Democratic Party Senators Propose Venezuelan-style Price Controls

US Senator Elizabeth Warren, along with seven colleagues in the Senate and six members of the House of Representatives, all from the Democratic Party, last week proposed something rare in the country: a price control bill. The plan would prohibit companies with revenues equal to or greater than US$19 million from selling products or services “at an exorbitant price”. The fine imposed would be 5% of annual sales – which is much more than profit.

The editorial board of the Wall Street Journal reacted on Monday (16) characterizing the plan as yet another attempt by Democrats (which includes President Joe Biden) to blame business for inflation. The Biden administration has spent trillions of dollars on different programs and adopted the monetary policy of printing more dollars. The editorial adds that the measure would be “a classic of its kind” when it comes to problems caused by the government that are made worse by government solutions, and calls the politicians involved Venezuelans, making a pejorative reference to the socialist regime of Chávez and Maduro.

Moralizing prices, Warren complains about “corporations that are taking advantage of the current crisis to grab consumers”, giving as an example supermarkets, car rental companies and pharmaceuticals. “The Democrats’ proposal is in a sense difficult to take seriously, because price controls are so obviously silly,” concludes the Wall Street Journal.

An irresistible mistake

In the year 301, the Roman Emperor Diocletian passed the Edict of Maximum Prices, which created price ceilings for 900 products and 150 services. The preamble of the edict moralizes profit, mentioning “the avarice of those who always want to turn even the blessings of the gods into their own profit”. The result was a disastrous shortage of these products and services.

In the more than 1,700 years that followed Diocletian’s error, humanity persisted in the error of moralizing prices and trying to freeze or control them. them centrally, often while actively devaluing currencies increasing their circulation. In Brazil, the lauded intellect of Ruy Barbosa did not save him from printing money without gold backing when he was Minister of Finance, which triggered the encilhamento crisis at the end of the 19th century.

During the Covid pandemic -19, Argentina repeated the mistake making lists of products to have frozen prices, with the predictable result of scarcity of products in the market. In the United States itself, the initiative of senators from the Democratic Party is not unprecedented. President Richard Nixon froze the price of meat because of inflation in 1973. Beef cattle ranchers have responded by holding back.

With post-pandemic problems and unbridled government spending, Americans are experiencing an inflation problem that is chronic in Latin America. Venezuela, used as a bad example by the Wall Street Journal, shows inflation of 222% in the last 12 months, according to a World Bank report published last month. Brazil has more than 12%, and Argentina, 58%.

In the desperate measures of governments to try to plug economic holes opened by themselves, Zimbabwe still has a tragicomic place of prominence: in 2009, in hyperinflation, the country launched a worth one hundred trillion Zimbabwean dollars. It got to the point where the bill didn’t even cover a bus ticket.

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