You Can Ignore Economics

But economics won\’t ignore you:

But of milk, eggs, sugar and cooking oil there was no sign. Where were they? The question yesterday prompted a puzzled look from the manager. "There isn\’t any. Everybody knows that. Pasta is probably the next to go," he shrugged.

Welcome to Venezuela, a booming economy with a difference. Food shortages are plaguing the country at the same time that oil revenues are driving a spending splurge on imported luxury goods, prompting criticism of President Hugo Chávez\’s socialist policies.

Milk has all but vanished from shops. Distraught mothers ask how they are supposed to feed their infants. Many cafes and restaurants serve only black coffee.

Families say eggs and sugar are also a memory. "The last time I had them was September," said Marisol Perez, 51, a housewife in Petare, a sprawling barrio in eastern Caracas.

When supplies do arrive long queues form instantly. Purchases are rationed and hands are stamped to prevent cheating. The sight of a milk truck reportedly prompted a near-riot last week.

This isn\’t actually a surprise. When you set the price of an item below its cost of production then people won\’t produce the good.

Government price controls on staple foods are so low that producers cannot make a profit, they say, and farms and businesses hesitate to invest in crops or machinery, or stockpile inventories, for fear of expropriations.

"We\’ve warned about this from the beginning – all of these price controls in the long run end up producing shortages," Ismael Perez, of the industry group Conindustria, told Reuters.

You can even fight economics but economics will win.

7 comments on “You Can Ignore Economics

  1. Hats off to that Chavez, he will go down in history as a textbook example of how dictators fuck things up. I am impressed at the speed with which he is fucking things up as well.

  2. And you can’t ignore geography either. Cuba is an island. It can hold its people in a watery prison, and keep out imports too. Venezuela can’t stop people walking over the border and when people want milk powder, someone will smuggle it in. Any news on the rate of emigration from Venezuela? And the black market?

  3. Chavez has a new statute ready to go to fix the problem, the “2008 Act to Repeal Supply, Demand and Gravity”. The problem with the former law was that it only fixed prices but did not deal with the underlying cause. the new law will solve everything.

  4. The shooting of kulaks will start when the $2 billion of arms are delivered from Russia. Armoured vehicles, aircraft and firearms – just what is needed for a country facing no external threat.

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