Friday, February 02, 2007

The high price of tortillas

Here's a story by Ioan Grillo of the Associated Press that evidences the abysmal state of news reporting today. Grillo writes about a protest in Mexico over rising prices.

Some 75,000 unionists, farmers and leftists marched to protest price increases in basic foodstuffs like tortillas, a direct challenge to the new president's market-oriented economic policies blamed by some for widening the gulf between rich and poor.

Since taking office Dec. 1 after a disputed election, President Felipe Calderon has drawn his greatest criticism for failing to control the largest price spike in tortillas in decades. Tortillas are a staple of poor Mexicans' diet.

The national uproar has put him in an uncomfortable position between the poor and some agribusiness industries hoping to profit from the surge in international corn prices, driven mostly by the sudden explosion of the U.S. ethanol industry. A free-market advocate, Calderon has said he does not want to return to direct price controls enforced by many former Mexican presidents.
OK, so President Calderon supports the free market and thereby opposes price controls. Yet notice how the third paragraph offers only one justification for Calderon's position: it gives agribusiness larger profits (which allegedly hurt the poor).

What about the fact that the "sudden explosion of the U.S. ethanol industry" is due to government mandates and subsidies, and that these mandates and subsidies coercively steer producers away from fulfilling market demands and instead push them toward fulfilling government demands? Don't misguided government mandates hurt the poor?

What about the fact that price controls discourage production and thereby encourage shortages by mandating that a good be sold at below market rates? Don't shortages hurt the poor?

What about the fact that the abolition of price controls will lead to an increase in production-an increase that creates jobs? Doesn't the creation of new jobs help the poor?

And what about the fact that the lure of new profits compels participants to learn how to be more efficient (and thereby reduce prices), rather than simply troll about for the government-set price? Don't decreasing prices help the poor?

There are a host of critical points about the impact of price controls upon people's lives, yet this news article fails to consider any of them. So what then does it consider?

High tortilla prices put some Mexicans in danger of being malnourished.

The poor eat an average of 14 ounces of tortillas daily, giving them 40 percent of their protein, according to Amanda Galvez, who runs a nutrition research institute at Mexico's National Autonomous University.

With the new prices, workers earning the minimum wage of about $4 a day could spend a third of their earnings on tortillas for their family.

"Some people can switch to more unhealthy alternatives. Others just go without," Galvez said.
Does this information offer any information or insight as to what the government of Mexico should do with its price controls? Does the reporter even think it is relevant to present economic evidence in his story beyond that the poor are poor? Apparently not, yet this is what often passes for news reporting these days.

It's no wonder Latin America is lurching toward the left; free market ideas (let alone their moral base) don't even show up on the radar screen.


Anonymous said...

What are you carzy. Didn't you read Tracinski's columns about "what went right"? Dont you know that fundamental philosophical principles are irrelevant? Milton Friedman is popular and India has a pro-free market PM. The world is sprinting towards freedom and capitalism.

Didn't you get the memo?

Anonymous said...

I used to say that reporters should take several semesters of economics in college so that they would get stories like this right. Of course, given that there are economists who will get on TV and say they support the minimum wage or tariffs, such courses probably won't do much good.

The reporters, just like the TV pseudo-economists, fail to think in principles. It is this basic failure to think that needs to be corrected. The alternative is concrete-bound reporting.