Streetwise Professor

March 13, 2008

Russian Price Controls Redux

Filed under: Economics,Politics,Russia — The Professor @ 8:41 am

Last year I blogged about Russian price controls, and was interviewed on the subject on Robert Amsterdam’s blog. Apparently the idea was not just a expedient to get Putin and Medvedev past the election:

Economic Development and Trade Minister Elvira Nabiullina took time out from a real estate forum in France to warn that attempts to impose long-term price controls on basic foodstuffs could lead to shortages, casting doubt on the prospects of a proposed anti-inflation bill.

The bill, which is being prepared jointly by the Agriculture and Economic Development and Trade ministries, would introduce maximum markup prices on staple foods to help consumers already reeling from spiraling inflation. It would also include methods for voluntary price freezes and outright price regulation by the state.

Nabiullina’s comments, made on Monday at the MIPIM forum in Cannes, appeared to have been in response to a suggestion last week by Agriculture Minister Alexei Gordeyev urging the introduction of long-term price controls on socially significant foods.

Gordeyev told reporters after a government meeting Thursday that staple foods, including bread, milk, meat and eggs, should have retail markups capped in the range of 10 percent to 15 percent.

Oi. At least somebody in the Russian government sees this as idiotic. Unfortunately, there are some folks in the private sector who don’t get basic economics:

“Price capping is good only as a stop-gap measure,” said Anton Saraikin, a spokesman for dairy producer Wimm-Bill-Dann, which led the group that initiated the price-freeze agreement in October.

“The government will need to improve the agricultural sector greatly to make basic foodstuffs affordable for ordinary people,” he said.

Er, Anton old buddy, if you expect “the government . . . to improve the agriculture sector” at all, let alone greatly, you haven’t been paying attention to, oh, say the last several millennia of history. During which time, governments–including quite prominently the Tsarist, Soviet, and RF governments–have an amazing track record at screwing up the agriculture sector of their countries.

The problems in the Russian agricultural sector are so acute that it is hard to know where to start a list. One thing for sure, these inefficiencies–especially the inefficiencies in transportation and marketing–will mean that any attempt to control margins will lead to acute consumer shortages.

I wish Nabiullina luck. She’ll need it.

Print Friendly, PDF & Email

No Comments »

No comments yet.

RSS feed for comments on this post. TrackBack URI

Leave a comment

Powered by WordPress