Price controls ignore private companies

Price controls ignore private companies, which are the breadwinner of private jobs. Indeed, private entities must continually compete and come to terms with suppliers, employees, unions, government regulations, etc. conditions that vary continuously, accumulating lessons, idiosyncratic discoveries, which explain their successes, their journeys, their failures.

The discipline of business administration has a host of notable cultistss, Chester Barnard, one of them, with his book “The functions of the executive”, which based on his professional experience defined the organization as a system of coordinated activities, to ensure essential services.

GlobeLiveMedia report that half of private sector employees have incomes below the poverty line. Contradicting widespread sensations, the real salaries of the years of the presidency of Mauricio Macri far exceeded that of the first three years of management of Alberto Fernandez. It seems that higher taxes and price controls hurt private workers.

In contrast, public jobs are financed by taxes, compulsory contributions and payments from potential customers. The survival of companies and public entities depends on politicians who grant them privileges, subsidies and various advantages. The success of state entities consists of political stories, giving rise to repeated opacities that disregard the benefits for users.

“Prudent pricing” also neglects the health of consumers, who appreciate the quality and success of the goods on offer. Be careful, suppliers of goods and services could be inclined to alter the quality of what is offered, even at the cost of their reputation. However, the companies would damage their prestige and brand value. Instead, officials are replaceable. Once resigned, no one remembers when defining responsibilities.

To thrive, businesses should at a minimum sell at prices above their replacement cost. Any lower value would result in losses that would weaken the continuity of its existence. How could bureaucrats recognize them?

To thrive, businesses must at a minimum sell at prices above their replacement cost

In several columns, I have explained that the level of income, poverty or prosperity of countries is the result of more or less redundant obstacles imposed on transactions. Despite this evidence, companies are faced with the imposition of certain prices. None of the prosperous nations – GDP per capita above USD 30,000 per year – apply general price controls of the Argentinian type.

The same reasons lead to resistance to differential norms of prices, taxes, various conditions. Frankly, what justifies the government establishing withholding taxes, export taxes, different depending on the value of foreign sales, the product in question or other particularities? What is the justification for currency purchase quotas based on the agreements of different companies with officials?

Obstructing the best decisions of businesses and consumers harms the population, because instead of seeking the best answers to productive difficulties, Argentines have to put up with artificial obstacles, regulations, decided by civil servants ignorant of privacy, idiosyncratic knowledge, of each operator and family.

Nations progress to the extent that they manage to establish an independent judiciary, well-trained in law, willing to pronounce judgments against the abuses of bureaucrats and to hold them accountable for their actions.

But the real nonsense of “prudent pricing” is in its profound contradiction. The price is the amount in pesos to be paid for a good. Bureaucrats try to fix prices while the BCRA issues money out of control.

Nations move forward as they manage to establish an independent judiciary ready to convict abuses by bureaucrats

The impossibility for any issuer of money to simultaneously establish the price and the quantity of money has been demonstrated. The hyperinflation of 1989 was triggered by ceasing to support the price of the dollar. Blaming traders for inflation counters the absurdity. Ashamed, many leaders should apologize for the damage done to the Argentine people.

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