Economy policies

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Venezuela’s economy medieval policies

The article focusses mainly on the policies that Venezuela sought toapply through the leadership of Hugo Chaves to curb the inflationrates. The Venezuela government had imposed price controls on themost basic products in the country. It is critical to state thatprice controls are restrictions on the prices either maximum orminimum that the government imposes on various common goods. Priceceiling is a policy by governments that seeks to set the maximumprice that businesses can charge the people on certain common goods.Price controls and price ceilings are the two major policies thatChaves applied to curb the rising prices of common goods. Thisresulted in one of the highest inflation rates with food priceshaving risen with over 9 times as they were before the price controlswere imposed (CARACAS 1). The article states that the consumer priceshave also increased by 27% as opposed to a rise of 6% in LatinAmerica. The inflation rates have prompted Hugo Chaves to imposevarious measures to curb inflation. He has used his powers toimplement a Fair Prices and Costs law that is meant to make inflationillegal and therefore curb the ever rising prices of products(CARACAS 1). However, these measures have been viewed by specialistsas targeted at winning the following elections.

According to the new decree by Chaves, the high prices are as aresult of scrupulous business people and businesses which exploit thepeople. The president has threatened to punish or close down thebusinesses that continue to charge high prices. The private sectorhas been the most affected sector by the new measures. It is evidentfrom the article that the Venezuela has been in such a situationagain between the years 1984-1989 (CARACAS 1). The article arguesthat the effect of price controls is the reduction of staple foods inthe shelves. Although the situation in Venezuela is not as worse asit was in 2008, it is evident that the price control measures havecontribute to make a bad situation worse. According to the articlethe government of Chaves is keen on importing staple foods to avoidshortages that would compromise his chances of re-election.

The theory of inflation has been well covered in the article. Theremedy that Venezuela seeks to employees has previously proven to befutile and only worked to exacerbate the situation. The theory ofinflation argues that inflation occurs when the prices of commongoods rise and the value for each unit of money goes down. In thearticle, inflation has been cited as a key problem in Venezuela. Theprices of common commodities has gone up drastically and the staplefoods have become scarce. These are elements of inflation in acountry. Inflation theory calls for various measures to curb it.Price controls are one of the alternative measures that has provenineffective over the years. Market socialism has also been exhibitedin the article. This is a school of thought that argues that marketsare controlled by the government, as well as the means of production.The prices of various commodities are controlled by the state.

I believe the steps that Chaves is taking of controlling the pricesof products are politically motivated. It is clear that Venezuela hasbeen in such a situation before and price controls did not proveeffective (CARACAS 1). It is therefore the wrong approach tointroduce price controls as a means of curbing inflation. It isprudent for the president to allow the market forces determine theprices of products. People must be given the freedom to produce theproducts or purchase the products they want. Market socialism is nolonger applicable in today’s capitalist economy.

Works cited

CARACAS. Venezuela’s economy medieval policies. Another stepforward from Hugo Chaves. The Americas. 2011. Print.