As a price control obsessive, I always finding it disappointing when opposition politicians won’t call a spade a spade and demand they end at once. After all, price controls may well win the hotly contested battle for the title of Most Destructive Policy of Bolivarian Socialism.

But yesterday I was left in complete shock when I heard an important opposition politician call for more price controls!

A estas alturas del partido we still have opposition politicians who think if your intention isn’t to destroy something, then a destructive policy won’t destroy it. ¡Por favor!

In a now sadly infamous statement, José Manuel Olivares, the National Assembly member for Primero Justicia who chairs the Health Subcommittee,  said the National Assembly should push for price controls over medical consultations in private health centers, adding: “it is not a regulation meant to destroy, let’s not forget that the private sector, with 8,000 beds, caters to 55% of Venezuelans.”

The coletilla is almost worse than the proposal. A estas alturas del partido we still have opposition politicians who think if your intention isn’t to destroy something, then a destructive policy won’t destroy it. ¡Por favor!

Even more, ¡no se reconstruye un país a punta de buenas intenciones y malas políticas!

Look, price controls have been around for over 4,000 years, dating all the way back to Babylon and the Code of Hammurabi, and we’re pretty sure they’ve been causing shortages for…4,000 years. 325 years ago, when French revolutionaries tried to cap the price of bread, the outcome was…bread shortages. López Contreras was the first Venezuelan President to implement them, back in 1939, though simpler forms go back to Colonial times. Every time they’ve been implemented, here or elsewhere, they’ve given rise to the same thing: shortages.

We’d like to think that the Venezuelan opposition, of all people, is wise to this dynamic. According to the latests industrial survey of Conindustria, private enterprises recognize price controls are one of the most binding constraints on domestic production.

Price controls are always bad and sometimes catastrophic.

And none of this is new. My husband and I have done some research on the matter and the lessons of close to 80 years of Venezuelan experience are unambiguous. Price controls are always bad and sometimes catastrophic. Pushed too hard, as they have been during the so called Socialismo del Siglo XXI, price controls are a central part of the policy mix that has devastated our economy.

This. Isn’t. Hard.

It’s 2017. Venezuelans are living the unintended impact of price controls every single day. We live with them when we can’t find the basic medicines and food we need to live. We’re far beyond the point of classroom discussions of disincentives and misaligned markets. These are people’s lives we’re talking about!

It’s an absolute scandal that people like Olivares, our political representatives, still don’t get this. Or is it a populist thing? Not sure… but it’s profoundly disheartening.

I’m glad to say Olivares did face some pushback. Manuela Bolivar, a National Assembly member for Voluntad Popular, jumped quickly and —among many other things— tweeted:

 

 

 

 

 

Some will say our National Assembly members should be supporting each other instead of pointing out one another’s faux pas. God forbid they do anything rash like debate each other!

Count me out. I expect a lot more from the political leaders that keep on talking about Venezuela’s reconstruction and I think we should be even more demanding and critical of them. The road to a strong and efficient economy and a better quality of life for every Venezuelan is a long and hard one. We need coherent politicians to lead the way.

José Manuel Olivares: I, like many, expected better from you.

Give me a call. I’ll talk you through these issues. Any economist would. As a doctor, though, you ought to know your bedrock duty is: first, do no harm.

35 COMMENTS

  1. Most Oppos use and only know the same playbook Chavez used at the beggining of his mandate populism populism and when that fail guess what? more populism.

    • Wanley and anon347: More evidence that the “opposition” mostly just wants a turn at the trough. Marxism is a deeply held cultural more in Latin America.

  2. But, but, but these are “good” controls.
    This will give political cover for the government to finally do it. “Even the opposition agrees that this is necessary to protect the people from greedy capitalist health merchants…….”.

  3. Can someone remind me again what are the credentials and experience of Jose Manuel Olivares please? Oh right….

  4. I read a comment from someone in FB that supported this complete imbecility, she was told that the solution should be to recover the hospitals, to what this woman replied “what happens in the public hospitals is too inhumane, let’s better LEAVE THAT AS IT IS”

    http://www.elchiguirebipolar.net/17-10-2016/senora-que-no-sabe-lo-que-quiere-prefiere-escasez-a-aumento-de-precios/

    http://www.elchiguirebipolar.net/30-10-2014/estudiante-que-esta-contra-el-control-de-precios-pide-que-regulen-precios-de-las-universidades-porque-es-un-tarado/

    • We must always remember that at its core, the central driver of leftism is hate for our fellow man. In just the last 100 years leftists have murdered over 100 million people, enslaved billions of people, and destroyed immeasurable prosperity. Leftism is the most destructive force in the world and we should condemn it and its proponents every chance we get.

