Something is wrong when a country says it’s 40 million rolls short on toilet paper

May 16, 2013
May 16, 2013

Since Venezuelan president Nicolas Maduro took office last month, the country’s already decimated economy has not only floundered but also continued its neglect in providing people with the most basic goods: Milk, butter, coffee, cornmeal and even toothpaste have all been in short supply. And now toilet paper is the latest staple to become scarce.

Early this morning, Venezuela’s commerce minister Alejandro Fleming told the country to relax; the government plans to import 50 million rolls of toilet paper to make up for the 40 million-roll shortfall.

Yet the lack of detail regarding when and how the 50 million rolls of toilet paper will be purchased and distributed allows Maduro to pledge support, without actually promising anything concrete. Super market shelves have already been stripped of toilet paper for weeks. But while matters of personal hygiene have taken center stage, Venezuela’s economic health is most worrisome.

In an attempt to quell inflationary pressures, which have pushed consumer prices up more in April than they have in several years, the Venezuelan government has put price controls on countless goods in the country. The problem is that forcing prices lower brings demand up, and Venezuela’s current inability to supply a needy market is being exposed.

CPI-index-in-Venezuela_chart

Steve Hanke, professor of economics at Johns Hopkins, expressed an equally dismissive response in AP to Venezuela’s current habit of price manipulation. “State-controlled prices that are set below market-clearing price always result in shortages. The shortage problem will only get worse, as it did over the years in the Soviet Union,” he says.

Last year, William Neuman explained the phenomenon in his piece for the New York Times:

Many economists call it a classic case of a government causing a problem rather than solving it. Prices are set so low, they say, that companies and producers cannot make a profit. So farmers grow less food, manufacturers cut back production and retailers stock less inventory. Moreover, some of the shortages are in industries, like dairy and coffee, where the government has seized private companies and is now running them, saying it is in the national interest.

Indeed, the Venezuelan government is currently causing more problems than it’s solving. Immediately after announcing that the government was working to address Venezuela’s toilet paper shortage, Maduro deflected all the blame. He turned to his opposition for causing panic amongst the Venezuelan people, and then to the media for sensationalizing it to a point of chaos. Because, what does the welfare of his people matter when his reputation is on the line?

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