Price Controls on Essential Goods?

As we prepare to mark Workers’ Day tomorrow, it is imperative to say that 42% of Namibians are undernourished, while there has been a 32% increase in millionaires over the past 10 years.

The country is burdened with an economic system that generates monstrous suffering for the majority – the working class – on one side, but obscene wealth for a few – the elite – on the other side.

This underlines the vital need for price controls on food and other essentials (housing, utilities, energy, etc) to make them affordable and accessible to all.

It is scandalous that such a resource-rich nation should be getting nutrition projects from other countries.

CONTRASTING SCENARIOS

Isabella Weber, in her award-winning book ‘How China Escaped Shock Therapy: The Market Reform Debate’, maintains that price liberalisation was the first diktat of neoliberalism.

Free prices were viewed as the fundamental economic mechanism of the capitalist market and the powerful neoliberal state.

Weber notes that this prescription of neoliberalism led to tight monetary and fiscal policies and was “a recipe for destruction”, giving rise to a deep recession and the collapse of most measures of human well-being in Eastern Europe and the former Soviet Union.
Scrapping price controls resulted in the upward distribution of resources.

In China, in contrast, economists decided on a dual-track system with price controls on essential goods and the gradual marketisation from the margins of non-essential goods.

For them it was necessary to have state regulation to ensure a level of economic sovereignty.

Today, China has high-quality productivity in the real economy and is the main engine of global economic development.

It is also pertinent to mention that Weber – who has just been awarded the 2024 Ellen Meiksins Wood Prize – was at the forefront of raising the issue of sellers’ inflation.

In her most recent research – using the price-setting model of Polish economist Michal Kalecki – Weber persuasively demonstrated that present-day inflation is not caused by too much aggregate demand, but rather by extreme profits and supply problems.

THE PRICE OF POWER

Today’s high inflation rate is a microeconomic question as corporations with market power can hike prices.

Therefore, sellers’ inflation must be managed with price controls, not interest rates.

Price controls have been widely debated since World War II.

In his ‘A Theory of Price Control’, social democratic economist John Kenneth Galbraith reasoned in favour of a gradual deregulation of prices after that war.

For that American economist, the imperfect competition (monopoly) in the capitalist market is the root cause of this new form of inflation but the rising prices can be contained.

Only big business can maintain their high prices.

An easy money policy is not the source of the inflation and therefore a restrictive monetary framework is not the solution.

If anything, such an inflation-targeting approach does not work and is painful and unjust to the weakest and the most vulnerable in society.

It leads to a large number of unemployed people which is disastrous as the productive capacity of any country is determined firstly by its human resources.

A strict monetary and fiscal policy camouflages the real causes of inflation and makes the situation worse.

What is needed is the expansion of aggregate demand (to full employment) which should in fact be accompanied by controls on prices (and ensure decent incomes).

‘IT’S DOABLE’

A starting point could be to freeze the prices of essential goods for, say, two years, at the price levels of the previous month.

A key point made by Australian economist William Mitchell (on his blog on the book ‘Fiat Socialism’) is that price signals are no longer needed for information about production and distribution.

A modern computer network can provide such data to the market. In other words, price controls can be done without distorting economic functioning.

In the final analysis, Namibia must produce all its basic foods because importing food and other essentials makes it difficult to regulate prices.

However, food sovereignty is doable with sufficient subsidies and public investment.

As John Maynard Keynes said, if we can do it, we can afford it. Contemporary capitalism is a monetary system of production and the Namibian government does spend money into existence; it is not ‘taxpayers’ money’ but public money that the government can direct towards, for instance, productive employment in the food sector.

So, price regulation is possible in order to begin to make sufficient living for every citizen achievable.
 

• The authors are members of the Marxist Group of Namibia