When the supply of toilet paper started running out back in 2013, the Venezuelan authorities came up with a novel explanation. “95% of people eat three or more meals a day,” the president of the National Statistics Institute, Elias Eljuri, said at the time. The suggestion appeared to be that if only Venezuelans ate less, there would not be a shortage of materials to clean backsides.
What the statement failed to mention was the use of price caps by the president, Nicolas Maduro—a forlorn attempt by the country’s leader to shield the public from the effects of a broken and corrupt economy.
As any high-school economics student knows, it is applying government controls to markets which creates shortages, not eating too much. Pricing signals are obscured and loss-making items withdrawn from production (toilet rolls, for example). Far from controlling inflation, price caps upset the demand-supply relationships a free market relies on—demand outstrips supply and inflation rises. By the end of the failed price cap experiment in 2013, Venezuelan food inflation had reached 76%.
With inflation fears stalking the globe, politicians are once again reaching for the wrong lever. The U.K. is the latest, with Scotland announcing that it wants to cap the prices of essential items like bread, milk and eggs at a state-enforced low price. “People are struggling to buy an adequate shop to support their families,” John Swinney, the First Minister of the devolved nation, told cheering activists.
The U.K. government appeared to distance itself from the plan, described by one business executive as “potty”. But it then revealed that it was also looking at “voluntary” price controls on key groceries. The chief executive of Marks and Spencer, one of Britain’s most popular retailers, said that the proposals were “completely preposterous”.
He is right, and the finance minister, Rachel Reeves, appears to have backed away from the plans.
The U-turn hides a deeper problem. Faced with insipid economic growth, politicians have not taken the action necessary to spark a resurgence, such as capital and digital markets reform, lower levels of regulation and lower business taxes. Rather, they have tried to control the results of the ever-increasing burden on businesses at the output stage (prices) when it is too late.
Hungary has had some form of price controls since 2025. Romania and Croatia have introduced price ceilings and margin controls. Many EU countries have regulated prices in energy markets. The U.K. has an energy price cap.
Sometimes such interventions are necessary. Poor political decision-making has left Europe’s energy system in a mess, and the consumer should not be left to pick up the cost.
But political leaders should take care. The U.K. has one of the most competitive retail sectors in the world, which brings consumers choice and low prices already. Free markets are much better at producing the goods people want at the price people want them than individuals sitting in government offices looking at lines on a graph. Growth is rarely magicked into existence by more regulation. In almost every case, the opposite is true.
Subscribe to Fortune Gulf Brief. Every Tuesday, this new newsletter will deliver clear-eyed, authoritative intelligence on the deals, decisions, policies, and power shifts shaping one of the world’s most consequential regions, written for the people who need to act on it. Sign up here.