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ECONOMYNEXT – Sri Lanka’s Consumer Affairs Authority is on a collision course with President Ranil Wickremesinghe’s ‘social market economy’ which imposes price controls on eggs after money printing led to shortages of maize for chicken feed and a decline in egg production.

The Consumer Affairs Authority, the main creator of black markets and supply disruptions in Sri Lanka during the crises, imposed price controls on eggs by color, apparently after looking at “costs”.

The CAA slammed price controls of Rs 45 per brown egg and Rs 43 per white egg.

Poultry farmers have been hit hard with maize, the key ingredient in chicken feed, dropping from around Rs 75 to Rs 275 per kilogram, said Ajith Gunasekera, chairman of the All Island Poultry Association.

The price controls were imposed partly after calls from the president of the Association of Bakery Owners who raise the prices of their products in a cartel fashion with impunity to impose price controls on poultry farmers.

Poultry farmers do not have cartel power to determine prices, but prices for live birds and eggs are determined in the market.

Poultry farmers have been hit with artificially high maize prices, maintained with import duties and licenses to give profits to the so-called “mafia mafia” which is close to the political establishment.

The Consumer Affairs Authority has already created shortages and black markets for a range of foods, including canned fish, rice, sugar and dhal.

Price controls run directly counter to the “social market economy” advocated by President Ranil Wickremesinghe and lawmaker Harsha de Silva.

“There is no political agreement on the imposition of price controls,” Cabinet spokesman Minister Bandula Gunewardena said.

“When there are unusual price spikes, the government is under pressure to act. I agree that equities are disappearing, black markets are emerging and there are market distortions. But when there is no control, the consumer is hurt. It is a matter of debate. »

Political moves by price control agencies result in delayed supply responses. Higher egg prices are prompting farmers to buy laying chicks and increase production at a time when thousands of farmers would have slaughtered laying hens for meat.

Poultry farmers had earlier warned that egg production was down due to poor nutrition and were asking for permission to import maize.

The imposition of price controls goes directly against President Ranil Wickremesinghe’s claims to operate a “social market economy”.

The social market economy was a term given to West Germany’s economy after World War II devastated by Allied bombings.

West Germany quickly recovered in a phenomenon that followed the German economic miracle, while the United Kingdom, which practiced money printing, suffered crises in the pound sterling (currency shortages ) and rationing. Similar stability was found in neighboring German-speaking countries.

John Maynard Keynes, himself, fired the money printing policies made popular by Harvard University (Alvin Hansen, Robert Triffin) and partly by MIT (Paul Samuelson) which turned out to be worse than the Cambridge of Keynes itself and resulted in the collapse of the Bretton Woods system, a centuries-old gold standard.

The whole world is now suffering from the high inflation of the Powell bubble, which has been cleverly blamed on Russia.

Keynes himself had to beg for money from the United States before his death, allegedly humiliated by Harry Dexter White, the main mover of the International Monetary Fund, just as Sri Lanka begged for “bridge funding”.

Germany led by the Austrian economist (Wilhelm Rokpe) and the ordoliberals of the Freiburg school (Walter Eucken, Franz Bohm, Walter Eucken) ransacked Hitler’s Reichsbank and tamed its central bank, first with the Westmark and later the Deutsche mark, which appreciated exceptionally during the Bretton Woods.

The ideas were brought to fruition by Ludwig Erhard, initially Economics Minister of Bavaria, then of the Combined Occupied Zone and eventually Chancellor.

After taming the central bank on June 20, 1948, price controls were lifted by Erhard to keep the economy working and supplies returning.

Erhard had to fight Harvard-Cambridge types as well as Social Democratic Party advisers in occupied West Germany.

However, he was trusted by the U.S. military due to his connections to the German resistance and his role as an adviser to General Lucius Clay.

It is not clear if the military already suspected New Dealer/Keynesian types. Harry White, who had studied at Harvard, was later accused of spying for the Soviets.

Meanwhile, in Sri Lanka, plans are underway to give more “central bank independence to the middle regime agency that had raised the currency from 4.70 to the US dollar to 360 over the course of his life through a ‘flexible’ policy instead of taming it with strict laws like in Germany. (Colombo/August 24, 2022)