1.05.2006

Democratic Katrina policies at work

Remember all the energy price control hullabaloo from the Democratic party after Katrina to “help the poor”? Fortunately this didn’t happen because the democratic party currently has about as much influence on policy as a double scotch does on Ted Kennedy. But assuming they did, through the miracle of crappy socialist dictatorships, we can see into a likely democratic future in Venezuela if below we substitute “coffee” for “oil”:

CARACAS, Venezuela (AP) -- Coffee is vanishing from Venezuelan stores as producers protest price controls they say are strangling profits -- no laughing matter in a country where drinking the bitter brew is not simply a habit but a culture.

Troops and inspectors have begun raiding inventories held by private companies in an effort to ease the scarcity, authorities said on Wednesday.

The dispute over the bitter beans can be traced back to early 2003, when coffee fell under price controls for staple foods imposed by President Hugo Chavez's government as a way to counter inflation and protect the poor. But prices set in early December outraged coffee producers, prompting protests in downtown Caracas and paralyzing deliveries.

National Guard troops have so far seized about 330 tons of coffee stored by wholesalers in Yaguara and Guacara, near the capital of Caracas, and more raids were planned, said Gen. Marcos Rojas Figueroa of the National Guard.

"That coffee is going to be sold ... at the established price," he said.

3 comments:

Joe said...

Wow..price controls are one thing. Seizing stocks of goods is another.

On an economic side-note, did anybody know Milton Friedman was still alive? I saw the old bastard on t.v. the other day. He's like 93 years old!

Andrew said...

Well Chavez wouldn’t be a tinpot socialist dictator if he didn’t crack some skulls occasionally would he?

The Venezuelan situation is simply a perfect macro-econ 101 example of what happens when an artificial ceiling is put on commodity prices. When you starve a market of profits the incentive to increase supply declines causing supply of that commodity to decline. This decreasing supply causes shortages and hoarding is a rational response to a shortage of a commodity. At this point all the government can do is crack some skulls to force the redistribution of the hoarded commodity, but at most all this can achieve is allowing everyone to experience the shortage equally.

By virtue of having a slightly more professional government, the US circumvented hoarding of gas in the 1970’s by instituting rationing through the use of vouchers. Though I’m sure that if these failed to even out distribution (which it’s likely they did fail more than we realize) Carter, like his buddy Hugo, would also have sent in the skull crackers to ensure that gas would be sold at the “established price”.

Am I misreading or is there something specific you don’t like about Friedman? The Chicago school does have 11 nobels...

Joe said...

Do I dislike Milton Friedman? Of course, I'm a democrat! But that doesn't mean I don't respect him. And he supports drug legalization, which I like.