Socialists are always claiming that socialism is SOoo much better than free markets and capitalism. So much more fair.
All right, Sparky, have at it: Let's see how well socialism works when socialists have total power. Because the best test of a system is, how well does it work?
Take Venezuela: Not long ago it had the highest per-capita income in South America, thanks to its huge oil production and resulting export income. But today basic commodities such as toilet paper, rice, milk, meat-- and amazingly, even coffee (!)--are so scarce that people line up literally for hours to buy them.
A number of actions led to this condition, but one of the standouts is that Venezuela is ruled by a 100% socialist government. Its last president--Hugo Chavez--believed that the law of supply and demand was fiction--an fabrication used by companies to rob the poor and reap unfair profits.
Accordingly, three years ago he rammed a "progressive" law through the country's rubber-stamp legislature: Rousingly named the "Law on Fair Costs and Prices," its stated purpose was
to "ensure greater social justice." It created a "National
Superintendency of Fair Costs and Prices" with the authority to set supposedly "fair"
prices at both the wholesale and retail levels.
Companies charged with violating these price rules
would be fined, or could even to have their goods confiscated by the government.
In a truly astonishing demonstration of bureaucratic frenzy, in just three years this agency issued more than 500,000 rules establishing the legal price of virtually everything.
Chavez--a chest-thumping speaker who often gave three-hour speeches without pausing--knew price controls would be wildly popular with his core supporters (the poor) from the popularity of setting the price of gasoline: In Venezuela the production and refining of oil, and the sale of gasoline, are controlled by the state-owned oil company. Since the government owned the company, Chavez ordered that the company sell gasoline for just 6 cents per gallon, the
lowest price in the world.
Unfortunately it was costing the government company almost $2 a gallon to extract oil, refine it into gasoline
and distribute it to stations.
It doesn't take a rocket scientist to see the problem: With domestic consumption of 600,000
barrels of gasoline a day, the sale price ordered by Chavez was forcing the company to lose $20
billion a year.
Forced by the president's decree to lose roughly $20 billion a year on gasoline sales, the state oil company had little money for exploration, production and maintenance, and had to depend on government funding for these things. Of course Chavez wasn't willing to be seen as giving billions to explore for oil while other commodities were disappearing, so the state oil company was essentially looted.
The effects were totally predictable: as exploration and maintenance were cut back, oil production dropped dramatically.
You'd think this clear and distressing demonstration would have convinced the socialists that there was probably some flaw in their theory, but of course it didn't: Emperors--which by this time Chavez essentially was--are immune to feedback from bad results, since they can simply issue decrees (sometimes called "executive orders") and everyone will rush to obey. Not having to answer to anyone, Chavez and his supporters began fighting an ever-escalating war on the law of supply and
The insane destructiveness of those measures can be seen in the country's production
Venezuela was once the largest coffee producer in the world. But for some mysterious reason, with the selling price of coffee strictly controlled by the socialist government, by 2004 the country was forced to import
coffee for the first time. By 2012
imports of coffee had reached 43,000 metric tons.
Today the movement of coffee beans
is attended with the care accorded to shipments of gold bullion, under
the watchful eye of government bureaucrats. Any significant transport of food
items anywhere in Venezuela must be declared. The truck, merchandise, driver, dates of delivery--everything must be declared ahead of time to make a delivery.
But mysteriously, even with bureaucrats micro-managing shipments and deliveries, production of everything has continued to fall. So now the socialist
government is convinced that the reason the shelves are bare must be that people are "hoarding" scarce goods. Solution? Control the amount of purchases
(Is any of this starting to sound familiar?)
Thus the socialist government is
rolling out a new system of ration cards.
Of course they don't call it that. Instead it's being touted in socialist papers as a grocery loyalty card. For example, Britain's socialist newspaper The Guardian describes it like this:
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 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. It will sound an alarm when it detects
suspicious purchasing patterns, barring people from buying the same
goods every day. But [the Food Minister] said the cards would be voluntary, with
incentives such as discounts and entry into raffles for homes and cars.
