The Ministry of the Economy has published an inflation forecast for the remainder of this year. The government expects the consumer price index growth for the twelve months not to exceed 6-8%. It will be recalled that in the first six months of this year inflation came to 4.6%. Strangely enough, in calculating the inflation rate the statisticians disregarded the price rises on foodstuffs in June. Minister of the Economy Valery Khoroshkovsky attributed this to the specifics of Ukrainian statistics. It turns out that oblast statisticians calculate the monthly inflation rate on the twenty-fifth of each month, while those in the districts do so on the twentieth. The price hikes occurred in the last ten days of June. This explains why the official inflation rate for June was a mere 0.1%.
However, the Ministry of the Economy warned in advance in its report that the inflation rate for July might prove low as well. It transpired that the category of foodstuffs that have been most affected by higher prices accounts for a mere 6.5% of all goods used to calculate the inflation rate. Moreover, ministry experts do not rule out deflation in July. This assumption is based on the anticipated cheapening of fruit and vegetables. Simultaneously, the government meticulously recorded the reduction of prices for eggs and meat in late June.
Put simply, state statisticians have turned a blind eye to higher retail prices for bread, flour, and cereals, which in some regions were up 120%. Why is it advantageous for the government to conceal and play down the actual scale of the foodstuffs crisis? The answer to this question is obvious. It was broadcast by national television channels providing coverage of Prime Minister Viktor Yanukovych’s visit to Bila Tserkva. When the premier stopped by at a local market, it turned out that prices there dropped below the pre-crisis level. And it was only the indignant residents who shouted to the premier that prices were reduced literally hours before his visit. The local authorities find it disadvantageous to reflect high inflation in statistics, because the dismissals and appointments that normally follow any major crisis are made based on such data. Meanwhile, the bumper crop of last year, with upward distortions accounting for its lion’s share, is a telling example of how official reports are made in Ukraine.
However, it is unlikely that the government will ever call into question the data it collects from local administrations. The central authorities are likewise interested in reporting the lowest possible inflation rate, even if not quite accurate. Every now and then the parliament presses the issue of the need to tie the indexing of public sector wages and pensions to inflation. The resulting additional budget expenses would most probably cause headaches in the cabinet. Only if the official inflation rate does not exceed forecasts can the government sidetrack this issue. If one is to speak of the actual state of affairs, expenses for bread and cereals far exceed 6.5% in the family budgets of pensioners and wage earners in the public sector.
To quote Pushkin, who probably imagined himself as one of the officials in the current government, “It doesn’t take a lot to fool me, I like to fool myself a lot.” This self-delusion might be harmless and even comical, as it was for the poet, except that the government uses official statistics to streamline economic development. The Cabinet of Ministers pretends to be managing the country, and the country pretends to be honestly reporting receipts of enterprises and wages and to be providing free medical care and education. Everybody remains happy.
A social conspiracy and negative social consensus are probably the two terms — coined by sociologist Yury Sashko and political scientist Volodymyr Nebozhenko — that best describe this weird theatrical act in which harmony is achieved through incessant falsehoods. Thus, we have no choice but to believe that in June prices were up a mere 0.1%, and July will see even lower prices. It is good that pensioners and wage earners in the public sector are not made to return money to the state budget in exchange for lower prices. That would make life even more interesting than it already is.
