How Governments Created a Century of Inflation
Prices must be free to rise and fall. When they aren’t hindered from doing so by the meddling of men who think themselves wise, they guide us through uncertainty and help balance the world’s needs.
Written by: Econ Bro
In my first Principles of Macroeconomics class, I was taught the four macroeconomic objectives of government
1. Economic growth.
2. Price stability.
3. Full employment.
4. Balance of payments equilibrium.
There are many criticisms that can be levelled against these objectives, and the government’s ability to achieve them, but in this article, I will focus on price stability.
What is price stability?
Price stability is when the general level of prices in an economy stays relatively constant over time – neither rising too fast (inflation) nor falling too sharply (deflation).
Governments try to stabilise prices using central banks and by making decrees to suppliers to not sell above or below certain price levels (i.e. monetary policy and price controls)
People generally agree that high prices are bad, but one might be stumped at economists arguing in against lower prices.
Price stability fails
Both monetary policy and price controls fail woefully at achieving the price stability goal and bring about more harm than good.
Monetary policy failure
No one can argue that governments have achieved their price stability goal. One look at the inflation levels of nations of the world over the last century is proof that central banks have obviously failed to achieving this objective; the price trend is always upwards. By no standard can this be considered successful.
In SA for example, Ouma Rusks are estimated to have cost R1.50 – R2.00 per pack in 1982 but now cost R30 – R40 per 500g pack (depending on the retailer) in 2025.
Mrs. Ball’s Chutney cost an estimated R1.00 – R2.00 in 1971 but are currently available at ShopRite for R36.99 in 2025
The same holds true for literally every commodity in SA and all over the world. Very clearly, governments of the world have failed woefully at achieving price stability.
Price control failure
Price controls fail spectacularly by leading to shortages and expensive black markets.
1. SA imposed price controls on petrol in the 80s, keeping prices low. This discouraged production and imports, leading to long-lasting fuel shortages as suppliers couldn’t cover costs and reduced output.
2. Price controls on electricity in the 2000s kept costs low but led to underinvestment in Eskom’s infrastructure. As a result, power supply couldn't meet demand, causing ongoing load-shedding and energy shortages.
To this day, Nigeria still has both problems caused by the same attempts at stabilising prices.
Price stability is calamitous
The price stability goal of governments not only fails but constantly fails in one direction – a most painful direction. Citizens of nations all over the world complain about the bitter sting of price inflation.
In volume nine of Milton Friedman’s ‘Free to Choose’ documentary, as far back as the 70s and 80s Americans complained bitterly of their inability to keep up with price inflation.
Clearly, the government hasn’t only failed to stabilise prices, but in their efforts to do so, have made things calamitous for people all over the world.
Let it be known, this pain of price inflation is unnatural, it’s not a natural function of the market, but is a direct consequence of price stabilisation policy. The government, in their misguided effort to flee from falling prices, have imposed great suffering on the world. If the price stability goal is abandoned, the world will be rid of this endless price inflation.
Price stability is futile
Markets talk through prices. Prices are how buyers and sellers understand what’s needed, what’s available, what’s expensive, and what’s not. They are not just numbers. They are signals that help people make decisions.
Silver, for example, is the best metal for conducting electricity. But it is expensive, and that high price tells manufacturers something important: "Silver is being used for more valuable things, like jewellery, medicine, or electronics." So instead of using silver in cables, which do not require the very best conductor, they turn to copper. Copper is inferior to silver as a conductor, but it’s cheaper, good enough, and available. The price made the choice.
Prices do not just help us choose between materials. They also send signals to producers. If the price of maize rises sharply, farmers get the message: "The world needs more maize." They will plant more next season. If petrol becomes scarce and expensive, companies start producing more, looking for new sources, or finding alternatives. This happens naturally, without government commands or central planning. The price alone tells people what to do.
Even during disasters like war or drought, when prices go up, it is not just bad news. The high prices are a call to action. They tell everyone: "There is not enough. Bring more." And in a free market, people respond. They invest, produce, and solve problems, all because the price said there was a need.
But when governments try to control prices by freezing them, setting them too low or too high, the message is lost. People do not know what to make, what to save, or what to substitute. That leads to shortages, waste, and confusion, and everyone is worse off.
Seeing as Prices serve as a coordinating mechanism in the market that guide decisions, allocate resources, and signal shifts in supply and demand, it is then entirely futile to try to “stabilise” them, as every effort to do so distorts markets and leads to the aforementioned calamities.
Conclusion
Prices must be free to rise and fall. When they aren’t hindered from doing so by the meddling of men who think themselves wise, they guide us through uncertainty and help balance the world’s needs. Contrary to the propaganda, government plans don’t bring order.
Econ Bro (@EconBreau and @EconBreau2 on Twitter/X) is a Nigerian Austrolibertarian economist and an apprentice at the Mises Institute. Under the organisation name “The Freedom Institute” he teaches individual liberty, personal responsibility, private property rights, free markets, and sound money to mostly young people across Nigeria. Econ Bro is an Associate of the Free Market Foundation.