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Wednesday, June 20, 2007

Nigerian Labor Strikes

One of the many problems with socialism is that once the government steps away from the free market and starts in with price controls, interest groups think they can vote themselves the price they pay for various goods via political pressure. For a good example of this, look at Nigeria.

Strike bites in Nigerian cities
Nigeria's main cities are reported to be very quiet on the first day of a general strike called by trade unions.

Office blocks are empty in central Lagos, with long queues at petrol stations. Schools and offices are shut in the northern city of Kano.

Police have cleared some barricades in the capital, Abuja, set up by strikers.

The government offered concessions on fuel and value-added tax rises on Tuesday, but the trade union federation said it was "too little, too late".
I get it. Damage your country's economy as much as you can to try to get a better standard of living. Right....

So, what is a socialist policy maker to do? Not much.
"Dino Mahthani, West Africa correspondent of the UK's Financial Times, told the BBC that the government was stuck between a rock and a hard place on the refineries. He says that despite being a major oil producer, it has hardly any refining capacity because the equipment is in such a poor state. To give the owners an incentive to put money into the refineries, the government should stop subsidising the price of fuel, he says.
So what you have here is a supply problem due to limited refinery space, thus causing an escalation in price (sound familiar?). Thinking you can fix a high price caused by supply shortage by price fixing is like thinking you can get rid of an infection caused fever by fixing your thermometer to say 98.6 only. You may temporarily make yourself think you've fixed the problem, but you are only kidding yourself and in the meantime the underlying problem only gets worse. And just as this will not fix the problem for Nigeria, price fixing will not work out well in the U.S. if the government is so stupid as to try it.

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