A long story of price controls and inflation

Roberto H. Cachanosky

Member of the Academic Council of Libertad y Progreso. Degree in Economics from Universidad Católica Argentina. He is an economic consultant and author of the books "Economía para todos" (Themes, 2002) and "El SindromeArgentino" (Ediciones B, 2006). He serves as a columnist in the newspaper La Nación. Previously, he worked the same task for the newspapers La Prensa (1985-1992), El Cronista Comercial (1992-2001) and La Nueva Provincia de Bahía Blanca (1992-1998). He's the host of the cable TV show "The Economic Report." Lecturer in Applied Economics of the Master of Economics and Administration of ESEADE, senior lecturer in Macroeconomic Theory of the Master of Economics and Administration of CEYCE. President of the Center for Economic and Institutional Studies. He was Economic Adviser to the Argentine Chamber of Commerce (1983-2002) and to the Argentine Chamber of Importers (1992-1993).

This article was originally published at La Nación on October 23rd, 2021.

According to economist Roberto Cachanosky, the Argentine government froze the prices of more than 1,400 products as of October 1 with the intention of reporting a reduction in inflation in November. “The Consumer Price Index (CPI) will be published by INDEC on November 11, three days before the elections,” he emphasized.

The specialist pointed out that there is an upward trend in prices. “As we see new projections, when comparing the first weeks of each month, we expect 3.6% to 4% inflation, he said, speaking at a well know TV show. In September, the INDEC reported a rise of 3.5%.”

Thus, the economic consultant maintained that the Government’s intention was to “show a lower inflation rate” on the eve of the elections. What did the guys do? Deflation by decree to set prices back ”, he pointed out.

Cachanosky considers the situation is critical. Our current policy is a mixture of our worst ideas but with an aggravation. “In 1975 there was a much larger social cushion. We didn’t have as much poverty. Facing that is not going to be easy.” he reasoned. However, he does see a way out.

The economist said that “the artificial backwardness” of both the cost rates of public services and the exchange rate complicate the situation. Another complicating factor are Liquidity Letters (Leliqs), issued by the Central Bank through auctions, and the debt it contracted with the banks.

The economist shared Juana Viale’s table with opposition leader Miguel Ángel Pichetto, journalist Diego Cabot and researcher Adriana Amado. Cabot emphasized the particularity of the action taken by the Government. This price freeze does not have any complementary measure. Traditionally these measures were accompanied by a salary agreement or other types of agreements that gave it a framework of containment, he pointed out.

Meanwhile, Pichetto considered that the decisions of the Secretary of Commerce are subject to the “electoral situation” and the government’s determination to “see how it gets to November.” “There is no doubt that we are facing inflationary data that will be approaching 50%. And the forecast for next year is very complicated, ” he said.

Cachanosky and a controversial association

Cachanosky insisted that “the temporary fixing of prices” established by the Government does not make sense, quoting the book “4,000 years of price and wage controls: How not to fight inflation”, written by Robert Schuettinger and Eamonn Butler in the late 1970s.

By quoting examples from that book, he made a controversial association. “The funniest case? In ancient India, a maximum price had been established for prostitutes – art and gifts included. Can you imagine that happening here? The whole of La Cámpora all sign up for quality control ”, he laughed.

He pointed out that not even Nazism, using “the whole apparatus of state repression” had been able to succeed at controlling prices.