People may not know this, but here in Hungary, the government has been capping prices on all sorts of things for at least a year or more. Well, it has no choice. I mean, if Hungarians ever found out how little they earn compared to their EU counterparts, well, I imagine they would be quite dissatisfied. Anyway, price caps. The result? Well, nothing much. Moreover, nothing good.
The Hungarian government began its price-capping spree with a list of essential grocery items, including chicken breast, sugar, flour, and 2.8% milk. Within a blink of an eye, all of the mentioned items suddenly became scarce.
If you were lucky enough to find a grocery store that magically still had some beat-up cartons of 2.8% milk crammed behind the other dairy offerings or a few punctured bags of flour tragically spilling their contents onto the shelves like wounded infantrymen in the trenches, you were quickly informed about the number you were restricted to purchasing.
"Only two kilos of flour per person, I'm afraid."
"Shoppers are restricted to purchasing no more than six liters of milk per day in this store."
And so forth.
After a while, the stores simply stopped stocking the price-capped goods, but they were sure to have abundant amounts of the items that were not price-capped, to which they added all the "losses" the price caps had inflicted upon them. So instead of purchasing 2.8% milk at 50 cents US a liter, Hungarians were forced to pay one dollar for 1.5% milk.
The price caps were so resoundingly successful that they inspired the government to extend them to gasoline, which it capped at about 1.25 US a liter last November. News traveled quickly. The very next day, hordes of Austrian citizens in fuel-deprived cars invaded the country armed with jerrycans, barrels, plastic bottles, and anything else capable of transporting petrol and lay siege to every Hungarian gas station within a hundred kilometers of the border.
A few weeks later, the government solved the problem it had created by declaring that the price cap on petrol was reserved for Hungarian citizens only. All motorists were legally obligated to show their papers before fueling. Hungarian citizens would get the capped price; everyone else, the market price.
The petrol stations responded by enforcing strict 20-liter limits on price-capped gasoline purchases. Anything over 20 liters would be calculated at the market price. After that, it wasn't always easy to find petrol and empty gas stations became an increasingly common sight around the country.
The recently imposed EU price cap on oil from Vodka-land through a spanner in the Hungarian government's stated objectives of "protecting Hungarian families from inflation", and it quietly and unceremoniously scrapped its price cap on gasoline a few days ago. It now costs the average Hungarian about 30% more to fill up the tank. Of course, the price-capped price was also about 15% above the average pre-war against Vodka-land price, but hey, who remembers that?
And what exactly is the EU's price cap on Vodka-land oil meant to accomplish? Bring the Russkies to their knees economically, in the same manner, the EU's other sanctions have?
Yeah, good luck with that.
Price caps are always presented as helpful, alleviating measures, but my experience has taught me that these supposedly benevolent measures bring little to no benefit. On the contrary, they tend to mess things up even more. But that's the whole point, isn't it?
I have come to view price caps and other "benevolent" economic interventions as nothing more than "conditioning" exercises. We simply have to accept that ridiculously high prices, shortages, limits, scarcity and all the rest of it are all par for the course in the West. It's all part of the "can't make omelettes without breaking a few eggs" approach to policy.
If you want to build back better, you have to destroy worse first. And there isn't a price cap in the world that will be able to stop the destruction our "leaders" have unleashed. Moreover, there isn't a price cap in the world that will be able to hide the fact that the destruction has been largely intentional.
Note added: Apologies for all the clichéd expressions in the post, but the subject matter simply demanded them!