Since Adam Smith wrote that (in)famous catchphrase about an “invisible hand of the market” adherents of capitalist ideologies have maintained that a) capitalism works in favour of the consumer, since competition forces the producer/service provider to keep the prices low while providing relative high quality to remain competitive; b) the less interference by the state in the operations of the market, the more efficient the market becomes (and the more efficient the market is, the more it favours the consumer).

History has proven the above to be complete and utter BS – as much as a misrepresentation of Smith’s thought about economics, still very much founded on mercantilism.

Any economic historian worth reading will go to great lengths to show that, as a matter of fact, from its origins, capitalism was always dependent on state intervention to create or ‘correct’ the markets, whether through the setting of interest rates, the creation of protective barriers by means of a tariff regime, regulating or deregulating according to the perceived needs of the time, implementing direct measures to boost employment, bailing out banks and corporations, and – where necessary – even through military intervention.

History, however, is not a popular subject. Especially in this country of ours. This means that we still have to suffer such myths (debunked as they might be) being spewed out by our illustrious and cultured politicians as if they were pearls of economic wisdom.

Ever since the Fenech Adami administration of the 1990s, whenever inflation raises its head, our politicians are quick to pull out the pseudo-Smithian rhetoric from their closet of ‘quotes-for-the-occasion’ and, while they remind us that the rising cost of living is not the result of economic brigandage from greedy businesses (God forbid there’s a dishonest businessman in this country), they encourage us to light the lamp of Diogenes in search of an honest businessman who sells his wares at a cheaper price.

Which completely misses the point.

If out of three companies in the same business, one raises the price by five per cent, the other by four and the third one by three, if I go to buy from this last company the cost for me will still be three per cent higher for the same product that I bought before.

Perhaps it is also the right time for the Malta Competition and Consumer Affairs Authority to start naming and shaming- Aleks Farrugia

Three per cent happens to be how much inflation has eaten out of the real minimum wage, according to Eurofund. One would assume, because of patterns of consumption, that the employee on an average wage has seen more of his salary eaten out by inflation. Although, so far, we have no published data, it is a safe assumption that the salaried middle class is ultimately the one bearing the lion’s share of such rise in inflation.

The government’s attempt to cushion the international causes for inflation is commendable but expensive and can only be sustained for so long, especially if the projected growth in the next two quarters doesn’t happen. The problem that needs to be addressed is that a large part of this inflationary bubble is artificial, caused by greedy bad businesses that, regardless of the cushioning provided by the government, are raising their prices way beyond the real cost of productivity.

This artificial bubble will, in turn, have a dire effect on the economy as a whole, threatening not only the spending power of local consumers but also the viability of foreign direct investment operating in Malta.

What is needed is for the government to come up with radical solutions. Now it is understood that in this country there is a profound allergy towards anything that might even sound to be radical.

Furthermore, it is highly improbable for the government to find support from the opposition to implement radical solutions, even if they be in the interest of the country. Yet, given the advantageous position it has in terms of public support, the government can afford a dose of courage to do the right thing and fulfil its responsibilities towards the electorate.

The artificial inflationary bubble has to be deflated, which means that a regulatory instrument has to be introduced whereby the pricing reflects the real cost in productivity (plus reasonable profit). Sectors liable to speculation should be curbed. The property industry perhaps before any other.

Perhaps it is also the right time for the Malta Competition and Consumer Affairs Authority to start naming and shaming, after all, the public deserves to know who the honest businesses are, who are the rogues, who gives value for money. It would also be an incentive for businesses to be on the right side, be conscientious and the public would be educated to obtain services and buy products from businesses that trade fairly, care for the environment, pay justly and have an honest pricing policy.

Of course, there will be political flak to take. For sure, there will be accusations of ‘going back in time’, when the pricing of a can of tuna was announced during the budget speech, even if the measures taken by the government won’t go that far.

The balance that has to be struck, though, is not between avoiding criticism and laissez-faire. The balance has to be between maintaining a workable, sustainable, market economy on the one hand and a moral, political obligation to secure a decent standard of living for all.

The people of this country elected politicians to represent them in parliament, not businessmen, and politicians have to think in the interest of the ‘polis’ prior to anything or anyone else. This includes radical measures when the times call for them, even if they might not sit down well with those whose interest is that the ‘hand of the market’ remains free to pillage the pockets of honest working people.

Aleks Farrugia is a writer and historian.