TP or not TP?

Shortages enter the public mind in the form of war time rationing of butter or gasoline, but many countries of the world still experience shortages on a regular basis. Even the mighty USA  sometimes experiences shortages of goods and services.What the public mind doesn’t see is that in economic terms there need never be a shortage. The invisible hand will move prices so that whatever goods there are will be allocated most efficiently. Of course there will always be people who try to game the system, buying as much as they can and then re-selling at a higher cost. When this occurs on a normal basis it’s considered good business sense, but when it touches the very fabric of our needs governments usually step in.

On a short term basis this may benefit society as price gouging may be stopped and the necessity made available at a reasonable price, thought quantity doesn’t change and some people will still be without. In the case of Venezuela this toilet paper shortage highlights the very reason why government should largely not interfere with the markets price mechanism. Toilet paper could be produced locally, but because of currency controls

introduced to stop capital flight the Bolivar is greatly over-valued, which causes the imported materials used to make the TP expensive. At the higher costs of production firms are producing less. This makes it necessary to import the additional toilet paper needed, but again the currency valuation makes this difficult as imported TP is expensive. The government can subsidize the production and imports since they have large oil exports, but that can’t last forever and it essentially undermines their intent. Letting the bolivar find it’s true value and then using cash from oil exports to subsidize local necessities might be a better option, or at least one less invasive.

In April many people hoped that the death of Chavez would signal a change in policy, but it seems like the band will play on and the people will suffer. President Nicolas Maduro, who was selected by the dying Hugo Chávez to carry on his "Bolivarian revolution", claims that anti-government forces, including the private sector, are causing the shortages in an effort to destabilize the country. May the revolution carry on.