The futility of price controls is indubitable


The lockdown period has given rise to a plethora and whole host of policies, strategies and decisions never seen before as the world makes frantic efforts to halt the ruthless spread of the COVID-19 disease.

From assiduous efforts to curb the spread of the predatory ailment in towns, we have witnessed world cities previously bustling with activity become desolate places with a handful security details ensuring compliance.

Hospitals, on the other end, have become places where extreme caution is now the watch-word. What further strikes fear in the hearts of mortals is the obstinate fact that this virus might not be vanishing in the soonest possible time we all desire in order to resume normal life.

There is no shortage of conspiracy theories across the world as answers pertaining to the origin of the virus have come in all forms and sizes.

There is one particularly curious theory that what the world is seeing is all but a biological warfare in the race to have a super economy among world powers.

Conspiracy theorists have defended the issue, saying it’s all about how America and China are locked in a fierce battle for economic dominance.

Now, far from the madding crowd of economic conspiracy theories, it is incumbent upon Zimbabwe at this juncture to make judicious decisions as the world panics over the virus.

True, indeed, these are desperate times which indeed call for desperate measures, but it must be borne in mind that some decisions seemingly made for the common good may actually work to the detriment of the citizenry.

The previous Wednesday, Vice-President Kembo Mohadi announced that all retailers would be directed to revert to the pricing level that obtained on March 25.

One thing must be clear: wherever the idea of price controls originates, it is indeed driven by good intentions.

It is fine to have good intentions but, as aforementioned, let’s be wary of good intentions that provide temporary succour and leave us in circumstances uglier than before.

One can check through erudite tomes on economics throughout this blundering world and come to the realisation that any governance system that advocates for price controls is certainly courting trouble for the economy.

Zimbabwe does not even have to look far; it has its own trail of destruction left by price controls during the late former President Robert Mugabe’s populist ideologies era.

Price controls have been resisted and ironically not through violent means but passively. Recall the time when Zimbabwean-produced goods flooded Mozambique and Zambia while they were scarce in Zimbabwe?

This is precisely where price controls lead us. Any other solution to any economic challenge resulting from COVID-19 could work, but it is rather ludicrous to push forward price controls as a formidable alternative.

Prices have been rising as evidenced by the annual inflation rate of 767,39% as at the end of March, a sharp increase from February’s comparative 540,16%.

The 21 day national lockdown that was set to end on March 30 significantly gave impetus to the increases.

But Zimbabwe must comprehend the fact that the rise of prices during the lockdown period is not only specific to them. Check right across the globe presently how prices of basic goods have hit the roof.

The palpable reason behind increasing prices is just but an issue of the interaction between supply and demand. In fact, the United States and the United Kingdom have not been spared by the price increase scourge.

The truth of the matter is that price controls will not work despite them being premised on the best of intentions. Price controls, through all history, in all nations have never prevailed against economic forces of supply and demand.

It would indeed be a first should they succeed merely because of the national lockdown. A surge in prices was inescapable in this period, but that does not mean we wreck the economy in efforts to fix a possibly temporary problem.

Historically, during instances of a national emergency, retailers increase prices as they would not be able to readily stock up due to restrictive measures in place.

It should be common economic sense that when prices are established by commerce in a free market, prices shift to maintain the balance between supply and demand in the case of price ceilings, or excess supply in the case of price floors.

It is also not a secret that the Confederation of Zimbabwe Industries has stated that the COVID-19 pandemic is affecting 88% of manufacturers in their production systems, that also affects local supplies.

In my ultimate view of the obtaining scenario, it is imprudent to make decisions with far-reaching ramifications for a temporary problem.

The inferno of price controls will be difficult to put out in any case.

The government would do well to be advised not to provide permanent solutions to temporary trouble.

Price control failure is on record the world over.

 Learnmore Zuze is a legal officer. He writes in his personal capacity


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