Written by:Diomer Antonio Galán Rincón.
Bachelor's Degree.Public Accounting / MSc.Science of Higher Education.
Author: @dgalan,through Power Point 2010 tool, and using public domain image Pixabay
The great changes and challenges generated by globalization, free trade, consumer demands for high quality products, as well as inflation, the exchange rate system, price regulations and the international trade blockade that the country faces, force companies to have innovative entrepreneurs who create and manage them according to the national and international market trends that are projected for the future, with the firm purpose of preserving themselves in time and space and making organizations more competitive, as they are the main engine of economic development of the country.
However, the control exercised by the Venezuelan State with the application of laws governing the matter, have tried to find a way out of the problems affecting small and medium-sized companies, and for this reason, without any benefit or resolution of the problem, the regulation of prices of products or items of basic necessity was presented, which was intended to reduce a series of illicit activities, such as: Speculation, hoarding and price increases that affect not only the population, but also the inventory stocks of the same, who day by day struggle to survive with the minimum economic profits generated, as well as the progressive increase in the prices and costs of the merchandise.
As described by Gutiérrez (2016), price control is "an instrument or mechanisms that allows the State to regulate the prices of some goods or services to be offered to the population and thus, achieve the maximum social welfare". In other words, it refers to the means employed by a State to ensure the welfare of society by preventing the imposition of exaggerated prices and guaranteeing that products, goods and/or services are within the reach of the entire population.
Image taken from:Pixabay
However, in spite of the great efforts made with the fixing and control of prices, the country has been affected by the inflationary process that currently reigns in the market, which beyond achieving the benefit of the community, has had a negative impact on the companies who have seen their growth and commercial development affected, bringing as a consequence many companies closed, others that have had to change their economic activity, to seek to stay in other markets, since they do not get any profitability.
It is important to point out that these organizations are the basis of the economy of a country by offering what they produce, to improve the quality of life of its inhabitants; and they are continuously looking for the necessary tools to improve their productivity, as well as that of their employees, and at the same time, they guarantee an effective inventory management that implies keeping stocks to protect themselves against uncertainties at the lowest cost.
I hope you like my article and I would appreciate all your comments.
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Greetings @dgalan, price controls in an economy like the Venezuelan one will undoubtedly bring shortages of products, since they cannot be quoted at their real value they will not be placed on the shelves and will be resold at prices even higher than the real one. We have already experienced this here in Venezuela and we know that the price controls
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Greetings @ carlir
I share your point of view price controls have a great impact on the Venezuelan economy , even more with the economic restrictions that fall on the country .
thank you very much for commenting
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hello @dgalan,
in my personal opinion I do not believe that price controls are a measure that gives any positive result, the reason is that if you control prices you limit free competition so that companies that manage to survive these price controls are forced to increase the price, on the other hand consumers have no choice but to buy the products at the price they have, I am not an economist but when it comes to basic needs price controls are the worst option for a state.
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Greetings @ trabajosdelsiglo
I share your opinion, the experience of the Venezuelan economy tells us that every time the state has implemented price controls these skyrocket out of control, certainly these measures do not contribute to stabilize the economy, and less with the economic constraints that fall on the country.
thank you very much for commenting
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Greetings my friend. By definition price controls are used to ensure the welfare of society, but in practice it is far from that reality, because it only causes shortages and that regulated products go to a black market. Excessive controls are harmful, especially because they are not supported by policies that allow the reactivation of the economy.
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Greetings @ emiliomoron. I share your opinion, it is important to note that price controls are necessary so that traders can adapt but for a certain time (reference price), however in economies like my country Venezuela with hyperinflation and the existing trade blockade is very difficult also we devalue any foreign currency that enters the market and who pays all this the final consumer.
Thank you very much for your comments
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Hello @dgalan
Globalization and its mistakes, will end up creating greater evils to humanity, when you say "despite the great efforts made with the setting and control of prices, the country has been affected by the inflationary process that currently reigns in the market", I sense that you are not taking into account external factors such as international restrictions that fall on Venezuela, if this is not included the data have a lot of noise therefore lack objectivity.
Best regards, be well.
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Greetings @ lupafilotaxia
There are many elements that are causing hyperinflation in the country and therefore affecting inventories,
one of them is as you mentioned in the publication and I share with you your opinion is the economic blockade that is on the country, this is certainly important, but we also have to take into account the free trade that affects SMEs, for their little room for maneuver and investment capital against large corporations, which affects the production of goods and services for the population.
Thank you very much for your comments
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Greetings friend @dgalan, a great topic you share, currently the trade is facing a constant change in market prices, this is due to inflation facing the country, on the other hand, the state is constantly fighting to try to maintain a price, but no merchant will sell at a loss, so it is a big problem that is presented to all, and the one who is most affected is the final consumer who buys the product at the price that the merchant wants to sell it.
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Greetings @ chucho27
The economic distortion that the country is currently experiencing, happens for several reasons and one of them is a product of the economic blockade, no doubt that price controls further stimulate hyperinflation and devaluation of any currency circulating in the country, very strange things that have no economic theory to support it.
thank you very much for commenting
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@tipu curate 5
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Upvoted 👌 (Mana: 0/4) Get profit votes with @tipU :)
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Thank you for your support
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Price controls are the counterpart of a Free Market economy system. They're the backbone of a Welfare State and a Socialist controlled economy.
Price control, and all kind of controls that emanates from an State, despite creating benefits and economical stability on any society the only thing they generate is scarcity and in the end, poverty.
And with scarcity comes a well known distortion that ends rising prices for the common public because of the natural Law of Supply and Demand, in which and scarce good naturally increases its price because of the consumers pressure on that good (or service)
Anytime a Government gets involved directly or takes decisions that involves the productivity of a nation, it immediately generates scarcity because these kind of actions moves away investment and generates distrust. This has been proven by mankind since its first experiences with Market more than 3000 years ago but specially in 18th century with the advent of industrial revolution and the born of the principles of modern economy.
And with scarcity comes Inflation (when government begins circulating inorganic money, or magic money as i call it, because no one has produced it) Devaluation (when productivity decreases, and also decreases foreign and internal commercial exchange, affecting the national currency value) increase of Public Debt (when government increases its Public Expenses trying to fill the hole left after the decrease of production) and other derived problems like unemployement, corruption and a general decrease in life quality, and another factor that only a few notices: an increasing dependency on State, which deepens poverty on a country.
All Controls generates more problems than it claims they are willing to solve, and in the end is the lower end of Society the one who bears the burden, ironically that segment of society (the poor) that the government claims to be aiding. The poor becomes poorer, and as a proof, in Venezuela poverty has reached the mark of more than 97%, and extreme poverty is now more than 76%.
Controls aren't a solution, Controls are the problem and from them derives all the rest of disasters on a nation's economy system. Controls increases poverty and dependency on the State welfare system, which needs public expenses to exist, so it increases the national public debt that has to be paid by the same society that is claimed to be aided.
From my point of view this is the best fraud ever made, because it's legal regardless is not legitimate.
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