Vice President Kamala Harris will unveil a plan for the federal government to control prices in grocery stores at a campaign rally in North Carolina on Friday.
The plan would include a federal ban on “corporate price gouging,” according to NBC correspondent Yamiche Alcindor.
Harris also wants to give the Federal Trade Commission (FTC) and Justice Department lawyers new powers to impose tough penalties on companies suspected of violating these regulations.
With the price control program, Harris, the likely Democratic presidential candidate for 2024, is trying to curb the inflation that the U.S. economy has experienced under the Biden-Harris administration.
Food, energy and real estate prices have all risen sharply since January 2021.
Harris is by no means the first politician to assume that economic problems could be solved by dictating prices to the central government.
From the Roman Emperor Diocletian in the fourth century to the French Revolutionary government, central governments have long harbored the idea that they could fix ailing economies or stop inflation simply by declaring a ban on price increases.
However, such policies almost always lead to shortages and black markets.
In recent decades, Venezuela, Zimbabwe and Argentina have experimented with state-controlled prices for basic goods.
In Venezuela, price controls on food, medicine and gasoline imposed by President Hugo Chávez led to shortages, huge black markets and a collapse in domestic production – an irony for a country that has some of the world’s largest proven oil reserves.
In Zimbabwe, price controls accelerated economic collapse as businesses realized they could not profitably sell their goods at government-set prices and chose to shut down altogether rather than lose more money.
In Argentina, a bloated central government attempted to impose price controls on food, utilities and other essential goods. The resulting economic distortions discouraged international investment in the once-prosperous country and ultimately led voters to support libertarian economist Javier Milei in December 2023.
In the United States, price controls have similarly led to perverse or unintended results.
In major cities such as New York City and San Francisco, local governments have attempted to control housing costs by introducing rent controls.
While these policies may succeed in limiting rent increases for current city residents in the short term, rent controls can have unintended consequences in the long term, such as reducing the incentive to retain rental properties, which can lead to urban decline.
Rent controls can also result in affordable housing being misallocated to wealthier urban residents by keeping rents low for those who stay in a particular rental unit the longest.
Harris’s renewed support for government-controlled prices has no precedent for the successful implementation of these principles in all of human history, but it does reveal the fundamental divide between Democratic and Republican politicians on how to respond to inflation in the U.S. economy.
Democratic politicians like Harris and Massachusetts Senator Elizabeth Warren see price inflation as a sign of corporate greed.
In this scenario, companies like Walmart or Hannaford have arbitrarily decided to raise prices to increase their profits.
One such theory posits that during periods of low inflation, businesses for some reason refrained from indulging in their greed, and that the response to their sudden greed is to give the government the power to set fair prices more precisely.
Republicans and many libertarians, on the other hand, view price inflation as a result of unbridled government spending.
In their view, it is not food prices that are rising, but the value of the US dollar that is falling.
