Chavez boosts food price controls

[WriteDown]

Source: BBC

Venezuela has set quotas for 12 basic foods which are to be produced at the government's controlled prices.

Ninety per cent of all milk production and 80% of all rice harvested in Venezuela are among the items included in the measure.

Last week President Hugo Chavez ordered troops to rice processing plants after accusing producers of sidestepping the law on controlled prices.

The food companies say the controlled prices will bankrupt them....

Read more: http://news.bbc.co.uk/2/hi/americas/7923073.stm

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What could possibly go wrong?

[Idealism]

1. South America had price controls in most countries until they were overthrown by dictatorships.

The second price controls were eliminated, often by IMF conditionalities and austerity programs, the prices of necessities exploded, leading to increased malnourishment and poverty throughout the continent. Bolivia and Argentina have yet to recover from the IMF treatments... 65% and 50% poverty respectively at this time. Argentina, under Peron and his socialism, price controls, and state-owned industries, was the 6th richest country in the world. Now, you have a quarter of the population rummaging through garbage for their meals.

[WriteDown]

2. Price controls can be effective

as long as they are high enough to allow for sufficient demand and do not create shortages. If you sell lemonade and make 1$ a glass after selling 50 glasses you've made 50$. If the price is then capped at 99 cents a glass and you are FORCED to still sell 50 glasses, this is where the problem occurs.

[Idealism]

3. Traditionally, they are accompanied by government subsidies

The idea is not to make something produced at a significantly cheaper rate, but for the government to absorb some of the operating costs it takes to bring the product to market. The bottom line is that the population pays less for necessities.

In resource-rich and liberal-leaning regimes in South America, subsidies always accompanied price controls. Food was seen as a right, whereas even in the US sadly, it is a privilege.

[WriteDown]

4. And that may work as long as the subsidies...

adjust due to raw material, labor, etc. As commodity prices adjust frequently, subsidy adjustments would have to adjust as well.

[Idealism]

5. Of course, it is not meant to be a static measure

Passive governance is not the way of a socialized economy, but a recipe for a Laissez-faire disaster.

[Judi Lynn]

6. Your comments are very helpful, and instructive. Thanks for taking the time.

:hi:

[Spouting Horn]

7. Central Planning

always works so well, I can't see why this strategy won't be an enormous success!

[Odin2005]

8. Epic Fail

Price controls always lead to shortages.

[AngryAmish]

9. What could possibly go wrong?

Cheap food for the poor is good, right?