Oh yes, we totally promise
that using these cards will be voluntary.
The notion of winning a car in the raffle may get a lot of support, because it's almost impossible for ordinary Venezuelans to buy one. Toyota
ended its operations in the country after the government denied it permission to remit payment
for the handful of cars purchased last year. Venezuelans wanting a car must buy second-hand. And wouldn’t you know? The country's current president
Nicolas Maduro signed an edict regulating the price of used cars “in
the government’s latest measure to combat inflation.”
The legislation would
allow the government to set car prices, ensure that used car prices
don’t exceed new car costs and provide licenses to individuals to import
a vehicle using an account in euros or dollars with a state bank,
Maduro said in a national address.
Venezuelans are now trying to compensate for shortages and rationing by buying food from street
vendors. But as might be expected, government bureaucrats
have that loophole covered:
The government ordered Tuesday that
sidewalk vendors may only sell basic foods if they respect price
controls….Foods subject to the government resolution [order] are “rice,
corn flour, wheat flour, pasta, beef, chicken, turkey, lamb, goat and
Also canned sardines, tuna and mackerel; powdered whole
milk, cheese, eggs,
soy milk, edible oils, margarine, legumes, sugar,
mayonnaise, tomato sauce, ground coffee, coffee beans, and salt.
The [order] allows 30 days for sidewalk vendors to
conform, and says that whoever infringes it will
be penalized with the “confiscation of their goods.”
The real mystery here isn't the scarcity but the absence of common
sense by the socialists. Specifically: why hasn’t the socialist government reached the obvious conclusion that forcing producers to sell essentially at their costs absolutely guarantees that supplies of everything so controlled will decrease? It's almost like they're terminally stupid or something.
When something you do produces disastrous results, rational humans analyze the failure and change what they do. It's called a "feedback loop." You would think
the disastrous experience with price controls would lead rational people to stop doing it, but in fact the opposite is
happening: the socialists are doubling down on greater controls, greater distortions of economics.
the feedback loop from working for Venezuela's socialist government?
I suggest the main factor is that they believe they'll be in power for the rest of their lives. If they never have to worry about being held accountable or being out of power, why change? And since they totally control all broadcasting and newspapers, no word of the true scope of the disaster reaches most of the public.
Of course the public sees the long lines, and the bare shelves. And stands in line for hours to buy cooking oil or rice or toilet paper. But the newspapers and TV simply echo the government line that the problem is the evil rich, or the CIA or their Colombian neighbors or some other form of foreign interference.
A devotion to government control of the economy isn't unique to Venezuela's leaders, of course: U.S. Democrats and Obama rammed through a total takeover of health insurance, convinced that they knew better than ordinary people what said people needed. Then by a series of presidential decrees Obama has changed the law's provisions, believing this will magically make it work--just as Nicolas Maduro thinks that
fingerprinting Venezuelan supermarket buyers will put food on the
Of course Obama and the Democrats are far
more educated and sophisticated than Venezuela's socialists, and with the help of the Democrat-covering media and an impeachment-proof senate they may yet retain power. But what made them think rejecting freedom of choice and the laws of supply and demand was a good idea in the first place?
One possible answer is that once someone--especially someone with power--buys into a paradigm,
they can only find solutions that are within the paradigm space. Venezuela's socialists keep pushing price controls
because the notion of ending them isn't within the boundaries of their mental
system. The only options any humans actually have are the ones they allow
themselves to consider.
In the case of Venezuela's socialists, they're wedded to price control system and won't consider any other option. To
accept price controls don't work--that in fact they make millions of ordinary people miserable--is to accept they and all their
useless functionaries are failures.
Similarly, U.S. Democratic leaders are psychologically unable to reject the government takeover they voted for--Obamacare--for exactly the same reason.