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Everything is connected, even if you deny human incentives and the market laws, built around them.

1. First, the intention to help the poor (absolutely correct) and aggressively attracting the attention of the state.

2. Next, officials’ misunderstanding of poverty. If the understanding was narrow, they would help pointwise in the form of social support. But Gosplan supporters need a bigger challenge: fighting low incomes.

For this propose a “consulting” approach is being applied – EITHER to raise incomes OR to reduce inflation, ignoring that this phenomena are connected.

Income is more difficult to raise (this has already been tried through GDP), so now it’s inflation’s turn.

3. The bureaucrat, hiding behind the demands of society, follows the usual path – prohibits inflation. This is called administrative regulation of prices with the establishment of a minimum margin.

What’s going on with this market:

  • Inflated demand that is not related to real needs. For example, walking at home in winter in a T-shirt, not turning off the water tap, not turning off the light, buying sacks full of goods during a frenzy.

  • Substandard supply. Investment is also a market. Conscientious businessmen refuse to participate because there are more profits elsewhere. As a result, the market is left with sume unscrupulous providers, who for some reason agree to low profit margins.

4. The logic of these providers is simple. The price (roughly) consists of operating costs (daily), capital (modernisation) and profit. The dealer initially knows that from this fixed price he/she will definitely pull out own market profit.

But for this to work it will require squeezing the operating costs and practically ignoring any modernisation. This is obvious to any auditor, so political support is needed. There is a fusion with power, which means that the problem rises to an unsolvable level.

5. Demand and supply are out of balance. Accidents and shortages are inevitable. In between, there are consumer complaints about the quality of goods and services, suppliers’ complaints about low prices.

If there was competition and market pricing, everything would be adjusted automatically. Sometimes through the courts.

But here the officials deal with this and that, so decisions are delayed.

6. Tragedy ensues, and with it the public demand for even more toughening policies. Dealers are expelled, the asset is nationalised, the industry is turned to the state.

7️. Problems are not solved, it gets even worse, because incentives fully disappear:

  • managers – former officials (at least they’re not oligarchs) start srealing

  • employment is definitively distorted in favour of relatives and friends

  • expenses are passed on to all Kazakhstanis through taxes and budget injections.

Accidents and deficits continue (remember any national company and Arys). The bolts are tightened even more. Claims are now being raised against the consumers themselves.

Grocery cards, portioned supply of utilities for a resident, and so on.

Step by step, we will slide back to where we started 30 years ago.

Once again: calls to control prices and behind the scenes regulation end in tragedy, nationalisation and return to the USSR.


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