The Lesson of Venezuela

Venezuela has become the personification of the disaster awaiting all socialist countries. The oil-rich South American country with copious natural resources and an extensive Caribbean coastline has become a human tragedy in motion. A bankrupt economy, barren store shelves, empty pharmacies, raging inflation. The only goods available are on the black market at prices far beyond the reaches of the average worker’s salary. Roving mobs of starving Venezuelans are looting delivery vans even before they can get to the stores.

Pundits commenting on Venezuela’s incompetent socialist government will tend to put their focus on either the incompetence (if they are progressives) or on the socialist (if they are conservatives). I believe that the focus should be on both factors. What we are seeing in Venezuela is like watching the ultimate demise of all socialist governments on fast-forward. The incompetence of the Chavez/Maduro regime has led them to make and amplify all the errors of socialism. Let me explain.

Socialism (as well as progressivism) rejects the pricing mechanism of the free market economic system described by Adam Smith as an “invisible hand”. Under socialism production and consumption are based on other, presumably loftier, reasons such as income equality or economic justice. In reality, economic decisions are made by state boards composed of faceless bureaucrats to serve the needs of the state. Personal preference is subjected to state production goals. Innovation is quashed. Economic decisions are subordinate to political decisions. No alternative to the socialist state can be permitted in order that economic control (usually dubbed the “Revolution”) can be strictly enforced. This requires that any vestige of democracy be crushed.

I had always thought the process of socialist collapse would take a long time as the economy slowed and stalled. The people would become innervated, listless and sullen. It took seventy years for the Soviet Union to collapse and this process was accelerated by the growing power and economic strength of the United States (Which, interestingly, is why the Soviets put so much on internationalizing communism by exporting revolutions worldwide. Socialist countries cannot compete with market countries.). Chavez/Maduro have managed to out do the Soviet Union in only 17 years.

Soon after he was elected, Hugo Chavez began concentrating power in the executive branch, the legislature and courts being inconvenient democratic anachronisms. He surrounded himself with like-minded sycophants and packed the state-owned oil company with political allies with no competency in managing oil production. He drove his media critics out of business and set up new media run by his inner circle. He threw opposition politicians in prison. He confiscated businesses that would not follow his orders to lower the prices of goods below their cost of production. Instead of using the country’s oil wealth to build up the country he used it to export the Bolivarian Revolution to other countries in the region and on supporting the communist regime of the Castro brothers in Cuba.

Hugo Chavez did not live to see the mess he was creating. If he had gone to the US instead of Cuba for his cancer treatments he might have survived long enough to witness the collapse of his Bolivarian dream (which was becoming a nightmare to the Venezuelan people). His handpicked successor, Nicolas Maduro, was chosen for his loyalty to Chavez’s legacy more than because of any innate competency. Maduro doubled down on Chavez’ policies, sacrificing the economy of the country to his strict Marxist vision.

It is true that incompetence has made the situation in Venezuela much worse. But the result was inevitable in any case. There is no room for innovation or profit in socialist planning. Without creativity and the surplus to invest the economy can only stagnate. The more their economic outcomes fail to meet the planning board’s plan, the more repressive the regime becomes. Socialism may create equality (except for the apparatchiks) but it does not create wealth. Under a free market system after a generation of economic growth everyone is better off, even with income inequality. Under socialism, everyone is equal but they all remain poor. That is why Deng Xiaoping, after the disastrous Great Leap Forward and the even more disastrous Cultural Revolution, changed course and introduced market-based reforms to the communist economy. China is now much richer than if it had stuck with strict socialist ideology.

The Venezuelan people will be forced to endure even more suffering in the coming days and months. It is unlikely to end well for them and could turn very violent while other countries in the region stand by helpless. It is important to remember the barrenness of the socialist vision so that other people will not be forced to trudge down this same sad pathway.

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