[Era of Hyperinflation] "Taming Prices" A Look into the Government's Price Index Dark History

Abolition of Restaurant Price Disclosure System After Three Months
MB Price Index Also a Representative Failure Case

On the 5th, citizens were shopping at a large supermarket in Seoul. Amid the recent severe inflation situation, with last month's consumer price inflation rate exceeding 5%, the sharp rise in international grain prices due to the Ukraine crisis and export restrictions by major grain-producing countries is being transmitted domestically. Additionally, with recent drought damage, the cost of living is showing unstable patterns, especially centered on some agricultural and livestock products. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Seo So-jeong] The government’s price control measures, introduced as drastic steps to curb soaring inflation, are failing to achieve their intended effects and are fading into history. While external factors such as the sharp rise in raw material prices due to the Ukraine crisis have been major drivers of inflation, there are concerns that excessive government intervention or price controls could cause unintended side effects.

Recently, Jeong Hwang-geun, Minister of Agriculture, Food and Rural Affairs, announced at a meeting with the food and dining industry that the ‘Dining Price Disclosure System’ would be abolished after just three months. This system, created during the Moon Jae-in administration, involved weekly disclosure of prices and price fluctuations for 12 dining items such as gimbap, hamburgers, pizza, chicken, jajangmyeon, samgyeopsal, and galbitang from some franchise companies. From the outset, criticism arose that the system was ineffective since price information was already publicly available by company. The government had hoped to provide consumers with clear price standards to prevent sudden price hikes, but consumer response was lukewarm, and the system showed no significant effect.

The ‘MB Price Index,’ created in the early days of the Lee Myung-bak administration in 2008, is also cited as a representative failure. Amid global inflation pressures following the financial crisis, the Lee Myung-bak government designated 52 items closely related to everyday life?such as rice, flour, ramen, and beef?as ‘managed’ items under the pretext of stabilizing people’s livelihoods early in the administration. The average index of these items became the MB Price Index. This index included not only goods but also services such as jajangmyeon, electricity fees, private academy tuition, and housing costs (monthly rent and deposit).

In July 2011, a second MB Price Index was introduced, allowing comparison of prices for 10 items?including samgyeopsal, city buses, napa cabbage, and seolleongtang?across 16 metropolitan cities and provinces. By 2012, the Ministry of Strategy and Finance’s deputy minister took overall charge of price stabilization, while the Planning and Coordination Office of the Ministry of Agriculture, Food and Rural Affairs was responsible for rice, and the Food Industry Policy Office handled napa cabbage, introducing a ‘responsible officer by item’ system. However, over five years, the MB Price Index’s inflation rate was 1.6 times higher than the consumer price index.

An official from Statistics Korea recalled, “The MB Price Index’s managed items rose more sharply than the consumer price index,” adding, “As a result, from March 2013, the consumer price index trends for the 52 major daily necessities under the MB items were removed from press releases.”