The Politics of Rice 10

Kompas reports today, a House member from PAN says that the recent rise of rice price is due to increase in production costs, not to a decrease in supply. The other factor, he adds, is the supply holding by rice speculators to take advantage of price differentials. This is a partial, incomplete way of looking at the problem. Cost of production, supply, and arbitrage are not unrelated. When costs increase, the price would respond upward (or else, the profit margin will be pressed down). And there would be a slowing down in the supply growth, until the adjustment is complete. In the meantime, some economic agents will do arbitrage until the price differential vanishes (taking into account any distortion).

But there's another disturbing statement in the same article. Some analysts say that the recent rice import approval by the government is just a way to get political support from ... urban middle class! I'm no political scientist but isn't it stupid to try getting support from minority, not majority when you want to keep your political position? In fact, if vote getting is of concern, then this person might be more likely to win the majority. And somehow that explains... Or not?