ABSTRACT
attracted into this activity by the operation of licensing and enabled to participate in it by the allocation of licences.10 Scattered information on the level of controlled and open market prices in India will be found in R. G. Agrawal, Price Controls in India, New Delhi, 1956, and in B. R. Shenoy, Indian Planning and Economic Development, Bombay, 1963.Some information on controlled and actual prices of consumer goods in West Africa in the late 1940’s is presented in West African Trade, p. 437. There is also some sporadic information on this subject in the reports mentioned in footnote 8.11 The beneficiaries of conditional sales, as indeed of other types of evasion, are often the employees of the merchants rather than the merchants themselves. Where the beneficiaries are employees belonging to the local population, their position under price control and their interest in its maintenance are analogous to those of the local intermediaries.12 There are certain favoured groups of consumers who benefit from price control; they are considered in section VI.13 These may either be individuals who are not usually engaged in trade at all, or traders who do not normally deal in this particular commodity. In West Africa in the 1940*s and 50’s schoolboys often acted as ad hoc intermediaries either individually or in small groups. The same phenomenon seems also to have occurred in some other underdeveloped countries, including Pakistan.14 We are considering here Case A, that is, instances in which the supply is perfectly inelastic beyond the quantity already imported. When additional supplies are obtainable at higher prices (Case B) the open market price will certainly be raised. This is considered later in this section.15 This neglects any satisfaction they may get from the knowledge that some windfalls have been transferred from foreigners to compatriots.14 This might to some extent counteract the advantages to established merchants from the operation of licensing. However, the merchants rarely oppose restrictive licensing on this account.17 Many books and reports could be quoted showing the failure to understand the essentials of this type of situation, especially the reasons for the discrepancy between the open market and the controlled prices and the resulting pressure on merchants for additional supplies which makes conditional sales or other types of evasion practically unavoidable. Locally published official reports are particularly revealing on these points; the reports listed in footnote 8 above are examples.13 The disturbances in the Gold Coast in 1948 which culminated in the Accra riots in which more than twenty people lost their lives were closely connected with such a situation.In principle, similar effects can be secured by the auctioning by the authorities of the limited supplies or the licences to import. However, in the conditions of many underdeveloped countries this may have results undesired by the authorities, for example an increase in the degree of concentration in the import trade.20 State trading is, of course, no novelty. The discussion is intended only to examine its merits and defects compared to the other principal methods of dealing with certain specified problems.21 Such purchases could, of course, also be subsidized out of general revenue if this were thought desirable.
