve set prices, this new policy will shrink the profit allowed on certain products, which means supermarkets are still making money, just not as much as before. Meanwhile, consumers stand to benefit.
The government will then examine whether the measure has achieved the desired effect and decide whether it is necessary to maintain it or not.
The analyst believes that the measure could reduce food inflation by up to two percentage points and have a beneficial effect on market competition. He also noted that the government tried a milder measure when it asked the chains to self-restrain, but according to reports, only two of the six major chains made a worthwhile offer.
“The power is in the hands of the government, now this power is being used to protect the Hungarian people from profiteers,” the analyst stated.
