Is John Stossel Right About Price Gouging? Zimbabwe and Food

Right now, Zimbabwe is facing a crisis. The people are starving. The president, in his infinite wisdom, has decided to ban the import of groceries for resale, despite starvation in the country.

I guess he's afraid of price gouging. There seems to be an inflationary crisis going on there. He recently forced electrical shops to reduce the price of televisions to 2 million from 50 million Zimbabwe dollars... there are no more TV sets to be found now.

John Stossel's position, stated in Myths, Lies, and Downright Stupidity, is that price gouging is not bad. Huh?

Well, maybe he's got a point.

I didn't know anything about Zimbabwe's problems until yesterday. I guess Paris Hilton getting to wear new underwear and having phone privileges in jail is more important than a starving African nation (who knew?). Doing a quick Wikipedia search, I learned that last month's unofficial inflation rate was 11,000%, and may reach 1.5 million percent by the end of the year. Yowsers! And I thought that seeing the cost of bread rise from $1 to $1.50 was bad.

Getting back to the food crisis and price gouging. The president is banning the imports of groceries into the country. People are starving. Does this make any sense? Just about as much sense as when farm owners used to spray crops during the great depression so their food was inedible because they couldn't afford to pay people to pick the crops (um... couldn't they have just given the crop pickers a few pounds of the food they picked and called it even?).

The fact that President Mugabe forced a lower price on television sets makes me believe that he's probably concerned about price gouging. But when your country is in the middle of runaway inflation and your citizens are starving, that seems to be a small thing in comparison. So let the groceries in the country and sort out the price gouging thing later... wouldn't that make sense?

Back to why John Stossel thinks that price gouging can be a good thing, and how it relates to Zimbabwe and the price of food and television sets.

In his book, he points to Hurricane Katrina. People were jacking up the prices of batteries and generators. On the surface that seems really bad. However, if you keep the prices low, a few people are going to come into the grocery store in a panic and buy out all the batteries. They might only need one pack of batteries, but they're going to buy 5 because a) they can, and b) they're scared because the hurricane's coming. But because a few people buy out all the batteries, many other people are left without batteries. Perhaps the solution to this is to limit the number of batteries per customer? But raising the price can have a similar affect.

What about generators? People aren't going to buy 10 generators in a panic. Most people will buy one. However, if generators sell for more, it encourages outside people to bring generators into the area. One example I remember reading about, a man found out that people needed generators after Hurricane Katrina, and he rented a truck and drove some down to the hurricane-affected area. It cost him a lot of money to rent the truck, pay for all the gas to get down there, plus he took on added risk by driving the post-hurricane streets, etc. So he sold the generators for well above the normal cost because of this. He got in trouble for this. It seems a little unjust, because the people that purchased the generators were probably very happy to have them. The man wouldn't have been able to get the generators to the customers without increasing the cost above normal.

So back to starving Zimbabwe. If you were in Zimbabwe, wouldn't you be happy to find food? Obviously some people are able to afford it at the prices being offered, otherwise the groceries wouldn't have been imported and sold at that rate. It's hard to imagine here in America, where we currently have such a surplus of food that most people are well fed, but if you are starving, you are happy to have food, at whatever price. By banning food imports, not only is Mugabe keeping the high-priced food out of the country, but the food that is left is going to skyrocket in price... that is, if he doesn't try to put price controls on the food. If he does put price controls on the food, a) there will quickly be no food left on the shelves to sell, and b) a food black market would most likely open up where food sells for an outrageous price.

I don't know what will happen in Zimbabwe, but it doesn't sound pretty there. Runaway inflation and no food is not a scenario that I would like to go through.

Perhaps they should learn how to make chopped cardboard dumplings? Sorry, I suppose that might be a bit in poor taste... but I had to say it anyway.

read more | digg story