Russia has joined the Third World fad of putting price controls on food:
Russian food prices rose steeply in September, with vegetable oil up 13.5 per cent, butter up 9.4 per cent and milk 7.2 per cent, thanks to global agricultural price increases. Given a big low-income population and meager pensions, the price rises are among the few factors capable of deflating President Vladimir Putin’s 80 per cent-plus approval ratings.
...
Russia’s agriculture ministry said the food pricing arrangement was voluntary. But industry insiders said they had come under heavy pressure. “We were told in no uncertain terms that we have to freeze prices on certain products,” said one Russian food industry executive, who asked not to be named. “Everybody understands what the government is doing. It is part of their election campaign.”
Food prices are going up because worldwide demand is going up. Not only do farmers have to feed all the people in the world, now they have to feed cars and the biotech industry, too.
Ordinarily, rising prices on basic commodities increase supply, as farmers plant more in order to make more money.
In the counterintuitive world of farm price supports and government subsidies, however, there's no telling what might happen. Here in the United States, we pay some farmers to grow less while subsidizing others to grow more, both of which have the interesting effect of making it harder for subsistence farmers in far off places to subsist. And in the game of government agricultural meddling, the United States is far from the most egregious offender.
Russia joins a worldwide movement of governments trying to lower food costs by artificial means:
China has also agreed to food price controls; Egypt, Jordan, Bangladesh
and Morocco are increasing subsidies or cutting import tariffs to lower
domestic prices. Rich countries are not immune: Italian consumer
groups organized a pasta boycott last month in a protest over prices.
Italians complaining. Who would have guessed?
Anyway, for those of you who have forgotten your basic economics, prices rise when supply, relative to demand, goes down. Lowering prices by government fiat is not a good way to increase supply.
Russia's approach to food price controls is ironic, since it attacks not the problem of food supply but the supposed perfidy of the blood-sucking merchant class. It is the commercial equivalent of killing the messenger. The Soviet -- excuse me -- Russian price controls limit the markup that can be charged on select food items -- bread, cheese, milk, eggs and vegetable oil -- by retailers and other middlemen. This is ironic because it recalls the days when Russia, then under-performing as the Soviet Union, produced lots of food even as market shelves were bare. The problem then was not food production but food distribution, a government-run system of dysfunctional railroads, trucking lines and state stores that replaced the blood-sucking merchant class of Czarist times. That government run distribution system of apathetic nine-to-five clock punchers wasn't able to ramp-up for the harvest, leaving food rotting in storage facilities and farm fields. It was actually easier to buy grain from the United States and ship it all the way around the world than it was to get native stocks a few hundred miles from the Russian breadbasket to the hungry in the capitol city of the worker's paradise.
By attacking, once again, the distribution channels, Russia could be headed back toward the good old days of bare store shelves and periodic, localized famine. At that point, Russians being Russians, I'm sure the public outcry for a permanent Putin administration will be overwhelming.