It begins with a good intention. Everybody deserves to consume fantastical juice. After all, everything is made out of it. It would be a grave injustice to limit its consumption only to those who can afford it.
Invested with executive power, a group of individuals with only the interest of the public at heart intends to make the fantastical juice available to everyone. They — the do-gooders —decide to introduce a policy to subsidize the production of the fantastical juice.
What follows is a production boom that lowers the prices of the fantastical juice to affordable levels. In fact, the fantastical juice sold here is the cheapest in the region.
On the breakfast, lunch, brunch, tea, dinner and supper menus, the fantastical juice is a star. Consumers are happy. The policy becomes popular. The do-gooders are popular.
All is fine and dandy until one little problem pops up: scarcity. They realize the subsidy policy demands a whole lot of resources. The policy is depriving resources from other programs. They begin to realize that good intention is expensive.
It is all the more expensive when the producers are guaranteed payment through the subsidy scheme. Producers of the fantastical juice just keep on producing even when there is no need for more fantastical juice. After all, who does not want free money?
The do-gooders complain, “Oh those pesky producers. How dare they take advantage of this noble effort to make the fantastical juice available everywhere to everybody at affordable prices? Never trust them. They are only in it for themselves. They leave us no option. We must regulate them.”
And so, the do-gooders decide to have producers of the fantastical juice licensed. Quota is imposed on production.
The producers protest but not too hard. After all, the policymakers still pay them money. “At least, we are still making profits.” Without the government and the subsidy program, they would have been left at the mercy of the market. “We might make a loss if there was no subsidy!” They figure, better work with the government than be at the mercy of the greedy consumers.
That stops the cost of the policy from ballooning further. It solves one problem but it creates another: the fantastical juice mysteriously begins to disappear from shelves of grocery stores.
Consumers are infuriated. Consumers demand action.
The do-gooders panic. They need a scapegoat fast. No, they do not need a scapegoat. One cannot make scapegoats out of smugglers. It must be those greedy smugglers abusing a system designed to benefit all. “We will double officers at the borders and we will triple the penalty.”
They catch those smugglers but fantastical juice still disappears into thin air. At some point, they realize that they cannot continue to blame the smugglers. If they still do so even after greater enforcement, they would send out a message of failure that there is something wrong with the good policy, and that it is not the smugglers after all. That would undo all good work they have done. Support for their policy would plummet with the slightest hint of admittance of failure.
“We need to identify the problem,” demand the do-gooders.
They conduct a thorough study of the supply chain of the fantastical juice and they find it. It is the retailers. “These retailers are hoarding the fantastical juice and profiteering from our noble effort. They leave us with no choice. We must regulate them.”
And so, the do-gooders decide that only retailers with the special license can sell the fantastical juice. The do-gooders also introduce price control and ensure that there is a fat margin for retailers. This will encourage the retailers to be more honest because if they are caught, they will lose their license and, because of high demand for the fantastical juice, they will lose a guaranteed profit. The elimination of price variation eliminates the opportunity for retailers to indulge in profiteering as well.
The retailers register a protest, claiming that it is not their fault. “Supply, being inflexible, is unable to match demand. We do not hoard it. We cannot sell what does not exist.”
“Oh, if that is the case, then you are not managing your inventory efficiently enough for the good of the people. There is enough production for the whole country. We will manage the supply for you.”
Just to keep it airtight, only government-owned transporters are allowed to deliver the fantastical juice in the country.
The do-gooders marvel at their new master plan for the fantastical juice. Their proudest achievement is this: the cheapest fantastical juice in the region is still here.
Alas, shortage persists. “Someone must still be profiteering from this noble effort,” cry the do-gooders.
Being at their wit’s ends, the do-gooders approach several consultants. These consultants point out that the consumers are consuming too much of fantastical juice. “That is why there is shortage. They are over demanding it.”
The do-gooders are angry. “Those no good consumers! They are abusing the system! We want to help everybody, but everybody is abusing our trust! We must regulate them!”
And so, consumption quota is imposed on every consumer. With control at every point, the do-gooders match demand and supply to solve the problem of shortage.
At least, theoretically because those with low demand get too much quota and those with high demand get too little quota. To solve the problem, consumers participate in the black market. Consequently, crime associated with the black market flourishes as cartels are formed to profit from the unlicensed and hence, illegal trade.
“Criminals! All of them are criminals!” shout the do-gooders, “Send in the police.”
First published in The Malaysian Insider on July 18 2010.