The most bla­tant example is the price of the shop­ping basket

Spain: Price Controls And Old, Failed Ideas

IInflation in the Supermarkets.
Inflation in the Supermarkets.

Fernando González Urbaneja | Keynes in the clo­sing pages of his “General Theory…” alludes to the failed ideas of old eco­no­mists nes­ting in the minds of new ru­lers as one of the avoi­dable mis­ta­kes. Old ideas, simple ans­wers to so­mewhat more com­plex pro­blems are fre­quent in po­li­tics, due to in­con­sis­tency, pre­ju­dice, ig­no­rance, lack of ex­pe­rience.

The most blatant example is the price of the shopping basket, which has undergone appreciable increases over the last year (16% on average) that affect the CPI and punish those on the lowest incomes.

The fact is clear, the data are convincing. Some of the basic products in the shopping basket have become extraordinarily expensive and deserve a detailed analysis of the reasons why and possible measures to correct them.

The response of the “old, failed ideas” is as automatic as it is simple: controls, intervention? This is nothing new, it has been tried on several occasions: for example, in the early 1970s in Spain (and before that in the United States, under the Nixon administration), with resounding failure.

In those final years of Franco’s regime, the government decreed a price freeze by means of a system of administrative authorisations. The casuistry was abundant and confusing, and its effectiveness null. In some cases shortages were caused and in others products were changed and underwent mutations to evade control.

It was not until the Moncloa Pacts were ratified, during the Transition, with effective policies that proposed competition and freedom as opposed to control, as well as a restrictive monetary policy. Thus, with less noise and better results, inflation dropped below double digits.

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