By Dr. Vishnu Bisram
ON January 13, the opposition PNC called for implementation of price controls (ceiling) to address the rising prices of goods. This is an old idea of the PNC, seemingly built into the political and economic DNA of the PNC. It was implemented around 1970, resulting in disastrous socio-economic consequences for the population. It was abolished in Hoyte’s economic reforms around 1988, as a condition for the UK and U.S. restoring economic aid to Guyana.

President Irfaan Ali rightly rejected the idea of price controls, stating “I would not ever take Guyana back to any system that did not serve us well.”

In a normal economy such as ours or the U.S., prices are determined by the market and cost of production. There is a dynamic interaction of supply and demand – as well as cost of production, transportation, scarcity, preference by consumer, affordability — that determine how much (if any) will be bought at any given price. Consumers will purchase more of a product as its price declines, all else being equal. Analogously, they will consume less if prices rise. Supply and demand shift constantly in response to tastes and costs. Currently, prices are high because of scarcity due to the floods and transportation costs. Government must address those two issues and provide incentives for farmers to produce.

During the period of Burnhamism, Burnham introduced this looney idea of price controls (fixed prices) on goods. Price control simply means that the government put a selling price per item (fixed quantity) of a good. Burnham implemented the policy years before he started banning food imports (that he called imperialist or White man food). Almost every food item had a price control. Even toilet paper was under price control. The price of the item had to be publicly displayed in front of it (on the shelf); if not posted, it was a hefty fine.

As a youngster, I helped to run a small shop, so I was well aware of the policy. Heavy fines resulted in selling above the controlled price. It did not matter for Burnham if the cost of the good was more than the selling price, the grocer had to sell at the controlled price or face a fine and jail time. The fixed price was the same all over the country– on the Corentyne or in Essequibo or far away from Georgetown. Transportation costs were not factored in when determining the price of goods. The cost of almost every item was much more than the selling price.

Government didn’t offer any assistance to grocers to make up for the difference. Shopkeepers had to sell at a loss. Which shopkeeper would remain in business selling at a loss? It was simply unprofitable, unwise for grocers to stay in business. Shopkeepers found ways to “kak’ consumers so as not to lose money. They would sell the goods at the controlled price but lower the weight of the item; unsuspecting consumers didn’t pay attention to weight because most items were pre-packaged and consumers didn’t bother to focus attention on the scale when goods were weighed.  So instead of selling, as an illustration, one pound (16 ounces) of sugar for seven cents (government price), they would give 14 ounces. Ditto flour, dhal, alou, onions, garlic, channa, boradhal, chaoor (rice), salt, etc; for canned (sardines, corned mutton, tomato paste, etc.), or bottled items, or toilet paper, etc., shopkeepers won’t put them out on display for sale. Only when consumers asked for those items, they would be told the practical (not government) price. The shopper decided whether to purchase the item. The shopkeepers sold only items above price ceilings to those shoppers they knew personally and who would not report them to the food police. In all instances, shoppers paid the demanded, non-controlled price. Consumers or shoppers knew that the fixed-price items were not profitable for shopkeepers. How can a tin of sardines be sold for the same price (24 cents) in 1970 in Georgetown and in Port Mourant? There was not transportation or labour costs to move the sardines from Georgetown to the Corentyne. Goods were often not sold to far-off locations by Georgetown wholesalers because they were forced to supply retailers at fixed prices. So goods became scarce in West Berbice, Corentyne, West Bank, West Coast, Essequibo, etc. Shopkeepers from far-off areas had to go to town and purchase their goods at fixed prices. And inevitably, prices went up (sold above price controls) because grocers had to factor in transport and labour costs. The government didn’t take into consideration while setting prices, compensation for spoilage and spills. Many items were perishables that would lead to losses? Didn’t the Burnham government recognise the idiocy of its policy? Was the policy driven by race? Almost all the stores were owned by Portuguese, Chinese, and Indians. Almost all the importers were Portuguese and Chinese and they did the wholesaling. The larger Indian stores also served as wholesalers and distributors. Almost all the retailing and community shops were owned by Indians. Then the import ban came as well as government control of all imports and exports in offices staffed by supporters of the PNC. The Portuguese, Chinese, and wealthy Indians and mixed-race merchants packed up and left the country, running successful businesses in the U.S., Canada, the UK, and Barbados. Guyana’s economy collapsed.

Price controls led to the collapse of the Soviet bloc and one of the causes for the low growth of the Indian economy. China’s economy ballooned because of the introduction of the market economy in the 1980s. Price controls were a failure in Guyana under the PNC. President Irfaan Ali was right to reject the PNC’s proposal to return to price controls. It will lead to ever-increasing shortages and prices.