  5. The setting of limits to hospital charges is utter nonsense in our current situation where inflation, rapidly rising personnel costs and the scarcity of needed medical supplies is at its worst . Understand that many hospitals are half empty or facing financial difficulties because people just cant afford the cost of seeking much of the medical assistance they need . This kind of populist initiative is a sign of demagogic irresponsibility on the part of any political party that suggests it !!

    Having said this , I am not sure that some kind of control should not be exercised in other situations where some Clinics are using a lack of competition or the ignorance of their patients or rather customers to gouge them of all they can… I can vouch from the testimony of physicians known to me and who have had an inside view of how some clinics operate of the way they sometimes engage in practices which abuse their patients toT maximize their profits. thing like making a patient think than he is lots worse than he really is to induce him to become hospitalized , or making up charges for items which havent been provided or charging extortionate prices for things that really cost a lot less or having them undergo procedures which arent really needed but which bring in more fees.

    Studies have been made in the US that show how in some areas the clinics and the doctor that work in them really abuse their patients in many unscrupulous ways …..distinctly remember an article by Atul Gawande ( a distinguished surgeon from the MGH and Harvard Medical School) who did an indepth study of the health costs in two zones , of very similar demographic composition , where the health costs of one doubled the other , even where the profile of diseases and conditions was almost the same , just because the ‘practices’ of the clinics in one zone were more ‘commercially aggresive’ than those of the other….

    What form these controls should take is something yet to be defined…but one thing is clear ..sometimes they are needed…!!

    • “thing like making a patient think than he is lots worse than he really is to induce him to become hospitalized , or making up charges for items which havent been provided or charging extortionate prices for things that really cost a lot less or having them undergo procedures which arent really needed but which bring in more fees.”

      And do you think a bastard like that would be stopped by price controls?

      Even with price controls he can still induce someone to be hospitalized without necessity, and do all the other things you said. He will probably just have to abuse a lot more his patients to match his previous revenue.

      “who did an indepth study of the health costs in two zones , of very similar demographic composition , where the health costs of one doubled the other , even where the profile of diseases and conditions was almost the same”

      The costs to operate may be cheaper or more expensive depending of the area. Just compare the rent one has to pay in some wealthy neighbourhoods, for example. And if he is really abusing his patients, competition will destroy him in the long run. The ‘cure’ you suggest may end up being worse than the disease.

      • Marc: I wrote ‘some kind of control’ were you read ‘price controls’ , I don’t particularly favour price controls but we must recognize that a problem exists which must be addressed . competition is often illusory because maybe there is only one clinic at a particular zone or those that share location bunch up and adopt the same predatory practices…..

        Dr. Atul Gwande looked for the reason for the difference between these two counties in detail and found no reason for the difference other than the practice in one county of bombarding each ill person with unnecessary and costly procedures, in short some clinic owners are more greedy than others and the sad part is that those providing the best health service were for the most part less expensive than those that charged more .

        Sharp practices are more common in certain states with large populations of elderly people (i.e Forida) than where there are less elderly people , the US is the country with the highest health per capita costs in the developed world , and US medicines sell on average for close to twice what they cost in Canada…..not to mention Britain.

        The health insurance companies exercise a kind of price control or regulation in that they have protocoles for determining how much a reasonable Clinic should charge or what medical protocoles are really necessary , but if you are uninsured then you are fair game ……in Venezuela these practices are fairly common , specially in the smaller clinics , and physicians are prodded into getting as many patients hospitalized as possible …….!! they are not always seen as healers but as money makers !!

  6. Andremember how Torrealba was “extremely worried” because Trump seemed to be as populist as Chavez. Capriles is also a price control enthusiast.

    “You hypocrite, first take the log out of your own eye, and then you will see clearly to take the speck out of your brother’s eye.”

  7. ….we’re pretty sure they’ve been causing shortages for…4,000 years. 325 years ago, when French revolutionaries tried to cap the price of bread, the outcome was…bread shortages.

    Off a century: The French Revolution was ~ 225 years ago. 325 years ago would put you into Glorious Revolution territory with the deposing of King James II of England, not King Louis XVI of France. Perhaps King James II considered the revolution to be Glorious because, unlike King Louis XVI, he didn’t lose his head in the process.

    As the article points out, price controls in a hyperinflationary situation merely make things worse.
    They haven’t worked in Chavista Venezuela. They didn’t work for Allende.

    My impression is that medical prices in the US are rather variable. Insurance companies often negotiate a discount. Those who pay by cash usually do not get the discount, unless they bargain hard.
    To add to the variability in medical pricing, some Doctors take only cash. What Happens When Doctors Only Take Cash.

  8. I have a relative who lives overseas and needed extremely expensive heart surgery and was having trouble with his insurance to cover it, he contemplated the possibility of having it done here, overseas the price of the surgery was over 150k here it was like 3k. But heck, let Olivares lower that to 1 dollar.

