CEO of the Center for Market Education Carmelo Ferlito said such a move could lead to famine and death, as it happened in the Soviet Union under Stalin’s watch and Mao Zedong’s Great Leap Forward in China.

Between 5.7 million and 8.7 million people perished in the Soviet Union during Stalin’s economic experiment of 1932-1933 and 15 million to 55 million deaths were recorded during the Chinese cultural revolution of 1966 to 1976.

“Where these experiments were tried and prices fixed by the government and production decisions taken by government agencies, famine prevailed,” Ferlito said in a statement.

The government announced that it will introduce a moving price ceiling for food items in a bid to strengthen food security, as suggested by the Economic Action Council. The ceiling price will be adjusted based on changes in the price of various inputs in the supply chain.

Prime Minister Ismail Sabri Yaakob said the country is looking to expand its agro-food ecosystem with supply chains led by government-linked companies, government-linked investment companies and government agencies.

Ferlito said that when prices are not determined by the market, they do not reflect the structure of demand and supply and therefore constitute a “bad signal”.

This, he said, would lead to wrong production decisions and artificial prices, which will potentially bring wrong products at wrong prices to the market, compromising the entire economic system.

“This could lead to price-driven decisions, and the market will be flooded with products that are not in demand, wasting resources, and creating shortages of what the market asks for,” he said.

Ferlito said that another key factor overlooked in moving ceiling prices is the cost of production and the demand in the market as well as entrepreneurs’ expectations on consumer prices.

“Therefore, wrong consumer prices fixed by the government could potentially cause upheaval in the market for production factors and thus, the production structure as well,” he said.