Price Controls on Essential Goods?

On the occasion of May Day 2024, 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.

There is hence a vital need for price controls on food and other essentials (housing, utilities, energy and so forth) to make them affordable and accessible to all. It is simply scandalous that such a resource-rich nation should be getting nutrition projects from other countries.

Isabella Weber, in her award-winning book ‘How China Escaped Shock Therapy: The Market Reform Debate’ – winner of the Keynes Prize and the 2022 Best Book in Interdisciplinary Studies Award of the International Studies Association – 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.
That market should determine the prices of goods and services.

Weber points out that this prescription of neoliberalism led to tight monetary and fiscal policies and was “a recipe for destruction”, since it gave rise to a deep recession and the collapse of most measures of human well-being in Eastern Europe and the former Soviet Union.

The scrapping of price controls resulted in the upward distribution of resources.

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

It was, for them, 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 on inflation, 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 supply problems and extreme profits.

The current high inflation rate is a microeconomic question as corporations with market power can hike prices.

Price Controls

Sellers’ inflation must therefore be managed with price controls, not interest rates.

The issue of price controls has been widely debated since the Second World War.

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

For the 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 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 very large number of unemployed, which is disastrous since the productive capacity of any country is firstly determined 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 be accompanied by controls on prices (ensuring decent incomes).

A starting point could be to freeze the prices of all essential goods for two years, for example, at the levels where prices were at in the previous month.

A key point made by Australian economist William Mitchell in 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 could simply 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 of its basic foods, because the importing of food and other essentials makes it difficult to regulate prices.

But food sovereignty is doable with sufficient subsidies and public investments.

In the words of John Maynard Keynes, 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 to start making sufficient living for every citizen achievable.

• The authors are members of the Marxist Group of Namibia.