Monday, November 15, 2010

Honduras Congress to enact legislation on price controls

US gas shortages in 70s
When will we learn? price controls do not work and have not worked anywhere. Price controls have not worked even in command and control economies such as China, Vietnam, Cuba or the old Soviet Union....depending on whether the price control is a ceiling (as they want to do in Honduras) or a floor, this only leads to corruption, scarcity, black markets, rationing and a generalized mis-allocation of resources that will eventually cause a collapse of the economy.

 This is more of a demagogic measure that does not address the real problems of low generalized productivity, protectionism, mis-guided public sector investments, unreal regulations (such as the mandatory salaries paid to teachers, nurses and doctors) and the fact that we in Honduras are still a mixed economy.

In Honduras we have quasi-feudal and mercantilism markets co-existing with some somewhat competitive markets...made worse in some instances by government attempts at "liberalizing" or "privatizing" markets. So-called unions leaders and some "experts" in economics, blame the "neo-liberal" reforms as the culprit for our current economic troubles. This story is much more nuanced than that...only people with an agenda can continue pushing such simplistic story.

©2005-2010 Douglas Smith
 The cellphone market in Honduras is a clear example of what I mean. Going from a "State" to a "Private" monopoly later to a duopoly after "privatization", does not make any difference whatsoever in economic terms. If we have had a true "neo-liberal" revolution, we would have competitive markets. We (our government) only pretended to reform things, mostly to benefit some of those same bureaucrats who were and continue to be in power.

So, Why is Congress doing the price control thing? because it looks good, but fully knowing it does not work. That my dear reader, is at the essence of our problems, more demagogic government actions that take us back years and which do not address the real issues. That is the issue....


  1. I also posted this on Facebook, but what I don't understand is that frijoles were the major problem (I thought) but frijoles are excluded from this legislation.

  2. red beans are apparently included in the legislation....