Posted by
voice_of_reason on Monday, January 29, 2007 12:01:44 AM
An recent article in the Washington Post caught my eye.
Here is the short version (click
here to read the WaPo article):
* Ethanol is made from corn
* Mexico (and other countries) convert to Ethanol as a fuel, mostly due to well-intentioned mandates from various green-keen Govts. It is useful to note that Mexico is an oil-exporting country.
* As a result of the increased demand, the global price of corn goes up
* Since corn tortillas are made from .. uh .. corn, the price of tortillas is going through the roof
* Tortilla manufacturers, long beloved by the populace, are now becoming targets of hatred
* Within one year, Mexico has gone from being an exporter of corn to an importer
* Mexico, being a socialist country, deems tortillas to be an indispensable product
* The Govt of Mexico embarks on a plan to CAP the price of tortillas
Guess what the 'well-intentioned' policy of the Govt of Mexico will do to Tortilla mfrs and to their employees?
If the price of their product is capped by Govt fiat, and the price of their main raw material (corn) goes up, their profit margins will shrink. Some mfrs may also go out of business. Many of those who were previously employed by Tortilla mfrs will be unemployed. Since there are 65,000 - 200,000 Tortilla mfrs in Mexico, the impact could be significant.
With the price of tortillas capped, consumers will be immune to the effects of the shortage. So, the demand will remain high, which ensures that the price of corn remains high. Without adequate incentives to produce more tortillas at their low profit margins, the demand will outstrip supply - causing shortages. By next year, we will probably see people in the streets, protesting the shortages that their well-intentioned Govt has caused.
> Click
here for a link to the WaPo story. I'm sure that many TH readers will get a chuckle out of it.
This story is obviously indicative of the failures of central planning over a market based economy. But is there a lesson in this 'Tortilla Flat' tale for our 'central planners'? Well, how about applying a similar model to Universal Health Care:
* During the 1950s (and prior years), the US employed the 'old-fashioned' fee-for-service approach
* Prices rose moderately, but the increases did not significantly outpace inflation
* In the 1960s, the US Govt mandated the creation of Medicare to ensure that seniors didn't have to worry about paying for healthcare in their declining years. A new voter bloc was born, one that everyone would belong to eventually - so, there were few protests.
* The costs of health care went up due to the increased demand - and since there was no longer any rationing of this scarce commodity, for a significant portion of the population that was the largest consumer of health care.
* The US Govt passed laws that led to the creation of HMOs - that capped costs, limited access etc.
* Prices continued to rise, offset only by lower quality and rationing of access
* Now (circa 2007) health care is deemed to be an indispensable right
* There is a clamor from Socialist politicos to apply the 'successful' Medicare model to all
* After the 2008 elections, Congress with an acquiescent President passes a landmark UHC law
* Circa 2015: America faces a shortage of qualified doctors. The Govt nationalizes drug companies that make 'essential' drugs, but, absent a profit motive, few new drugs are created. Private pharmaceutical & medical technology companies produce only 'luxury' or vanity products such as Viagra & Silicone breast implants that are exempt from Govt control. In addition to the black market in prescription drugs, a black market springs up for private practice physicians who are willing to skirt the law to make a living.
Not so funny anymore, eh? Sorry, that's a terrible impersonation of a Canadian 'accent'! Needless to say, our Canadian 'comrades' have been down this path before us!
Oh, and don't think that it will only be a Democrat President who signs onto the UHC law .. observe the recent actions on the part of Arnold in California.
We should all remember this when we hear people demonize insurance companies, affluent doctors, pharmaceutical companies, hospitals and other free-market agents that play an important role in making health care available. Although there are numerous examples of mistakes made by those entities, let's be aware that Govt meddling is the largest single reason for most of the problems in this industry.