Why Social Stability Cannot Be Bought by Holding Down Prices

In Ukraine, electricity costs three times as much as in Kazakhstan, and gasoline is twice as expensive as it is here. In Russia, fuel prices are higher than ours because VAT, excise taxes and the taxation of subsoil users are structured differently. Maintaining social stability by holding down the prices of socially significant goods will inevitably lead to shortages, especially with open borders, where no such price restraint exists on the other side.

If a good is cheap, people will buy more of it. This is a basic law of economics. If its price is capped, it will quickly run out. That is why Kazakhstan has more crypto miners than other countries, and why there is now talk of restricting mining: there is not enough electricity. The price of electricity cannot be raised, so miners and other consumers will be restricted by administrative fiat. Administering such a manual mechanism will, of course, be very expensive and not always effective.

Diesel fuel has disappeared from the market, and people have started talking about our refineries, about borders and about transit. The borders have been closed, but it is impossible to close off trucks with large fuel tanks, just as it is impossible to close off dirt roads and the various gray-market exports by road, since within the Eurasian Economic Union (EAEU) it is formally impossible to ban the export of anything. The only thing that might help here is to synchronize tax policy on subsoil use with Russia. But whereas in Russia production is carried out predominantly by Russian companies, here it is carried out by foreign ones, which enjoy a stable tax regime. The refineries have nothing to do with it.

Soon the question of bread prices will arise. The grain harvest was poor, yet bread must not become more expensive, because that would affect inflation. Bread producers will, of course, find ways around this: very poor-quality plain loaves will be very cheap, while various specialty breads with additives will be very expensive.

This cannot be fixed by manual management; only market balance and market pricing will do. The market pushes toward the efficient use of resources, efficient production and so on. Subsidies and handouts push toward freeloading and inefficiency. Some smoothing is possible through tax maneuvers and reserves, but objectively it can only be smoothing, not the foundation of inflation management policy.

Nothing more effective than market regulation has been invented so far, and it is unlikely to be in the coming years. Manual restraint and management lead only to imbalances and inefficiency.