Politics is often the art of lying about the effects of policy, and Hugo Chavez, Venezuela’s Prevaricator-in-Chief, is a master politician. As consumer-price inflation hits a 27 percent per annum rate, he blames capitalism.
One report summarizes his position: “Mr. Chavez said the market had become a perverse mechanism where the big monopolies, the big trans-nationals, and the bourgeoisie, dominate and ransack the people.”
So he’s extended price controls from staples to all sorts of goods, with some prices being immediately subjected to a rate freeze. Big firms will have to report costs to the government, so bureaucrats can determine a “fair price.”
Were it not a ratcheting up of oppression and hardship, I’d say this is all getting rather funny. Price controls notoriously fail to achieve what they aim. In the United States, Nixon-era wage and price controls set stagflation into overdrive. Long lines at the gas pumps, shortages in supermarkets, and rising prices. What a mess.
There’s good theory to explain why price floors and price ceilings cause major problems. But according to the head of the country’s price control board, “The law of supply and demand is a lie.”
Hugo and his cronies deny the relevance of the central bank’s doubling the volume of money in circulation since late 2007. Supply of money increases? No possible effect on skyrocketing prices, supply and demand being a lie, you see.
Meanwhile, people have begun to hoard products. It’s now almost impossible to even find coffee in Venezuelan stores.
This is Common Sense. I’m Paul Jacob.