There’s no miracle solution. It’s just that you did not find it yet!

Here’s yesterday’s headline: “4 suggestions from Emre Alkin to fight back against the inflation”, which made me think about Osman Birsen, the former president of Istanbul Stock Exchange. My co-worker from whom I’ve always drawn inspiration, Osman Birsen has once told me this:

“When it comes to give economic advice, almost everyone tends to say reasonable things. But the important thing is to do the right thing. In other words, it’s easy to say “don’t eat that cake”. However, you should find the right doctor that is capable of stopping the fat guy from eating the cake. An absolutely accurate proposition…

People sometimes reproach me on social media, asking me whether I talked to the authorities about this stuff. Obviously, I talk to the right people about the issues requiring urgent attention. But how can I expect them to take action about every single suggestion I make? Another fact is: I am not the Doctor responsible for stopping the fat from eating the cake. People would be right in criticizing me if I were that doctor.

I am trying to tell people about things I know to be true to the best of my ability because the right thing said at the right time is better than the right words. If I were so fond of being right all the time I would not have chosen to become a scientist. If “make people the right thing” is key, the style people adopt when criticising me won’t bring any good to anyone.

Now let’s get back to the real issue: İnflation data released on Monday fairly reflects the market reality. It at least matched Istanbul Chamber of Commerce data. Luckily, our worst fears did not become true, thus releasing pressure from TurkStat. Some say “This is not my inflation”. I know. The reality they’re talking about is called “high cost of living”. That is why it should not be confused with inflation.

“Here are my 4 suggestions…..”

Let’s make an analysis of some points worthy of attention now: There’s sharp decline in clothing and footwear prices, which is caused by big discounts due to fragile demand.
As for the food prices, on the other hand, we notice a considerable rise, especially in whole foods prices. As I always say, it’s rather a big phenomenon that Turkey faces a food price rise while it declines or remains stable in the rest of the world. Apparently, government fails to take effective actions against cartels and trusts as well as other forms of monopolistic groups and organizations that exhibit conduct and behaviour disruptive to markets.
On the bright side, I was pleased to see a decline in core inflation. However, I think it’s a bit early to declare that we’ve come a long way regarding inflationary issues.
I always try to respond to the “when will interest rates fall?” question when I find the chance. It’s still early for us to get hopeful considering recent CPI data. Turkish Central Bank will reduce rates only when a permanent decline in core inflation is maintained. We still have two months ahead to see that accomplished.

As far as I can see, CBRT, Ministry of Trade, Ministry of Agriculture and the Ministry of Treasury and Finance must work in total coordination on order for inflation can fall. We can’t say that there actually is demand-pull inflation, but cost-push inflation is real. I think we must face the reality so as to be able to bring inflation under control. It is not possible to reduce inflation permanently by offering 10% instant discounts. We, therefore, need the following drastic measures to decrease costs:

1- Government spending must be brought under control while levying lower rates of tax as they do in Mexico and similar countries which are the real competitors of Turkey.

2- Maintain accurate statistics of Turkish sectors and ensure their proper monitoring. There is serious lack of statistics in all Turkish sectors. No statistics exits covering the number of employees, number of machinery, production capacity etc. Current information, in the other hand, is not completely reliable. Today, each sector declares that they employ millions of people, significantly contributing to the economy. But there are no statistics to prove such claim. From agriculture to services, we fail to monitor the economy in acceptable and valid standards. Given that we do not possess accurate data, we consequently fail neither to control price behaviour nor eliminate activities that are disruptive to markets.

3- The government must identify and monitor groups and organizations dominating all sectors, especially agriculture, and fight against cartels and monopolistic groups with determination.

By the way, here is my warning to the CBRT:

  • Focus on core inflation, not CPI.
  • Deliver clear and intelligible statements.
  • CBRT President should talk less but avoid remaining silent in situations where he should really speak out.

I can almost hear you ask, “Didn’t you say you were going to give 4 suggestions?” No, I did not. I’ve already given 3 suggestions, plus one warning for the CBRT. 2 suggestions and 1 warning, more precisely…