Caracas Chronicles

The Economic Committee of the National Constituent Assembly (ANC ) is now supposedly developing “strategies to combat high levels of inflation in Venezuela,” including a proposal for what they cryptically describe as a “functional price control system.”

The specifics haven’t been made public yet, possibly because the phrase itself is a raging contradiction: calling for a “functional price control system” is like calling for dry wetness.

Price controls have a 4,000 year-old track record of failure. As a means of fighting inflation, they’ve been tried around the world by governments of the left, right and center and they’ve failed Every. Single. Time.

In Venezuela, they’ve been failing since 1939.

However, the government believes that the problem is not price controls per se, but the way they are being implemented.

Calling for a “functional price control system” is like calling for dry wetness.

Before the ANC was convened, Maduro said the constituyente would develop new distribution and pricing schemes that include severe punishments for “those who violate the people’s access to products at fair prices”. Maduro even promised that the first of many economic laws to be approved by the ANC would be a law against speculation, adding that he would draft it himself.

Instead of promoting an adequate business environment, Maduro thinks the way out of shortages transits through yet more controls, threats and punishments. Apparently, controlling the distribution of basic goods and the allocation of foreign currency, and executing over 85 thousand inspections and close to 15.500 fines between 2012 and 2016, is simply not enough.

And let’s not forget that a fixed FX rate is also a price control over foreign currency.

Maduro even promised that the first of many economic laws to be approved by the ANC would be a law against speculation, adding that he would draft it himself.

Some elected constituent assembly members believe that it’s imperative to review the foreign exchange system first. However, no Constituyente or government spokesperson has mentioned the possibility of dismantling foreign exchange controls, or even of unifying the multiple exchange rates: measures virtually every economist you talk to, up to, and including Mark Weisbrot, see as vital.

“Fair prices” —a cute and misleading term for controlled prices— is the seed from which black markets and bachaqueo germinate. These are, in some way, the original economic sins of the 21st Century Socialist System.

If anyone in the government can remotely aspire to seriously want to steer the Venezuelan economy towards recovery, their crucial first step must be admitting that excessive controls are, first and foremost, dysfunctional. Instead, from the bottom of a deep, dark hole, Maduro announced we’d be prying that shovel out of his cold dead hands.

So much for hope.