The UNCTAD, UN:s agency for supporting global trade and managing the expansion of capitalism and neo-colonial resource flows (its purpose stated below) …
… [to] maximize the trade, investment and development opportunities of developing countries and assist them in their efforts to integrate into the world economy on an equitable basis …
… has called for price controls with the purpose of addressing inflation (Ibid. p 11), rather than further central bank rate hikes.
The price controls are supposedly part of a toolbox including policies to increase supply, strategic purchases or sales of securities, and modest and limited quantitative easing efforts and liquidity infusions (helicopter money).
The basic problems of price controls
Price controls might sound like a decent idea on the surface. Just stop rampant inflation by mandating that the retailer can’t sell you coffee above five bucks a package, and prices won’t spiral out of control.
That’s a crude caricature, of course, yet it makes the problems immediately obvious. Unless you can control the producer as well, fluctuations in the retailer’s costs that cannot be transposed to retail prices, mean shortages.
And with the already razor-thin margins the private sector faces today, that’s sooner rather than later. This is especially significant in case manufacturers and producers also face narrow margins, or outright resource limits and shortages.
You know, like inexplicable pipeline accidents.
There are of course more balanced approaches to price controls, such as mandated profit limits which quite readily can be imposed through taxation. Apart from killing off economic growth, however, such solutions will likewise not help if the producers’ backs are against the wall.
So if the producer’s costs are high and rigid, and you mandate profit limits on the retail sector, the effect will be that prices now can’t as readily fluctuate to relieve pressure on the on the more fundamental parts of the chain of production, with shortages as a result.
In other words, consumers can no longer as effectively compensate for disruptions and shortages at lower levels by taking on a larger share of the burden.
Price controls in independent economies
In a self-sufficient economy such as a traditional farming community on a renewable resource base, some sort of price controls is basically hardcoded into the social structure. If the village smith for some reason would try to take out exorbitant prices for his essential goods, and there were no viable option on the market, people would intervene and sanction him into a more reasonable markup.
And since this sort of society sits atop the entire chain of production, price controls are much less of a problem since they can be immediately balanced out across the entire economy, unlike our contemporary global network of semi-independent polities.
And given that the community rests on a renewable resource base (assuming there’s plenty of land), there’s more leeway for producers to compensate for tightening markets.
Price controls in economies on non-renewable resource bases
The main problem in all of this is really that the contemporary economic orthodoxy is more or less blind to the fact that prices always are a proxy for available energy and resources.
In a certain sense, the producer’s price reflects absolute costs in terms of resources, such that there’s a certain limit beneath which production is no longer physically possible. If I get too few calories out of my potato patch, I won’t be able to survive the winter and plant it again next spring. If I get a significant surplus, I can provide you with additional calories for free. Or in exchange for some light labour, or a proxy thereof.
But if there’s a bad harvest and my surplus shrinks to the extent that I face a net energy loss by selling anything to you at yesteryear’s prices, anythink akin to retail price controls will essentially mean that you’re demanding something for nothing. And any imposition of them will mean I won’t survive the winter.
This is more or less the situation we now find ourselves in.
The producers at the base of our global economy are beginning to be more acutely constrained by actual energy and resource scarcities, which manifests as imbalances, first in the financial sector, and subsequently in the real economy.
The fact that the UN is advocating for price controls is a very ominous sign. While price controls can be reasonable in extraordinary circumstances, such as a situation of producer cartels with an exorbitant markup on essential goods, this is hardly the case in relation to our neo-colonial system of resource extraction.
Rather, support for price controls is evidence of hard resource limits and the system’s utter inability to expand the profitable production of goods and sustain further growth.
Stay tuned for a quick dip into Diocletian’s price edict (300s AD) from the point of view of Joseph Tainter & Gibbon.
It it what it is. I like the blend of description of the market in conjunction with Tainter's book. I will add to the land idea within the point you make. Plenty of land for all of us humans on this planet once hierarchal agriculture debases the soil enough to no longer be viable. Of course, most habituated to the scheme don't want to do it and they will eat bugs before actually tending a garden, and bugs are just like corn, next to no nutrition, so the suffering before death will continue.