Bringing down organically inflated food prices

Through artificial manipulation and lies

Kamala Harris, during a recent campaign speech, stated that she would lower grocery prices for Americans by ending price gauging gouging through price controls. At this, the most-disliked-politician-suddenly-turned-America’s-sweetheart received raucous rounds of rejoicing from rally attendees. Those proffering their praise have clearly never lived in a city with rent-controlled apartments (or simply never lived in a communist country). The idea of price controls is so awful, that Harris’ water-bearing fan base in the main stream media even expressed pause at this preposterous policy proposition.

When the Washington Post and CNN (there have actually been multiple commentators on CNN opposed to Harris’ plan) take the faction’s favorite to task for a talking point, people should pay attention.  As I already mentioned, the idea of rent-controlled apartments allow me to share a statement from a New York Times article:

Rent control became politically popular after World War II when soldiers returned home and sought apartments for their families. The demand caused rents to increase, which led to a housing shortage.

The result would be no different with grocery prices than was the case with apartments. Just think of bread lines in Soviet Russia. This is what happens, as the title of the WaPo article intimates, under communism.

Soviet-era bread line

Now, just as the New York Times piece argues that rent stabilized apartments have been more successful, the author of the WaPo article, Catherine Rampell, who also on CNN criticized the concept comparing it to similar strategies previously implemented in Venezuela, Argentina, and the USSR , has reversed course and said Harris’ plan is actually a good one. I can only assume she was pressured either by the party or one of her employers (or both), because neither she nor the NYT is correct.

There are several problems plaguing this kind of policy decision, not the least of which is that the government can’t control the cost for the seller of any given product. Worse, however, is that the proposition is based on a lie - that grocers are price gouging, and that price controls via profit caps will reduce prices for consumers are both false, just as is Harris’ claiming that greedy grocers are making record profits while their customers are struggling just to make ends meet.

Inherent in the VP’s claim is a serious lack of economic understanding. While grocers appear to be making more profit, that profit is actually worth far less. Consider, Kamala claims that it costs 50% more for a loaf of bread than it did a few years ago. But that isn’t a matter of grocers raising prices to make more profit - this is (and this is where people like Harris are completely tone deaf) the result of inflation, it is the result of each dollar bill being worth less than it used to be. This is inflation, the inflation that has been caused by government spending excessively and then flooding the market with newly-printed money to cover that spending. It makes your dollars worth less, which then requires more of them to purchase the same item.

To use the VP’s example, if a loaf of bread costs $3, but the $3 you have in your pocket goes down in value such that it’s only worth $2, then you have to make up the difference, because the value of the bread has not changed (nor has the cost, though it too may go up as a result of the lowered value of the dollar). Since the numbers on the bills you carry don’t change, the decrease in value is reflected in the higher price of the bread. So then, when the price of bread goes up to $4.50, it’s not that the grocer is making additional profit; it’s that the grocer has to adjust the price of the bread to account for the decreased value of the legal tender for which it’s being exchanged.

That’s not a perfect example because there are so many factors affected by the lower value of the dollar, but it makes the point - prices are higher because they are adjusted to account for the devaluation of the dollar, not because grocers are price gouging. This is the nature of inflation, and inflation will not be stopped by government-imposed price controls. Inflation is reigned in when the government cuts spending and stops printing money. The market will adjust and recover through the natural balancing of supply and demand, just as free markets always do.

Like much we see in medicine, this is an attempt to treat a symptom rather than the cause of the problem. Such an approach carries with it many implicit issues and, just as with medicine, allows the root cause to continue festering and inducing destruction while introducing further damage into the system.

Price controls have been tried over and again in communist countries and have had the same result every time. Madame VP may believe this will somehow help smaller grocers and disadvantage major corporations (this goal is ironic considering what all the government Covid countermeasures did to small businesses while advantaging corporate giants), but it will only end up hurting small businesses and, in the end, consumers. Harris should take the advice offered in the title of Rampell’s WaPo column: “When your opponent calls you ‘communist,’ maybe don’t propose price controls.”