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The Folly of Price Controls

  • By The Newnan Times-Herald
  • |
  • Dec. 08, 2022 - 8:46 PM

The Folly of Price Controls

The Newnan Times-Herald

“Even the tyrant never rules by force alone,” wrote G.K. Chesterton, “but mostly by fairy tales.”

Alexander Lukashenko meets Chesterton’s description perfectly. Since 1994, he has kept himself in power as the socialist President of Belarus by stealing elections, mugging the press and serving as Vladimir Putin’s most loyal stooge in Eastern Europe.

The least free nation in all of Europe, Belarus is cursed with a horrific human rights record thanks to the blood-soaked hands of its maniacal dictator.

The fairy tale side of Lukashenko is legendary. He boasts a fondness for the old Soviet Union, whose collapse he labeled “a disaster.” He champions state ownership of industry because he says it’s efficient, which not even the most moronic fairy tale would dare claim.

October brought news that Lukashenko fancies himself a sort of economic sorcerer. Facing an annual rate of price inflation of nearly 20 percent, he angrily declared, “All price increases are forbidden. Forbidden! From today. Not from tomorrow, from today!”

A year from now, you can bet your life that no headline in the world will read, “Lukashenko’s Decree Miraculously Ends Inflation, All is Well in the Belarusian Economy.” The 9.5 million people of Belarus are about to experience the same painful outcome that price controls produce always and everywhere. Lukashenko’s fairy tale will be their nightmare.

If I could place just one book in the hands of every Belarusian today, it would be a classic from 1979 by Robert L. Schuettinger and Eamonn F. Butler titled “Forty Centuries of Wage and Price Controls: How Not to Fight Inflation.”

“The historical record,” reports the author of the book’s Foreword, “is a grimly uniform sequence of repeated failure. Indeed, there is not a single episode where price controls have worked to stop inflation or cure shortages.”

Market prices are what they are because of a confluence of factors, chief of which are the supply of and demand for goods on the one hand, and the supply of and demand for money on the other. Prices send signals to both consumers and producers, telling them what and how much to produce as well as what and how much to consume. When prices are free, they bring supply and demand together so surpluses and shortages are ephemeral. When a tyrant simply decrees what prices will be, and enforces his order at gunpoint, chaos and disaster result.

The Babylonian king Hammurabi “smothered economic progress” with wage and price controls in 1750 B.C. Trade declined, and “the very people who were supposed to benefit” from the restrictions “were driven out of the market.”

For a time in ancient Greece, merchants were put to death for violating price controls. “The Athenian government,” reported Schuettinger and Butler, even “went so far as to execute its own inspectors when their price-enforcing zeal flagged.” Inflation didn’t disappear as effectively as either the merchants or inspectors did.

The historical examples of price control failure are almost endless, and Belarus will soon join the sorry list.

Why is knowing economics and history important? Because without the knowledge these disciplines give us, we can be as stupid and as destructive as a Belarusian despot. And that’s no fairy tale.

Lawrence W. Reed, a resident of Newnan, is president emeritus of the Foundation for Economic Education. His most recent book is “Was Jesus a Socialist?” He can be reached at .