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Last Updated: Thursday, 26 July 2007, 05:09 GMT 06:09 UK
Has profiteering hit flood victims?
By Ben Richardson
Business reporter, BBC News

Water bottles being delivered by emergency workers
Despite emergency water supplies, there are fears of a shortage
Heavy rains were still falling and flood waters rising when the first rumours of profiteering started to emerge.

White vans were seen parked in front of supermarkets selling bottles of water for many times their original price to panicked shoppers hunting emergency supplies.

Unscrupulous retailers were accused of pushing up the price of everything from eggs to bread, while it was claimed that hotels were ramping room rates to take advantage of people fleeing their homes.

With a second wave of flooding hitting Oxford and Berkshire, after large parts of Gloucestershire were submerged earlier in the week, the stories will probably be swirling long after the waters recede.

'Totally lost'

The sudden emergence of pricing fears is no surprise to international refugee agency UNHCR.

"If people have to leave their homes quickly, then they can be very disorientated, totally lost," a spokesman explains.

Board advertising free drinks, food and toilets
Observers said that the disasters tend to bring the best out of people

Fears of losing out and being taken advantage of are fanned by the uncertainty that surrounds their future and the level of state assistance that will be on offer.

Yet far from lining up to con those in trouble, the UNHCR says that local communities normally react generously when faced with an influx of people.

The British Red Cross echoes this sentiment, saying it persuaded one supermarket in a flood hit area to open at night so that it could make up emergency packs for free from the goods on the shelves.

"While I assume that profiteering would happen, I have never heard of it happening," says Mike Goodhand, head of logistics at the British Red Cross.

Bad business

According to the British Retail Consortium (BRC), it would not make sense for firms to alienate their core consumers by extracting an unfair extra profit in areas where they would have to keep operating.

"Retailers are actually sacrificing profits to ensure the local communities they serve have access to supplies," the BRC says in a statement.

We have become fonder, more admiring of the entrepreneurial spirit. People operate more as an island
Rosie Campbell, psychologist

"There are reports a few rogue individuals are attempting to profiteer from the situation but no retailer will be involved."

Rosie Campbell is a psychologist who believes that changes in the way our society is structured and how many of us view business and businesspeople may have contributed to our willingness to believe the worst of others.

"We have become fonder, more admiring of the entrepreneurial spirit," she explains, adding that over the past 20 years there has been a shift away from a loyalty to a broader society and an increased focus on self interest.

"People operate more as an island," she says.

Blitz spirit

The problem is that many consumers are unwilling to accept higher costs, and their suspicion of the motives behind any increase can often be stoked by the free-market ideals that form the basis of a liberal economy.

In the first years of World War I, the government of Herbert Asquith did not impose price controls and exercised a "laissez faire" attitude that saw costs increase, explains Terry Charman, a historian at the Imperial War Museum.

What is so striking about the floods today, is that WWII looms so large
Terry Charman, historian at the Imperial War Museum

Instead of seeing a link between a supply squeeze because of the war and stronger spending power boosted by extra work, consumers blamed profiteering retailers.

Bakers, fishmongers and butchers were ridiculed in songs and satirical cartoons and there was a sense that someone, somewhere was making money at the expense of others, Mr Charman says.

During World War II rationing was introduced almost immediately, and while a black market developed alongside a bartering system for hard-to-get goods, there was a far greater sense of everyone being in the same boat, he adds.

"What is so striking about the floods today, is that WWII looms so large," Mr Charman says.

"There is talk about the Blitz spirit and how it stays the same."

Snap back

Despite these positive sentiments, it would be wrong to argue that no one had tried to make a fast buck.

However, it is generally accepted that these incidents are down to opportunistic traders rather than an orchestrated profits push by big retailers.

Shop front in flood hit area
Many shops are trying to operate as normally as possible

For Dr Eamonn Butler, director of the free-market think tank The Adam Smith Institute, a surge in costs would be short-lived and signal a business opportunity that would undermine price gouging.

Keen to make a profit, retailers would seek out extra goods to sell, bringing more to market and ending the shortage that had pushed prices higher.

At the same time, some increase in prices may well be justified because of factors such as the extra costs incurred by traders in bringing hard-to-find products to flood-affected areas, Dr Butler says.

Ultimately, though the market will adjust to supply and demand and iron out any significant irregularities.

The only problem is that - as the profiteering water trader reportedly chased out of Gloucester by citizens angry at his high prices found out - when the market does correct itself, it can often do so violently.


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