The free market should be the ultimate deciding factor over prices. Some may say that it would be much fairer if the government had control over prices because it would then allow a less fortunate person to buy something he wanted- but could not afford- at a cheaper price.
This government control would only lead to disaster. There is in fact a real example in this world today of how horrible government price control can amount to.
The Venezuelan government is controlling its country’s prices. Nicolas Maduro, the Venezuelan President succeeding the late Hugo Chavez, decided to extend the country’s price controls saying that “We can’t allow our hard currency to be used to rob people through the sale of these goods.” This meant he was putting a price ceiling on basically everything. The country’s Fair Price Law limits the seller to a profit margin of no more than 30%. If you violate this law by hoarding or trafficking cheap goods you could face up to 14 years in prison.
This price drop enabled people to buy something that they originally might not have had the funds to buy before the price ceiling. There were also price ceilings applied to electronics, food, and other basic day to day necessities. This all might sound great, but the price drop is the “seen” factor, there is much more that remains unseen.
Since price control was fixated the prices of things have been put into a considerably unrealistic, artificial price, leaving a huge shortage of many things. This shortage occurs because Venezuelan people find it very agreeable to purchase an abundance of cheap goods to bring across the border to sell to Colombia at a profit through the black market. The people who are selling through the black market buy up many, if not all, of the goods when they become available, which leaves few goods in stock for other customers, making a shortage.
Venezuelan citizens line up outside of supermarkets in order to try to obtain sugar, flour, milk, and toilet paper along with more basic necessities. Citizens are even limited to one designated day of the week when they are allowed to shop at government stores.
While people wait in line at supermarkets fights emerge as some people try to steal from others who were able to get the wanted commodity, leading to an increased presence of police officers.
Journalists who wanted to report on the matter were even taken prisoner by the government because the government didn’t want any encouragement of a revolt to get to their citizens.
In the beginning of this month Venezuelan hotel owner, Xinia Camacho, said that “For over a year we haven’t had toilet paper, soap, any kind of milk, coffee, or sugar. So we have to tell our guests to come prepared.” Some hotels who are facing severe situations “prepare” their guests by asking them to bring their own soap and toilet paper.
Did you know that only in Venezuela new cars are cheaper than used cars? Yes, it is indeed true. Everybody who is able to get a new car wants to buy one because they are sold at such a low price. The problem is that there are no new cars to buy- they have all been sold already. The government can control prices, but the supply of that object is out of the government’s hands. During 2013 in Venezuela you could not find a single new car in a dealership showroom, there was a waiting list for at least a year for people who desired to purchase a new car.
New cars weren’t readily available, while used cars were much more accessible. The high or doubled price of used cars was put into action because the demand of cars was soaring. After this became noticed the president decided to make another law allowing the government to control both new and used car prices. This then started a new market for cars- selling cars on the black market.
While the black market is often thought of as an agency of crime, in Venezuela it is actually selling a commodity at a reasonably normal price. The black market makes an item available to people when it might not be readily available at stores. Take for example a roll of toilet paper, when found at the legal supermarket a roll costs $0.08 which is an extremely cheap and irrational price. In the black market a roll might cost $0.50- a much more realistic consumer price.
Some people who don’t wish to support the black market refuse to buy from it, the people just cannot see that the black market price is in fact the real cost of the item. The black market would actually be beneficial to some if they would just consider the facts. Would you rather use a leaf as toilet paper or actual toilet paper by simply buying a roll at a reasonable price through the black market?
This country, Venezuela, is in chaos because of its government’s insane price controls along with over controlling government power. If this is what government price control brings why would we even consider putting this control into action throughout other countries when we already have a functional pricing system- the free market?