Tuesday, July 5, 2016

Liberals Should Learn From Venezuela's Misery

Any time I run into a wild-eyed socialist, I ask them about Venezuela.  Most of the time, I get a blank stare, others are in denial.  My neighbor fits in the latter camp.  He supported Bernie Sanders who has a similar ideology as the Chavistas.  When asked this question, he proclaims he doesn’t know what’s going on down there.  I know damn well he’s lying to me.  He just can’t admit his utopian ideology is a proven failure.

Last week, I asked a millennial what he thought about Venezuela.  He stated their condition is directly related to the price of oil.  I asked him why it is that a resource rich country is dependent on one government controlled commodity.  He couldn’t answer.  The simple fact is this regime installed wage and price controls and expropriated private property which created shortages.  The only worthwhile investment is in government bonds.  As of now, speculators are wondering when Venezuela is going to default  on their debt.  Here is an excerpt from CNS News:

During the decades of continuing price controls, the profits of farmers and other processors were eliminated through the artificially low state-mandated prices. What happened to the coffee-roasting companies beginning in 2006 is a typical scenario. First, some coffee producers simply held supplies off of the market in hopes the government would agree to price increases that covered their costs. The government countered with military force, authorizing the National Guard to “find every last kilogram of coffee” being “hoarded.” By 2009 the Venezuelan government seized control of two of the largest coffee-processing plants, claiming that the private companies were engaged in hoarding and smuggling coffee and therefore being disloyal to the state. Shortly thereafter, Chavez nationalized the two largest coffee enterprises. However, the government running the plants produced no benefits for the consumers. Today, market analyst Luis Vicente Leon sums it up this way. “They [the government] expropriates the sugar companies, and you cannot find sugar … They expropriate the coffee companies … and you cannot find coffee. They expropriate Owen-Illinois, and we cannot find packages.”

This kind of economic policy is a proven failure.  FDR tried it with the New Deal and it was disaster.  Nixon tried and it too failed.  I guess people have to learn the hard way.

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