Egg in the face of Sri Lanka President’s ‘Social Market Economy’
ECONOMYNEXT – Sri Lanka’s Consumer Affairs Authority is on a collision course with President Ranil Wickremesinghe’s ‘Social Market Economy’ imposing price controls on eggs after money printing led to maize shortages for chicken feed and lower egg output.
Sri Lanka’s Consumer Affairs Authority, Sri Lanka’s main creator of black markets and supply disruptions during crises, slapped price controls on eggs by colour apparently after examining ‘costs’.
The CAA slammed price controls of 45 rupees per egg brown egg and 43 rupees per white egg.
Poultry farmers have been badly hit with maize, the key ingredient for chicken feed rising from around 75 rupees to 275 a kilogram, Ajith Gunasekera, President of the All Island Poultry Association said.
The price controls were imposed partly after calls by Bakery Owners Association President which raises prices of their goods in a cartel like fashion with impunity to slam price controls on poultry farmers.
Poultry farmers have no cartel like power to determine prices, but both live bird and egg prices are determined in the market.
Poultry farmers have been hit by artificially high prices of maize, kept with import duties and licenses to give profits to the so-called ‘maize mafia’ that are close to the political establishment.
The Consumer Affairs Authority has previously created shortages and black markets in a range of foods including tinned fish, rice, sugar and dhal.
The price controls run directly contrary to the ‘Social Market Economy’ advocated by President Ranil Wickremesinghe and legislator Harsha de Silva.
“There is no policy agreement on imposing price controls,” Cabinet spokesman Minister Bandula Gunewardena said.
“When there are unusual price surges, the government comes under pressure to act. I agree that stocks disappear, black-markets appear and there are distortions in the market. But when there is no control the consumer gets hurt. That is a subject of debate.”
The political moves of price control agencies lead to delayed supply responses. Higher prices of eggs gives incentives for farmers to buy layer chicks and expand production at a time when thousands of farmers are said to have culled layers for meat.
Poultry farmers had warned earlier that egg output was down due to poor feed and were asking permission to import maize.
Imposing price controls goes directly against President Ranil Wickremesinghe’s claims to operate a ‘social market economy’.
Social market economy was a term given to the economics of post-World War II economy of West Germany which was devastated by allied bombing recovered fast while the UK, which was practicing money printing US and suffered sterling crises (forex shortages) and rationing.
John Maynard Keynes, himself who fired money printing policies made popular by Harvard University (Alvin Hansen, Robert Triffin), MIT (Paul Samuelson) which turned out to be worse than Keynes’ Cambridge itself and ended in the collapse of the Bretton Woods system and a centuries old gold standard.
Keynes himself had to beg for money from US before his death, reportedly being humiliated by Harry Dexter White, the key driver of the International Monetary Fund, just like Sri Lanka begged for ‘bridging finance’.
Germany driven by Austrian economics (Wilhelm Rokpe) and the ordoliberals of the Freiburg School (Walter Eucken, Franz Bohm, Walter Eucken) on the other hand junked Hitler’s Reichsbank and tamed his central bank, initially with the Westmark and later the Deutsche mark, which unusually appreciated during the Bretton Woods.
The ideas were given effect by Ludwig Erhard, initially the economics minister of Bavaria and later the combined occupied area and later Chancellor.
After taming the central bank, price controls were lifted by Erhard to make the economy work and supplies to return.
Erhard had to battle the Harvard-Cambridge types as well as Social Democratic Party advisors in occupied West Germany.
However he had the confidence of the US military due to his links with the German resistance and advising General Lucius Clay. It is not clear whether the military already suspected the New Dealers types.
Harry White who had studied at Harvard was later accused of spying for the Soviets.
Meanwhile in Sri Lanka plans are afoot to give more ‘central bank independence’ to the intermediate regime agency which had busted the currency from 4.70 to the US dollar to 360 during its lifetime through ‘flexible’ policy instead of taming it with tight laws like in Germany. (Colombo/Aug24/2022)
