Tuesday, August 7, 2012

Let them eat chocolate, or: Doing command economy is hard

In April 1949, faced with the enormous task of absorbing hundreds of thousands of mostly penniless new imigrants in a society of fewer than a million locals, many of whom had themselves arrived only a few years earlier, and following the successful but costly War of Independance, Israel's government decided to enact a policy of harsh austerity, based on rationing of many goods. Within a year the governmnet was having second thoughts, and the policy was successively dismantled over the next few years, until its final remains were abolished in 1959.

At the height of the policy, however, the government was very serious about it, and set up the inevitable bureaucracy needed to run and enforce it. Here's one document illustrating what that meant. On March 24th 1949 Eliyah Frumczenko, the general manager of the Elite chocolate factory in Tel Aviv sent an irate letter to Eliezer Kaplan, the Minister of Finance, as well as to assorted other top officials, explaing that the emerging policy of prohibiting him from producing high-quality chocolate pralines was imbecilic (he used politer language but the sentiment is quite clear.)

The chocolate industry is one of the few industries in the contry which has managed to rise above basic quality and thereby to export its produce... The main difference between basic chocolate and high-quality pralines is the labor-intensive designing and shaping of each praline. If you forbid us to make them we'll have to fire hndreds of highly qualified workers, and we'll lose our markets abroad... This year we expect 20,000 foreign tourists: what do you think tourists buy as presents for their local hosts? Chocolate! And what do you think they buy as presents for their friends and families when they return home? Chocolate! Your decree is about to cost us anywhere between IL 100,000-250,000! Our exported chocolate is proof of the value of Israeli industrial products; if you forbid us to produce it, you'll be harming the reputation of the whole country. You must prevent this economic and moral damage!

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