The Key to Peace and Plenty is Worldwide Free Markets
While the US is heavily a free market economy, especially inside the country, it is not completely free from price controls, rent controls, subsidizing farmers and sugar production, and allocation of resources such as communications and power.
This idea of worldwide free trade, if applied, would remove tariffs and duties from imports and exports between all countries. What prevents application of free trade is the problem of significant dislocation of people and industries both in the US and in other lands from the time of onset of free trade until each industry had readjusted to the new situation. Hence, the concept has been attempted internationally in small increments, but with mixed success.
It has been shown that price and rent controls have exactly the opposite effect from what is intended, that is, low prices and low rents for the consumer. Over a few years, artificially-controlled low prices result in scarcities of commodities, poorer quality, and even higher prices because of the scarcity.
Suppliers shun lower price markets for higher ones, thus the scarcity in the low price markets. This in turn effectively drives prices higher because of people being forced to buy higher-priced substitute goods not under control, or as in the case of rentals, being forced into renting in the excluded luxury apartment sector at a high price to get a convenient place to live at all.
Then too, owners of rental properties react to rent controls by removing their properties from the market, causing a shortage of available housing at the controlled price. This phenomena has been observed in NYC; San Francisco; Stockholm, Sweden; Tokyo, Japan; London, England; and Sao Paulo, Brazil, so it is a well-proven result. Many abandoned buildings in NYC attest to owners not only removing their property from the market, but abandoning them altogether because they cannot provide the services needed at the price they are forced to set.
The public welcomes price controls, and politicians vote them into place rather easily, knowing that before the price impacts are realized they will have moved on and the public will have forgotten their role in it. Once the nightmare of controls reaches hysterical proportions, the politicians then in office are again heroes for removing them. In some cities, removing controls cannot seem to be done at all, to the long-term negative impact on the citizens, even if they can’t believe it.
Few people are sufficiently educated in practical economics to see the trouble for what it is, or they themselves don’t want to lose their own benefit of a large, spacious and cheap apartment downtown. This has been true in NYC particularly.
The conservative believes that a free market, where supply and demand are allowed to work, is by far the best policy.
# posted by Mannning @ 4:16 PM
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