Thursday, August 2, 2007

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How price controls favor the few

Today the New York Times has a front-page story by Michael Wines on the economic disaster that is Zimbabwe:

Bread, sugar and cornmeal, staples of every Zimbabwean’s diet, have vanished, seized by mobs who denuded stores like locusts in wheat fields. Meat is virtually nonexistent, even for members of the middle class who have money to buy it on the black market. Gasoline is nearly unobtainable. Hospital patients are dying for lack of basic medical supplies. Power blackouts and water cutoffs are endemic.

Manufacturing has slowed to a crawl because few businesses can produce goods for less than their government-imposed sale prices. Raw materials are drying up because suppliers are being forced to sell to factories at a loss. Businesses are laying off workers or reducing their hours.

The chaos, however, seems to have done little to undermine Mr. Mugabe’s authority. To the contrary, the government is moving steadily toward a takeover of major sectors of the economy that have not already been nationalized.

There's nothing really new here, except the depressing way in which government efforts to impose price controls favors those connected to the government:
Ordinary citizens initially greeted the price cuts with a euphoric — and short-lived — shopping spree, since they had been unable to buy even basic necessities because of hyperinflation. Yet merchants and the government’s many critics say that much of the cut-rate merchandise has not been snapped up by ordinary citizens, but by the police, soldiers and members of Mr. Mugabe’s governing party who have been tipped off to the price inspectors’ rounds.

In Plumtree, near Zimbabwe’s border with Botswana, a line of shoppers gathered outside a shoe store last week even before opening hours, said Moses Mzila, who represents the area in Parliament. As the store opened, government inspectors appeared — and the throng followed them in, buying up stock as it was marked down.

“It’s theft, outright theft,” Mr. Mzila said. “Some of them had big cars, shiny, sparkling double-cabs, and they filled them up with shoes and just drove away.”

posted by Dan on 08.02.07 at 08:46 AM


Abel Muzorewa's looking pretty good right about now, isn't he?

posted by: srp on 08.02.07 at 08:46 AM [permalink]

The other side of the effects of price controls is the devestating impact of hyperinflation. This is also something that Mugabe's government is responsible for. So bad--really, really awful--monetary policy creates the hyperinflation, and then attempts to control prices make everything even worse. The daily double.

posted by: Donald A. Coffin on 08.02.07 at 08:46 AM [permalink]

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