The Venezuelan experiment – proving what everyone already knew

The Venezuelan experience is an example endlessly repeated about how the politics of resentment, the natural home for the socialist ethos, leads to ruin for everyone within such communities, aside from its political leaders or their friends. And so Venezuela, which is an example in so many different ways, but here we are looking only at price control:

Two years before his death, Hugo Chavez tried to repeal the law of supply and demand. . . . Chavez despised the law because he believed it robbed the poor and unjustly profited producers. . . .

In its place, he persuaded the Venezuelan legislature to enact the 2011 Law on Fair Costs and Prices, a price-setting mechanism to ensure greater social justice. A newly created National Superintendency of Fair Costs and Prices was empowered to establish fair prices at both the wholesale and retail levels. More than 500,000 price edicts have been issued. Companies that violate these price controls are subject to fines, seizures and expropriation.

And the results. This is from The Guardian who may report but being good leftists probably don’t really understand what’s gone wrong:

“Battling food shortages, the Venezuelan government is rolling out a new ID system that is either a grocery loyalty card with extra muscle or the most dramatic step yet towards rationing in Venezuela, depending on who is describing it. . . .

Registration begins at more than 100 government-run supermarkets across the country on Tuesday and working-class shoppers – who sometimes endure hours-long queues at the stores to buy cut-price groceries – are welcoming the plan.

“The rich people have things all hoarded away, and they pull the strings,” said Juan Rodriguez, who waited two hours to enter the government-run Abastos Bicentenario supermarket near downtown Caracas on Monday, then waited three hours more to check out….

Patrons will register with their fingerprints, and the new ID card will be linked to a computer system that monitors purchases. The food minister, Félix Osorio, said it will sound an alarm when it detects suspicious purchasing patterns, barring people from buying the same goods every day.

Re The Guardian story, what is most revealing of all is its last para:

Defenders of Venezuela’s socialist government say price controls imposed by the late President Hugo Chávez help poor people lead more dignified lives, and the United Nations has recognised Venezuela’s success in eradicating hunger.

Do you think the idiot who wrote this story and ended it this way has learned a thing. He lives somewhere else but in spite of the evidence he has reported still thinks what Chavez did helped the poor. With morons like this around, the next Venezuela is just around the corner.

The socialist nightmare – Venezuelan edition

This is about the collapse of the Venezuelan economy post-Chavez. It has seemingly taken place almost out of nowhere. Things limped along for a longish while and then, almost overnight, fell apart.

The problem in being unable to recognise what’s going on is due in large part to our economic notions now so firmly based on “flows” rather than “stocks”. We look at how much we are able to buy and not at the underlying productive apparatus. A bridge collapses and the effect on GDP is either nothing at all or perhaps even leads to an increase in output as more effort is required to get from place to place while there is activity in re-building the bridge. That’s the flow side of the story. The stock side, however, is to note that the actual productive apparatus of the economy has been impaired. It cannot produce as much as it could the day before the collapse.

What happens in a socialist economy like Venezuela, or the US at the moment, is that there is a time during which the capital is being run down and there is little recognition that there is major structural damage taking place. Then, in what seems almost inexplicable, the entire economy falls apart all at once. This is from an article on the collapse of the Venezuelan economy.

Welcome to Hugo Chavez’s Venezuela, a country with the fifth largest oil reserves in the world and absolutely broke. It’s a remarkable achievement for Chavismo. A just-wow moment. Socialism is useless at everything except for smashing things in record time. There it excels. It’s hard to imagine that as late as the 1980s Venezuela had the highest standard of living in Latin America. But then in 1960 Detroit was the richest city in the world in per capita income. Now it’s well … Detroit. . . .

The genius of the Left — Chavez’s for example — is that it destroys things from the inside out. They pervert religion, collapse the mores, abolish the family, shred the constitution and gradually expropriate the property. The differences from one day to the next are apparently imperceptible, but it is harder and harder to go back until finally there is no reversal of ‘progressive gains’ possible at all. The public is finally faced with the stark choice between chaos or authoritarianism. And most people will chose the Boss over the Mob.

The capital, both physical and social, is eaten away and then completely breaks down. Building is hard and requires patience. Destruction from the inside by socialists looks great for a while while the wealth is spread around. But when it falls, not only does it crumble, but no one knows how to put it together again, least of all the socialists who promise everything but deliver nothing but misery in the name of equity and justice.