Price Caps Crippling Zimbabwe Economy
Zimbabwe’s already shaky economy is going into a tailspin after Robert Mugabe ordered price caps.
Robert G. Mugabe has ruled over this battered nation, his every wish endorsed by Parliament and enforced by the police and soldiers, for more than 27 years. It appears, however, that not even an unchallenged autocrat can repeal the laws of supply and demand.
One month after Mr. Mugabe decreed just that, commanding merchants nationwide to counter 10,000-percent-a-year hyperinflation by slashing prices in half and more, Zimbabwe’s economy is at a halt.
Bread, sugar and cornmeal, staples of every Zimbabwean’s diet, have vanished, seized by mobs who denuded stores like locusts in wheat fields. Meat is virtually nonexistent, even for members of the middle class who have money to buy it on the black market. Gasoline is nearly unobtainable. Hospital patients are dying for lack of basic medical supplies. Power blackouts and water cutoffs are endemic.
Manufacturing has slowed to a crawl because few businesses can produce goods for less than their government-imposed sale prices. Raw materials are drying up because suppliers are being forced to sell to factories at a loss. Businesses are laying off workers or reducing their hours.
Bruce McQuain suggests that this is “a lesson that many in this country would be wise to heed.” Mark Perry agrees, citing “minimum wage laws, rent control laws, price gouging laws” and the like as parallels.
Thankfully, our interference with the laws of supply and demand are relatively marginal and thus the damage is relatively contained. Still, there’s not much doubt that ordering people to charge less for goods than it costs to provides them will lead to suboptimal provision.
Government has a role to play in regulating the excesses of the market. But the tendency is to do more harm than good. It only seems fair that someone putting in a full day’s work should be able to provide for his family; but if he doesn’t provide more value than that to his employer, he’s not going to get hired. Affordable rent is a great idea but not if it means no apartments are available. We don’t want people to take advantage of disasters by jacking up the prices of available goods; at the same time, though, we want to encourage badly needed goods being brought to the area.