Monday, May 19, 2008

Economic Xenophobia?

The French are paying through their nose. Inflation is at a 17 year high. They could do with lower prices; yet they don’t want competition. Could it be termed as an economic xenophobia?

Christine Lagarde, the finance minister, is promoting a new law to let in more competition into retailing to make it easier to build out-of-town hypermarkets, scrapping a rule stopping retailers from selling below cost. In many places, hypermarkets have de facto local monopolies, and so are protected from competing with each other or with the big discounters, which account for only 13% of food retailing, next to 30% in Germany. Nor can hypermarkets negotiate freely with suppliers, which retailers say allows big brand-names to impose high prices.
So why are consumers not cheering on the new law? The Economist has this view.
"The Socialists say the fringes of historic towns will be destroyed. Deputies in Mr Sarkozy's own party, lobbied by food producers and small shopkeepers, want to dilute the text. Scepticism about competition has deep roots, ranging from a lingering influence of Marxism to a fear of American capitalism trampling the French way of life. Above all, voters see competition through the eyes of producers—as a menace to jobs and factories—rather than consumers."
But the French should do something about inflation soon if they don’t want to look like Zimbabwe. To me it reads like the opposition by small shop keepers in small town India that stalled the efforts of big retailers like Reliance Fresh. Flat world, it is.

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