Governments everywhere always think they know what’s best for everyone. It’s true here and true in Argentina, where the government decided to address the soaring cost of bread by banning the export of flour and wheat. “Hoarders” of baked goods were threatened with jail time.
President Christine Fernandez de Kirchner found a dusty 1974 law that enables the state to compel merchants to sell their stock of wheat and flour, on pain of fine and prison. This is the government response to the mess it made with years of market manipulation.
Mrs. Kirchner’s husband, Nestor Kirchner, created an export permit system for wheat in 2006. Argentina has been one of the leading exporters of wheat, but year-by-year farmers are bringing less of the crop to market, despite the rising prices that everywhere else has stimulated production.
Producers aren’t free to adapt to the marketplace. Instead, they must obtain the government’s permission to sell their wheat overseas. That adds uncertainty to planting a crop. Over the years, as officials in Buenos Aires searched for more revenue, an export tariff was added that further discouraged growing wheat. Fields sown in wheat are down to 9 million acres, the lowest in a century.
Growers complain they no longer know whether they can turn a profit in wheat. The government intervention has only driven down supply, making consumers worse off than ever.
Demonizing merchants and jailing people for “hoarding” may make for good theatrics, but it won’t make bread magically appear on the shelves. Nor will price controls increase the goods available or make them affordable. Intervention creates a thriving black market where the hungry poor pay ever higher prices to feed their families.
The sure-fire way to ensure food is made at the lowest possible price is for government to intervene less, not more. The Fraser Institute’s Economic Freedom of the World Index shows the most prosperous, peaceful nations are those that honor economic freedom. Argentina is blessed with an abundance of natural riches yet the people are denied prosperity because the nation’s ruling elites withhold liberty and deny opportunity.
Argentina traded this heritage for an embrace of socialism. At the turn of the 20th century Argentina was one of the 10 wealthiest nations in the world. Now the World Bank ranks it No. 62. To recover, Argentina’s elites must put less faith in themselves and more trust in the free market, with confidence that the people are capable of taking care of themselves. Until then, the price of a loaf of bread will be the least of Argentina’s problems.
The Washington Times