Price Controls: Guaranteed Disaster
Thomas DiLorenzo wrote an excellent article back in November on the consequences of government price controls. There’s an interesting underlying theme here. DiLorenzo catalogs more than 2500 years of government price controls and the disasters they brought about, all the way up to modern times and the energy crisis of California. And the thing that jumped out at me was that we never seem to learn from history. And it isn’t just the things that we think of with history, war, crime, totalitarianism. Those are the issues most people mean when they say that humans don’t learn from history. But, arguably, government controlled economic systems have caused more misery, for more people, throughout history, than anything else humans have done to ourselves.
Listen to this (summarized from DiLorenzo’s article):
- In the 3rd century B.C. the Egyptian economy and political stability collapsed due to agricultural price fixing. Farmers left their land because of the strangulation caused by price inspection armies, enforcing prices set by fiat.
- In Babylon, four thousand years ago, the Code of Hammurabi contained a maze of price controls, setting the rate that workmen were to be paid, how much a boat could be hired for, and so forth. This “smothered economic progress in the empire for many centuries”.
- In the American Revolution, after the Pennsylvania Legislature introduced price controls to support the war effort, Washington’s Continental Army nearly starved to death because of shortages of the very items under price controls. The actual language from the legislation was “those commodities needed for use by the army”.
- American planners in charge of Germany at the end of WWII instituted incredible central planning and price controls, on par with those found under the Soviets. None other than Hermann Goehring told them “I tried and it failed. Nor can any country do it all the way either. I tried that too and it failed. You are no better planners than we.”
And on and on the list goes. Considering the incredible misery that economic regulation by government has brought about, including the deaths of many millions in Europe, Asia and Africa in the 20th century, you would think we would have learned our lesson by now. But we seem, somehow, to be blithely convinced that we can do it better than those other bums. Never mind that we ended up with brown outs and black outs in California because of price controls on electricity, that we had gasoline shortages in the 70’s because a “conservative” President instituted draconian price fixing on oil. Just ignore the entire black market that existed throughout the country to deal with the price controls and rationing of WWII. Forget about the fact that the Southern slave owners were huge proponents of socialist economics (bet you didn’t know that). It doesn’t matter that Canadians now wait longer to get worse health care than they did before they gave themselves 100% socialized medicine.
Oh, wait, history really does show that government regulation of economic activity fails miserably every time? Oooops. Ignore all that evidence. This time we’ll do it right. And, even if we don’t, you’ll be so busy trying to find some staple that you absolutely have to have that you will not pay attention to the horrible situation government economics have put you in. The USSR banked on that. It worked well for them too.