Price Controls

The Socialists are following the socialist playbook.

• Institute profligate government spending policies
• The spending causes massive, uncontrolled inflation
• Blame business owners for the increased prices <——– You are here
• Institute price controls
• This causes scarcity of products,
• Which puts pressure on the supply side,
• Causing runaway inflation
• Food shortages and famine

I’m joining @SenWarren to put billionaire food companies and grocery giants on notice. Stop price-gouging the American people at the supermarket while raking in record profits. Your time of greed is coming to an end! pic.twitter.com/Jh1jCbjIFQ

— Rep. Jim McGovern (@RepMcGovern) May 15, 2024

The reason why prices of food are outpacing inflation is that the government doesn’t include food and energy as a part of the consumer price index. It’s ridiculous.

Price controls don’t work. An artificially low price set by the government leads to a spike in demand, while the producers are not willing to sell at that price, considering that their profit margins drop considerably or even lurch into the negative. As demand exceeds supply, shortages emerge and consumers are left to cope with them or deal with inferior quality goods in the market. Those who bought up all of the government approved goods then resell them on the black market at the (now even more inflated) market rate.

Ask Venezuela, since they instituted price controls in 2003. The artificial prices set by the government were so low that farmers couldn’t produce food at that price. They had to go out of business. By 2008, the government was spending nearly $7.5 billion on basic food items, but even then high levels of incompetence and deep seated corruption led to the food rotting before it could reach the supermarket shelves. 

Chavez responded to this in 2009 by ordering the military to seize rice farms and make them produce at full capacity. This, and food imported from other countries that was paid for by the nation’s oil exports made up much of the shortfall, and prices stabilized for a couple of years.

Then the bottom fell out from under oil prices. By mid-2011, food prices were 9 times as high as before the price controls. Considering that elections were coming, Chavez persuaded the Venezuelan legislature to pass the 2011 Law on Fair Costs and Prices, which actually made inflation ‘illegal’. A newly created ‘National Superintendent of Fair Costs and Prices’ was empowered to establish fair prices at both the wholesale and retail levels. Companies that violated these price controls were to be subjected to fines, seizures and expropriation. So they simply stopped producing once the prices could no longer support the costs of producing goods.

This caused massive shortages, so people began to hoard necessities like toothpaste and toilet paper, with people buying up 48 rolls at a time. (Sound familiar?) Such trends saw the supermarkets being emptied out even before stockers could get in the supply. The answer for all of this isn’t that the government policies were a failure, nope. Instead, it was the greed of companies and of hoarders, so they had to go.

In 2014, Chavez’s successor Nicolas Maduro passed the Fair Prices Act through which it banned profit margins above 30% and chalked out prison terms for those caught hoarding and over-charging. 

By the year 2020, a dozen eggs cost more than a month’s wages. People were eating the animals in the zoo, as well as their pets.

That’s where we are headed.