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Sunday May 22nd, 2022

Sri Lanka parliament follows Emperor Diocletian after printing money

ECONOMYNEXT – Sri Lanka’s parliament has approved the hiking of fines for breaking price controls by as much as 3,900 percent amid the worst money printing in the country’s history but stopped short of the death penalty decreed by Roman Emperor Diocletian.

The 225 member Mercantilist assembly approved changes to the governing of the Consumer Affairs Authority (CAA) which had already caused shortages of liquefied petroleum gas, milk powder as well as lentils, tinned fish, sugar, and cement in the past through its price controls.

The amendment for the CAA Act was unanimously passed in the parliament which will raise the current 2,500 rupees fine for breaking a price control law to 100,000 rupees.

For larger companies the fines are higher.

The parliament debate on the amendment lacked options or suggestions from the both government and opposition side and that compelled Consumer Affairs Minister Lasantha Alagiyawanna to urge the legislators to ask for some good suggestions to protect the consumers.

“Most of the traders are good,” Alagiyawanna told the parliament. “But there is a 10 percent of them who think only about their profit regardless of the pandemic.

“We are bringing this amendment to act against them.”

He did not explain how for decades the traders have been supplying people without much problems and suddenly the need arose to hike fines to 3,900 percent just as historically high volumes of money was printed by his government.

Sri Lanka has printed over 1.109 trillion rupees from February 2020, and has lost around 5.08 billion US dollars in net international reserves giving convertibility to the new rupees, also known as a balance of payments deficit.

The rupee has fallen to 230 to the US dollar for imports though the central bank has decreed a rate of 203.

Sri Lanka is following on the path of Roman Emperor Diocletian who debased the gold coins in the realm with copper and plated coins sending inflation up.

Like Alagiyawanna, inscriptions of Diocletian in his law claims to “check those practices by which the raging and boudless avarice,” of traders and “ameliorate this detestable enormity and pitiable condition.”

Price controls however create shortages.

“Then much blood was shed over trifling and cheap articles; through fear, wares were withheld from market, and the rise in prices became much worse,” the writer De Mortibus Persecutorum had observed according to Roland G Kent, wrote in the University of Pensylvania Law Review.

Alagiyawanna also acknowledged that the CAA’s price controls have created shortages.

“In future, we need to go beyond price controls and create a market-driven price mechanism to protect the consumers,” he said.

“In a market like this, as long as we control the price of commodities, the shortages of the commodities also increase. There is a milk powder shortage, wheat flour shortage, cement shortage.”

Sri Lanka’s President Gotabaya Rajapaksa declared a food emergency and appointed an army general to seize food stocks as prices inflated.

Diocletian’s edict on maximum prices decreed in 301 and mandated among other punishments, death for those breaking his price controls.

“In the late Republic and early Empire, the standard coin was the silver denarius, the ancestor of the franc, and worth approximately the same as that coin,” explains Kent.

“But from time to time the amount of silver in the coin had been reduced, until shortly before Diocletian the emperors were issuing tin-plated copper coins under the old name.

“Silver and gold coinage naturally disappeared from circulation.

“Diocletian took the bull by the horns and issued a new denarius which was frankly of copper, and made
no pretense of being anything else; in doing this he established a new standard of value.

“The effect of this upon prices needs no explanation; there was a readjustment upward, and very much upward.”

Diocletian abdicated in 301. (Colombo/Sept23/2021)

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