Reply To: Cost of living crisis
Price controls in inflation hit Argentina
In the poor neighborhoods of Buenos Aires, where the inhabitants often lack even the basic means of life such as safe drinking water, Argentina’s persistent inflation problem is wreaking havoc on livelihoods.
Padre “Paco” Oliveira, a Catholic priest who caters to the needs of the poor, thinks the government price curbs do not go far enough. “A fair price is an agreement with companies so that they do not increase the prices of certain products beyond the agreed level. But that is far from enough. People must receive wages that are above inflation,” he told DW.
https://www.dw.com/en/argentinas-rampant-inflation-will-price-caps-work/a-64696859
Lars-Andre Richter is observing the experiment for Germany’s liberal Friedrich Naumann Foundation in Buenos Aires. The price controls are problematic, he says, because of their “market-distorting effect.”
“In Argentina, the government wants to counter inflation. That’s like trying to dam a raging river with a few pebbles,” he told DW. “Officially, the blame for the high inflation rate is being placed on the producers and their allegedly speculative tendencies. That is a clear distortion of the facts.”
Instead, Richter blames government money printing for high inflation, as the central bank is printing pesos “virtually around the clock.
Agustin Etchebarne from Libertad y Progreso (Freedom and Progress), a nonprofit public policy research center, is also critical of the government measures. He argues that the price controls cannot work.
“If a price is set below the free market price, you distort the signals and ask producers to produce less and consumers to consume more,” he told DW, adding that this would lead to “shortages and empty supermarket shelves.”
Once prices are freed again, he fears that those which go up the most will, of course, be “the ones that were controlled.” As a result, Etchebarne expects that the fair price strategy will fail, like many other such attempts that have been undertaken “all over the world in the last 4,000 years.”