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June 27, 2007

Price controls cause shortages

Example #2379:

Zimbabwe's government announced sweeping price cuts in a bid to curb inflation Tuesday and said it set up a unit drawn from all its security agencies to enforce the cuts.

But most businesses -- including gas stations ordered to reduce the price of scarce fuel by more than two-thirds -- ignored the government's directive. There were no reports of security agents arresting business managers on the first day of the ordered cuts.

Far from cutting prices, retailers have been struggling to keep up with the falling value of the Zimbabwean dollar, in some cases curtailing their hours of business to give employees time to put new, higher prices on goods.

Industry Minister Obert Mpofu announced price cuts of up to two-thirds on a range of basic goods and services, from commuter transportation to bread, sugar, meat, milk, corn meal and even newspapers, state radio reported Tuesday.

The result?
On Tuesday, shops in central Harare seemed to be defying the new directive. Instead of cutting prices, some supermarkets simply emptied their shelves of goods such as sugar, salt, flour cooking oil, beef and fuel that would be subject to the order.

"We have been instructed by management to remove some of the products from the shelves for now," an assistant at a leading chain store said as shoppers scrambled to buy bathing soap.

At another store there were long queues as people stocked up, saying they feared basic goods would now be in even shorter supply.

Zimbabwe's government must be among the most incompetent gang of morons ever to rule a country. After years and years of stupid policies that have devastated the economy, still they keep at it -- seemingly thinking that their absolute physical power can change the rules of supply and demand. They seem to have some sort of institutional learning disability.

June 11, 2007

The 'devastating urge to do good'

Recently, Bono and Bob Geldof wagged their fingers at Canada for our government's unwillingness to hand over the money they're demanding. But if you listen to Kenyan economist James Shikwati, more big checks and aid handouts are the last thing Africa needs:

SPIEGEL: Even in a country like Kenya, people are starving to death each year. Someone has got to help them.

Shikwati: But it has to be the Kenyans themselves who help these people. When there's a drought in a region of Kenya, our corrupt politicians reflexively cry out for more help. This call then reaches the United Nations World Food Program -- which is a massive agency of apparatchiks who are in the absurd situation of, on the one hand, being dedicated to the fight against hunger while, on the other hand, being faced with unemployment were hunger actually eliminated. It's only natural that they willingly accept the plea for more help. And it's not uncommon that they demand a little more money than the respective African government originally requested. They then forward that request to their headquarters, and before long, several thousands tons of corn are shipped to Africa ...

SPIEGEL: ... corn that predominantly comes from highly-subsidized European and American farmers ...

Shikwati: ... and at some point, this corn ends up in the harbor of Mombasa. A portion of the corn often goes directly into the hands of unsrupulous politicians who then pass it on to their own tribe to boost their next election campaign. Another portion of the shipment ends up on the black market where the corn is dumped at extremely low prices. Local farmers may as well put down their hoes right away; no one can compete with the UN's World Food Program. And because the farmers go under in the face of this pressure, Kenya would have no reserves to draw on if there actually were a famine next year. It's a simple but fatal cycle.

Obviously, it's a complex issue. No one wants to turn their back on suffering. But clearly it isn't money alone that will get Africa on the path to modernity. Africa needs reliable banks, dependable currencies, and honest government and law enforcement. Without them, people seen no reason to try to better their lives because the fruits of their labours will be stolen/inflated/taxed away. But since we can't stick those foundations of prosperity in a container and put them on a boat, and because any attempt to provide those services would be met by deafening cries of "Colonialism!" from the usual suspects, perhaps a bit of tough love, as Shikwati suggests, is in order.

(via Instapundit)