Price-suppression, which includes cuts to tariffs and indirect taxes as well as price controls, can reduce inflation expectations “slightly”, the IMF authors concede. But these measures have little else to recommend them. They benefit the rich more than the poor for the simple reason that the rich buy more of the stuff the policies keep cheap. The IMF authors calculate that for every euro spent suppressing the price of electricity, gas and petrol in European countries, only 20 cents reached the poor. Price-suppression sometimes takes the form of subsidies to producers. These make downstream firms more competitive overseas, increasing their exports. The money, in other words, flows from the taxpayer to foreign customers. Even price controls, which do not require direct payments from government coffers, can impose fiscal costs in the long run. The state must often bail out utilities that cannot pass on the extra cost of their inputs.
Makes some sense but I feel like they are leaving out options like breaking up monopolies, or subsidizing the production of things like housing that can’t be exported, or directly producing various infrastructure (trains, renewables) that reduces the need for fossil fuels.
