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At the morning press conference on March 31, 2022, López Obrador said that he would not rule out the idea of price controls for certain products if they continue to rise. Again, he is giving a popular response that far from bringing a solution, the only thing he will achieve will be to make products scarce.
Beyond going against economic theory, which he does not know, AMLO’s speech is based on an idea he has repeated on many occasions that businessmen are abusive with prices and seek to make extraordinary profits. In fact, at the same conference, he called on gasoline suppliers not to increase prices too much.
As we discussed last week in this same space, AMLO’s statements are designed for people who do not understand how the economy works but believe that there is a legitimate interest of the president to take care of the poorest. If the president really wanted prices not to continue their rise, he could go for a number of economic policy options: reduce or eliminate the Special Tax on Production and Services (IEPS); eliminate all limits on the importation of foreign products; reduce taxes to attract investment and thus increase employment and production, killing two birds with one stone, etc.
But the president does not care that prices fall naturally due to the free operation of supply and demand, he is concerned that people believe that he is the one who is reducing them. In this light, we realize that López Obrador’s hands are tied. He cannot bet on international trade because the discourse of self-sufficiency does not allow him to do so, reducing taxes would prevent him from paying his gifts and allowing the private sector to solve the problem would detract from his prominence.
It is not complicated to understand that most Mexicans who are not engaged in any kind of commerce do not fully understand how prices work, and in a country where some prices (such as tortilla and gasoline prices) were determined in a Soviet way, it does not sound strange to anyone that the president says he can decide what the prices of things will be without any consequences.
If price controls were to bring shortages, AMLO would be shielded from criticism, since he can always say that businessmen stopped producing because they oppose his “Fourth Transformation,” but that it is good that they are leaving because now only the good businessmen will remain, those who do want the welfare of the people.
López Obrador talks about Mexican history at every opportunity. He never contributes anything interesting or new, but rather repeats the same nationalist legends that children learn in elementary school: shepherds who become presidents, priests who lead insurrections against empires, indigenous people who rise up against dictatorships, sinless heroes who have superhuman characteristics with which they overcome any obstacle.
That story that we are taught as children is the same one that is prescribed to us over and over again in the lucha libre: a hero who faces the greatest challenge of his life and who, being close to losing, remembers how much he loves his country and from there draws the strength to win. This is how AMLO perceives himself as a Mexican Hulk Hogan, facing powers greater than him, who want to destroy the country, but that he has the courage to overcome.
And being that superhero requires him to make the tough decisions, such as canceling airports, even if everyone opposes it; organizing popular consultations, even if no one votes for them, and taking measures that no one dares to do, such as price controls, even when all the experts warn him of the terrible consequences this will have. In the end all detractors will be labeled as technocrats, neoliberals or conservatives, enemies of the people.
There is a quote that Simón Bolívar probably never said after the 1812 earthquake in Venezuela that, I understand, helped delay the independence movement in that country: “If Nature is against us, we shall fight Nature and make it obey.” Bolivar defied the laws of nature in the same way that AMLO defies the laws of economics.
The big difference is that Bolivar is a legend that was created to embellish his life and portray him as a hero, while Lopez Obrador is living his own legend in his head, telling it to an ignorant people, while the least of us can see that he is nothing more than a crazy old man fighting against windmills… literally.
José Torra is an economist, Research Coordinator at Caminos de la Libertad, co-author of the Fraser Institute's Economic Freedom of North America Index, and co-host of the podcast Libertad Aquí y Ahora // José Torra es economista, Coordinador de investigación en Caminos de la Libertad, coautor del índice Economic Freedom of Northamerica del Fraser Institute, y co-conductor del podcast Libertad Aquí y Ahora