Friday, September 30, 2005

Classics of Conservatism - part XI - Gary North - How You Can Profit from the Coming Price Controls

For previous editions of "Classics of Conservatism," click here.

With the steady rise in gasoline prices over the past year (or more), we are starting to hear more talk about prices controls from state and federal politicians. I wrote earlier about proposed measures that would limit the ability of gasoline prices to rise during an emergency. Even these measures create shortages, long lines and the potential for panic.

There is a phrase we must remember in the event that politicians are tempted to impose price controls in the future -

"Price controls cause shortages."

I dug out of my collection a copy of a book that was written in 1980 - near the height of the last government created gasoline "crisis".


Gary North makes the case against price controls in a way that is understandable and entertaining for the average reader. North's predictions of new price controls have not come true on a grand scale, but it is only a matter of time - unless some of our politicians start standing up for principal. In fact, it was the election of Ronald Reagan in 1980 and his termination of the fuel price controls that eased that era's gasoline "crisis" and delayed the day when North's fears would come true:
The response of politicians to price inflation has been the same for 4500 years: impose price and wage controls. This will be the answer again.
(page 3)

North provides examples in which the government is determined to ignore the laws of economics in order to accomplish its goals. North quotes Senator Proxmire (D-Wi.)[from 1976 hearings on the future of Social Security]:
. . . [W]e have the power to provide that money [to Social Security beneficiaries]. And we are going to do it. It may not be worth anything when the recipient gets it, but he is going to get his benefits paid.
[emphasis added]

North's "Price Controls" book describes the consequences of the federal (and state and local) government's attempts to provide money that "may not be worth anything." [North goes on to expose the myth that government pension funds in general (and social security in particular) are somehow solvent.]

Remember that this country has endured runaway inflation during our lifetimes, most recently in the 1970's. The Nixon administration responded with wage and price controls in the early 1970's - before the gasoline "crisis" even started. Those controls violate the law of supply and demand and always result in inevitable shortages.

North's title is somewhat misleading. No one will "profit" from price controls. But the controls and the inevitable shortages can be endured. North provides various strategies for the average person to obtain the items he needs and maintain his standard of living despite government created shortages.

The real purpose of the book - and my purpose in bringing it to your attention now - is to prevent price controls from ever being imposed. Politicians believe that we have forgotten the 1970's. They believe they can repeat the mistakes of that decade without consequence. If we recall the lessons of that decade now, we might yet prevent the government from making the same mistakes.

Gary North's book serves as a reminder of how this country nearly came apart in the late 1970's. There was little reason for optimism in the early 1980, as we entered our second straight year of double digit inflation, seemingly endless energy problems, mounting foreign challenges in Iran, Afghanistan (and elsewhere) and a President (Carter) that could do little more than blame Americans for "malaise."

One can find numerous books from the late 70's and early 80's that addressed this doom and gloom environment, most of which made ominous predictions and recommended self-reliant actions on the part of individuals. These books were part of the backlash that swept Reagan into office. Only by rediscovering how badly the government can mess up the economy (and everything else) will we avoid the need to implement some of North's recomendations in our own lives.

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