President Cristina Fernández de Kirchner is going down to Chavezville by repeating the same errors as Venezuela. The only way that she could mess up Argentina any further would be by actually starting a war with the UK.
Last month, retailers agreed to freeze the prices of around 200 basic goods–ranging from detergent to milk to condoms–to fight inflation that economists say likely surpasses 30% annually.
Obviously there’s a problem here. Passing price controls doesn’t mean that the products will actually be available.
At the time, retailers said the agreement could lead to supply problems if manufacturers of certain goods curbed production of products that yielded little or no profit or, in some cases, directly led to losses.
While you can bully retailers into selling products at a loss, they already do that with loss leader items in sales, as long as the rest of their inventory is profitable, you can’t force producers into manufacturing products that they are taking a loss on. It becomes cheaper for them to export the products to a country that will pay market prices for them… and if exports are banned, then they will smuggle them out of the country.
That’s how Venezuela ended up with shortages of everything, police taking over stores and mobs fighting over powdered milk… which is price controlled and which producers find more profitable to sell to Colombia.
So naturally the Argentinian government is being entirely realistic and reasonable about this whole thing.
Commerce Secretary Augusto Costa said, in a presentation to reporters, the government fined Carrefour about $ 167,000 and Wal-Mart around $77,500. The companies were allegedly found to have an incomplete stock of certain products that they agreed to sell at capped prices. Changomas, also owned by Wal-Mart, was fined about $41,000. Other local retail firms were also fined.
Simple problem. Fine the stores until they begin selling products that aren’t available at prices that producers won’t sell at… until they go out of business.
The fines also come a week after political activists allied with the government plastered this capital city with poster-size photos of retail executives accusing them of fueling inflation by raising prices.
The posters featured portraits of executives from the local units of Wal-Mart, Carrefour and other companies. ” These are the people who steal your salary,” the posters said. “They raised the price of everything to take your money.”
Sure, it’s not the government. It’s Walmart’s fault. For some reason other countries where Walmart operates have low prices. But Walmart is deliberately raising prices because it wants to fuel inflation that will wipe out its profits.
Kirchner is going Full Chavez.
On Friday, Mr. Kicillof defended the government from critics while placing blame for inflation on businesses. “The government doesn’t raise prices,” Mr. Kicillof said. “Some businesses may occasionally be justified in raising prices, but in most cases there can be no justification for this,” he said.
Could there maybe be some justification for it?
The fines come a day after Economy Minister Axel Kicillof announced a change in the methodology to measure price increases and reported that consumer prices rose 3.7% in January from the previous month. This was the first time in seven years that the government has acknowledged that the country has high inflation.
For years, the government said that annual inflation totaled around 10%–a number so implausibly low that it led the International Monetary Fund to censure Argentina and order a change in methodology to calculate key indicators accurately.
Clearly Walmart’s fault. Or maybe it’s Socialism’s fault. Planned economies and price controls don’t work. They lead to shortages which lead to riots which lead to scapegoats which lead to economic wipeouts.