    • By the time your relative makes it to Venezuela this is what may happen: a.- the attending surgeon would have migrated b.- Most of his staff would have done exactly the same as their boss c.- he/her might find the operating team still in place but will have to bring all the stuff needed for the peocedure from abroad, assuming it would be sold to him/her, and would also have to bring all the meds required in the post op period, even the ones needed for complications

  9. LOL… If only there were a Hippocratic Oath for politicians!

    I would also note that in order to be a medical doctor, you need extensive education and training. In order to be a politician, in charge of billions of dollars and the social, economic, and political policies needed for the country to thrive, you need… uh… still thinking… uh… the “gift of gab”?

  10. It is interesting that the private health care system not only continues to exist in Venezuela, but is dominant under 21st Century Socialism. The same goes for education. In my mind, this disconnect has always undermined the claim – made by the regime itself- that it is socialist.

    The reality is, I think, that the regime likes their public hospitals and they like their public schools, but just not for them.

  11. muchacho pa Gafo!!! y ese nos representa en la asamblea??? parece que 18 anos de patria no han sido suficientes para el!!! la mejor manera de controlar la medicina privada es ofreciendo medicina publica de excelente calidad y cantidad!!!

  12. One interesting thing I discovered was that the Ley de Precios Justos if correctly applied (a very BIG if) would result in profit margins similar to those which are average in most types of industries in the US. Of course there are a lot of lagoons in the Law which allow for quite a bit of discretion on the part of the official to decide how to enforce it . During WWII quite a few prices in the US were subject to regulation . Generally were conditions of fair competition are ensured price controls just mess up things , but where competition is less than open and free then the US does sometimes regulate prices to avoid abuses.

    Its become increasingly obvious that the regime has in practice abandoned price regulations for quite a few products , it doesn’t declare a new policy but just looks the other way allowing many prices now to fluctuate with the free dollar exchange rate , this allows these products to reappear on the market but at prices which for most are inaccessible ….

    Something close to controlled prices are still applied to certain basic commodities and staples which the govt itself supplies on an ocassional basis , one might say that even the govt now in practice is turning away from price controls in order to face the crisis in supplies , lip service continues to be paid to the principle that price controls are necessary but if you go to a regular abastos you realize that this is ´dead letter´for a large part of the commodities sold there.

    • Yes Bill the Ley de Precios Justos couuuuuld result in similar profit margins as those in the US, but that is an if that doesn’t exist, and that’s the whole point. There is no way that the Ley de Precios Justos could be correctly applied, there isn’t a government now a days who could apply it in full control. And that is why the market is more efficient in deciding the price. However I do agree with you with your first comment, that sometimes the market can be harmful and this issue should be addressed (how to address it is a whole other issue).

      • If the inflation rate was lower and costs weren’t increasing 30% each month, then businesses wouldn’t have the need to crank up profit margins for products and services above 50% of the cost, because what drives most of inflation nowadays is the distortion created from the cencoex / control de cambio / currency monopoly and the constant hikes in the wages.

  13. That’s sad. I was genuinely disappointed by this comment, since I respected Olivares a lot. Anyways, it’s not as if the AN can do anything at the moment.

  14. Current Venezuelan medical insurance covers up to a max of 3.0 million Bs (3,000,000.00) approximate cost of an appendicitis or aprox. $720,00 at 4100 Bs/$…. Even if dollar wise it is dirt cheap, like the $6 mentioned above for a doctor appointment, you will not go very far on local private insurance…

  15. I know of a highly trained specialist whose main diagnostic tools are certain very sophisticated imported machines which operating costs are very high (in Bs ,not in US$) and whose consulting rooms are now empty because very few people can afford to pay for the use of the machine , the specialist ( a real talent) is now thinking of moving abroad. If a price cap is put at medical services it will only push more talented physicians to move abroad, the inititive is evidently well intended but counterproductive …!!

    • Those amateur politicians never anticipate situations like that, they are always “caught by surprise”.

      What if people just give up working for that limited income?

      I remember when a moron politician in my city set a series of draconian laws for parking lots, and then she got extremely surprised (and upset) when those businesses started reducing the parking spaces, renting the areas to stores, selling them to construction companies etc. The offering of parking spaces had been drastically reduced in the months following the decision. The population was mad.

      And the moron politician was like: “How come? How could they go that low? They are doing that to put me against the population!”

      It’s like those leftist people in the US that want to tax the rich I don’t know how many times more and assume they will be just there, totally inert, paying it like idiots. They won’t! They can always leave. And the idiots will be with the mouths half open, eyes gazing the infinite and saying in a whisper: “How come?” Fucking idiots!

  16. Francis Fukuyama doenst think the size of govt is as important as the quality of govt , if you have good quality of govt (like in Scandinavia and northern Europe and Japan ) then a bigger size govt is compatible with good governance and a healthy respect of private freedoms . If you have low quality govts then the smaller the better !!

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