On taxes and government spending, Kamala is the most left-leaning candidate of any major party since George McGovern, who proposed a universal basic income in 1972 and won in just one state.
But her most idiotic plan to date has been to impose price controls, which she has positioned to the left of McGovern and threatens to punish grocery stores if they dare to charge more than they cost.
In fact, grocery stores only make one or two cents on the dollar, meaning they have to pass on costs that come straight from the printing presses in Washington.
In short, this means that price controls would ruin the food market.
Price controls always fail
In a recent video, I mentioned that price controls have been tried many times and each time they failed so spectacularly that they were lifted again, after much pain, suffering, and empty shelves.
When France tried, a black market emerged where price gouging actually occurred. Even Venezuela lifted price controls in 2016 after food shortages and nationwide unrest.
But what do price controls look like in reality? I’m looking at a great thread by Robert Sterling, a former M&A manager at one of America’s largest food manufacturers.
Robert takes us through a thirteen-step process from food price controls to widespread food shortages—something we haven’t seen in this country since the Great Depression, when Roosevelt also imposed price controls.
Phase one: Food retailers affected by bankruptcy
So the government first announces that grocery stores can’t raise their prices despite ongoing inflation – courtesy of the Fed and Wall Street. That means their costs keep rising, turning those few cents in profit into losses.
Like any business that loses money, they close.
Of course, not all grocery stores are the same – small stores lack economies of scale, and while the rich buy vegetables and expensive cuts of meat with high profit margins, the poor turn to ready meals with low profit margins.
So the small shops and the shops with low turnover are first in line.
Food deserts are created as people in urban centers or rural areas have to drive miles or take multiple buses to find food. And ironically, this leads to more concentration as the little ones are eliminated.
The survivors are selling less and less food. They are shifting their shelf space to things that are not subject to price controls: clothing, furniture, nutritional supplements.
Grocery stores are becoming more and more like dollar stores, with little food and lots of junk.
As food shortages grow in cities, we would need police checkpoints in parking lots and armed escorts on delivery trucks – perhaps we could even set up government grocery stores, as Chicago has just announced.
Phase two: bankrupt food producers
The only way to save grocery stores is to control their costs. This means food manufacturers like Kraft, Heinz, Tyson and Hormel.
Of course, Kraft once again has no control over costs – ingredients, wages, parts and electricity. So now the company is making a loss.
As in the food retail sector, there is a downsizing process in which peripheral factories are closed and equipment runs out without being replaced.
If food producers reduce their production or go bankrupt, there will now be real shortages. And the only solution is – once again – price control at the next level down: with the farmers.
Phase three: bankrupt farmers
And that brings us to the last point. Farmers today are also forced to sell their products at low prices, even though the costs of inputs such as fertilizers and tractors are still rising.
They too are going under.
You are now full Venezuelaand the only alternative to starvation is a complete state takeover of the food supply, centrally planned from the farmer to the grocer.
As Sterling puts it: “The government will struggle to keep one of the most complex industries in the world running. The entire food supply chain is at risk of imploding.”
“Implode” as in starvation.
What happens next?
It is very unlikely that there will be a famine. For the simple reason that at some point the frog will boil and the voters – or the rioters – will tell the politicians what they think.
This is precisely why price controls fail, from France to Venezuela.
However, we have already done this once under FDR.
And if the idiots who run Kamala’s think tank are stupid enough to impose price controls, then unfortunately they are stupid enough to do a lot more.
(The article picture shows Florence Thompson “Migrant Mother”, a wandering pea farming family by Dorothea Lange in March 1936)
