Chavez Threatens to Jail Price Control Violators Article Review

Things Learnt From the Article

There are various things that come to light from reading the article, where the country's traders are threatened by the government with jail time if they do not adhere to the commodity prices set by the authorities. The retailers and wholesalers are supposed to comply with the directive lest their businesses get confiscated and nationalized by the government. Besides the requirement to observe the set prices of goods and services, the article reports that traders are also directed to remove the three last zeroes in their paper currency to mitigate the surging inflation in the country's economy. The country's president has expressly stated that supermarkets and other commodity outlets that fail to stick to the government pricing will be reported by social control committees formed at the grassroots from loyalists (Romero, 2007). This directive, however, has visible effects with a clear case in point being the lack of variety in the goods found in supermarkets with a complete shortage in supply of other items altogether.

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This is happening in an oil-exporting nation with vast reserves of the valuable commodity whose inelastic global demand and rising prices have beefed up the national coffers. The large financial resources accumulated from the oil trade does not mask the fact that the substantial part of the government resources have been injected in public spending. Government expenditure is so high that a proportional increase in consumer spending and subsequent inflation have ensued. The scarcity of market goods and services has led to economic vices like hoarding and also given rise to a black market. Sugar and foreign exchange currency are taking place in the black market where suppliers and consumers trade at an agreeable rate (Romero, 2007). Inflation is soaring high courtesy of the biting shortage in items while traders are feeling the heat of operating in a hostile environment where they have to adhere to the laid down regulations or risk losing their businesses. Capital flight has become common as rich traders are disposing off their businesses and getting out of the country.

Opinion on the Article

In my opinion, and considering the class teachings, it is never a wise idea for a government to intervene in the market economy. This is because the price ceilings and price floors introduced in the market in terms of price controls have an adverse effect where they stifle the production and supply of various commodities, including the essential ones. The government should leave the market to the forces of demand and supply where the prices and quantities of the goods and services supplied in the economy are dictated by willing sellers and willing buyers. Threatening the traders in the country's economy with jailing them is likely to create jitters within them where some of them will fear and move to other countries where their business interests will be protected. Privatization, as opposed to nationalization, is the ideal way to mobilize capital and finances within an economy as it creates a better atmosphere for borrowers and lenders. There will be no capital flight in a free economy that allows firms to freely enter or exit the economy.

A free economy would be ideal in this case because the government will have multiple sources of revenue without having to rely on the oil boom for financial resources. This will enable the government to be able to pump as much money in its public expenditure as it wants without having to worry about providing other essential services as they will be supported by the income from other economic sectors. A free economy will also support the different sectors to produce a variety of products that will give shoppers the freedom of choice in the market. Black market and hoarding are practices that will not be expected to be present in a free economy because buyers and sellers will agree to the prices set by the forces of demand and supply.

References

Romero, S. (2007, February 17). Chavez Threatens to Jail Price Control Violators . The New York Times.