Argentina's Cristina Kirchner has ordered a price freeze on food products to last two months. The price freeze applies to the largest food retailers, which account for seventy percent of the market. It follows a day after the IMF censured Argentina for its manipulated statistics, most importantly its gross underreporting of the inflation rate. Customers have been urged to keep cash register receipts as proof if the largest retailers violate the freeze order.
The results are predictable. Market demand will spill over to small retailers who cannot satisfy the demand for food products. Their prices will rise, and there will be two quite different prices of the same food products. Customers of large retailers will stand in line hoping to buy at the frozen price. There is no assurance that there will be anything to buy when they get to the front of the line. Outside Wal-Mart, Carrefour, Coto, Jumbo, and Disco stores, black market sellers will offer customers goods at much higher prices. Police will either tolerate them or try to dislodge them, only to see them come back later to continue their business.
Corruption at the wholesale level will soar as black marketers seek supplies at prices higher than the large retailers can legally offer and still cover their costs. Corruption will spread throughout the economy and into government as freeze breakers seek the support of influential political figures within the economics or agricultural ministries.
Meanwhile, the government of President Cristina Kirchner will divert blame for food shortages from the true villains – namely themselves – to the black marketers and others who violate the price freeze. Instead of the failure of government policies, "speculators," "big business", or enemies of the Argentine people will be to blame. Such nonsense should not work, but it does.
What a mess it will be. I guess no one ever learns. Or have they learned that economic chaos allows them to point the blame for economic mismanagement at others.
Cristina Kirchner's Argentina illustrates an alarming trend. Her government has expropriated major foreign investors, falsified statistics, destroyed central bank independence , used the nation's currency reserves for political payoffs, and faces default. Yet she was easily reelected, just as her neighbor Hugo Chavez, whose gross mismanagement of Venezuela's economy may be unmatched in Latin America. Barack Obama was re-elected in the United States despite the worst recovery of the postwar era. All offer populist programs, which seems to buy them a pass at election time.
Have we passed the time in which economic mismanagement is not punished at the ballot box? It seems so.
