Want to Talk “Terrible,” How About Price Controls?
Global food prices skyrocket getting an IMF official to warn of “terrible” consequences:
Further gains in food prices would be “terrible'’ for the world’s poor and throw hundreds of thousands of them into starvation, International Monetary Fund Managing Director Dominique Strauss-Kahn said.
Governments throughout Asia, Africa and the Middle East are seeking to combat food inflation and avoid social unrest by curbing exports or lifting import duties on basic food staples such as rice. Global food prices surged 57 percent last month from a year earlier, according to the United Nations, and the World Bank warns civil disturbances may be triggered in 33 countries.
If food inflation keeps accelerating at its current rate “the consequences will be terrible,'’ Strauss-Kahn told reporters at the IMF’s semi-annual meeting in Washington today. “Hundreds of thousands of people will be starving, leading to a disruption in the economic environment.'’
So what is Haiti doing? Going for price controls:
Haitian Prime Minister Jacques Edouard Alexis was voted out of office by the country’s senate today after violent protests over rising food prices, news agencies reported today.
President Rene Preval, who called the no-confidence vote “unjust,'’ announced a 15 percent cut in the price of rice, which had doubled this week to $70 for a 50-kilogram (110-pound) bag, Agence France-Presse reported. No replacement for Alexis was announced.
Price controls didn’t help President Nixon when he tried them:
In the months that followed, inflation began to pick up again in response to a variety of forces — domestic wage-and-price pressures, a synchronized international economic boom, crop failures in the Soviet Union, and increases in the price of oil, even prior to the Arab oil embargo. Nixon, under increasing political pressure from the investigations of the Watergate break-in, reluctantly reimposed a freeze in June 1973. Government officials were now in the business of setting prices and wages. This time, however, it was apparent that the control system was not working. Ranchers stopped shipping their cattle to the market, farmers drowned their chickens, and consumers emptied the shelves of supermarkets. Nixon took some comfort from a side benefit that George Shultz, at the time head of the Office of Management and Budget, identified. “At least,” Shultz told the president, “we have now convinced everyone else of the rightness of our original position that wage-price controls are not the answer.” Most of the system was finally abolished in April 1974, 17 months after Nixon’s triumphant reelection victory over George McGovern — and four months before Nixon resigned as president.
Food shortages should be expected in Haiti if the government-set rice price is below what the market would set. There will be little incentive for more rice suppliers to sell to Haiti. That won’t help those there seeking affordable food.
“Strauss-Kahn Warns Food-Price Inflation May Trigger Starvation”
