The Great Depression: a time of unprecedented hunger, homelessness, and crime. What you probably don’t know is that the government was buying tons of food and destroying it. In 1933, the U.S. government bought six million hogs and slaughtered them, in an effort to keep prices high. A.K.A price control.
This line of thinking, that price control will help the economy, is not found only in the U.S. India, a place of great poverty and hunger, grew “a whopping 80 million tonnes (sic) or four times the amount necessary in the case of a national emergency. Yet while all the wheat and grain lie rotting millions of Indians don’t have enough to eat.” according to the Far Eastern Economic Review in December of 2001.
How could this be? Three words: artificial price control. When the government decrees that, for example, the price of potatoes shall be this high, the average citizen can’t afford that. For the sake of discussion, let’s say that potatoes are the only food source. Then the people can’t afford it and go hungry, while the potato industry will grow more potatoes than normal because they know that the government will buy them. This is exactly what happened in the U.S. during the depression and India.
If I haven’t convinced you already, here’s another example. In the early 1970s during the “gas crisis,” prices were kept artificially low by the government. Can you guess what happened? Customers waited in long lines reminiscent of the Soviet Union, yet, “there was more gas sold in those years than there were in any of the previous years when there were no lines at filling stations, no shortage, and no crises atmosphere.” According to Thomas Sowell in his book Basic Economics.
I will let the evidence speak for itself. Price controls never work well for the economy at large.
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