Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
US Coronavirus Trend Trajectory Forecast Current State - 7th Apr 20
Boris Johnson Fighting for his Life In Intensive Care - UK Coronavirus Crisis - 7th Apr 20
Precious Metals Are About To Reset Like In 2008 – Gold Bugs, Buckle Up! - 7th Apr 20
Crude Oil's 2020 Crash: See What Helped (Some) Traders Pivot Just in Time - 7th Apr 20
Was the Fed Just Nationalized? - 7th Apr 20
Gold & Silver Mines Closed as Physical Silver Becomes “Most Undervalued Asset” - 7th Apr 20
US Coronavirus Blacktop Politics - 7th Apr 20
Coronavirus is America's "Pearl Harbour" Moment, There Will be a Reckoning With China - 6th Apr 20
Coronavirus Crisis Exposes Consequences of Fed Policy: Americans Have No Savings - 6th Apr 20
The Stock Market Is Not a Magic Money Machine - 6th Apr 20
Gold Stocks Crash, V-Bounce! - 6th Apr 20
How Can Writing Business Essay Help You In Business Analytics Skills - 6th Apr 20
PAYPAL WARNING - Your Stimulus Funds Are at Risk of Being Frozen for 6 Months! - 5th Apr 20
Stocks Hanging By the Fingernails? - 5th Apr 20
US Federal Budget Deficits: To $30 Trillion and Beyond - 5th Apr 20
The Lucrative Profitability Of A Move To Negative Interest Rates - Pandemic Edition - 5th Apr 20
Visa Denials: How to avoid it and what to do if your Visa is denied? - 5th Apr 20 - Uday Tank
WARNING PAYPAL Making a Grab for US $1200 Stimulus Payments - 4th Apr 20
US COVID-19 Death Toll Higher Than China’s Now. Will Gold Rally? - 4th Apr 20
Concerned That Asia Could Blow A Hole In Future Economic Recovery - 4th Apr 20
Bracing for Europe’s Coronavirus Contractionand Debt Crisis - 4th Apr 20
Stocks: When Grass Looks Greener on the Other Side of the ... Pond - 3rd Apr 20
How the C-Factor Could Decimate 2020 Global Gold and Silver Production - 3rd Apr 20
US Between Scylla and Charybdis Covid-19 - 3rd Apr 20
Covid19 What's Your Risk of Death Analysis by Age, Gender, Comorbidities and BMI - 3rd Apr 20
US Coronavirus Infections & Deaths Trend Trajectory - How Bad Will it Get? - 2nd Apr 20
Silver Looks Bearish Short to Medium Term - 2nd Apr 20
Mickey Fulp: 'Never Let a Good Crisis Go to Waste' - 2nd Apr 20
Stock Market Selloff Structure Explained – Fibonacci On Deck - 2nd Apr 20
COVID-19 FINANCIAL LOCKDOWN: Can PAYPAL Be Trusted to Handle US $1200 Stimulus Payments? - 2nd Apr 20
Day in the Life of Coronavirus LOCKDOWN - Sheffield, UK - 2nd Apr 20
UK Coronavirus Infections and Deaths Trend Trajectory - Deviation Against Forecast - 1st Apr 20
Huge Unemployment Is Coming. Will It Push Gold Prices Up? - 1st Apr 20
Gold Powerful 2008 Lessons That Apply Today - 1st Apr 20
US Coronavirus Infections and Deaths Projections Trend Forecast - Video - 1st Apr 20
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20
US and UK Coronavirus Trend Trajectories vs Bear Market and AI Stocks Sector - 30th Mar 20
Are Gold and Silver Mirroring 1999 to 2011 Again? - 30th Mar 20
Stock Market Next Cycle Low 7th April - 30th Mar 20
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

What Makes Venezuela Different

Politics / Venezuela Jun 12, 2016 - 04:03 PM GMT

By: MISES

Politics

Ryan W. McMaken writes: Unlike other leftist South American regimes, the Venezuela regime has intentionally crushed even the middle and working classes.

The economic disaster in Venezuela has prompted many to take a look at the country and attempt to understand what it is that has made things so bad in Venezuela. 


It's not enough to say "socialism." After all, the political leadership in Ecuador and Bolivia right now are avowedly socialist, at least in rhetoric. Argentina has long been socialist in practice, but not even Argentina's repeated defaults and other messes brought the country anything like what is going on in Venezuela. Leftist Brazil remains something of an open question at this point. 

So what is it about Venezuela that has led the country to the brink of starvation while Bolivia remains relatively stable and without famine? After all, the Bolivian president, Evo Morales, a self-described disciple of Marx, gave Pope Francis a crucifix shaped like a hammer and sickle during a recent visit by the pontiff. 

The answer lies in the sheer volume of socialism practiced in Venezuela versus its South American neighbors. 

True Believers vs. Pragmatists 

Ever since Lenin, political leaders have known that "pure" socialism leads to starvation very quickly. Lenin had attempted to implement total control of the economy by the Soviet state when he came to power. However, after quickly realizing that this would destroy the economy, Lenin backed off and implemented the "New Economic Plan" which allowed for limited market activity, especially in food production. 

Every regime that attempts socialism quickly runs up against the calculation problem inherent in socialism. Without markets, how can we know what to produce, or for whom to produce it? What should goods and services cost? Without at least partial freedom for market prices to function, economies grind to a halt very quickly. 

Wisely (and fortunately for ordinary people), Lenin allowed his pragmatism as a politician to eclipse his devotion to Marxism. Similarly, after the mass starvation and social upheaval caused by Mao's hard-core Marxism in China, Deng Xiaoping turned to the pragmatism of "socialism with Chinese characteristics." It was, in other words, socialism-lite. 

As always occurs when socialism recedes, wealth increases. In the case of the Soviet Union, Lenin's limited markets never progressed beyond a very limited realm — thanks to Stalin's reassertion of centrally-planned economies. In post-Mao China, where markets were allowed to become widespread (although always heavily regulated) the Chinese economy flourished (relatively speaking) as farmers, merchants, and countless other small and medium-sized enterprises were allowed to function with relative freedom. 

In Venezuela under Hugo Chávez, and today under Nicolás Maduro, things have been moving in the opposite direction. 

Perhaps more than any other Latin American strongman in recent memory, Chávez was a "true believer" when it came to socialism, and he showed his ideological devotion with his war, not just on multinational corporations and other powerful corporate interests, but on everyone he considered to be "bourgeois." 

Antagonizing foreign corporations has long been politically popular in South America and has been a centerpiece of the administrations of Rafael Correa in Ecuador and Evo Morales in Bolivia. But both Correa and Morales tempered their political meddling in this respect with limited laissez-faire for domestic businesses. 

A War on Middle Class Retailers and Merchants 

Chávez, on the other hand, did not seem to discriminate when it came to crushing business and business people across the country. 

Simon Wilson contrasted the regime in Bolivia with the Venezuelan regime in 2015 for mises.org: 

[Morales's] tenure has undoubtedly been one of pragmatism. It is true that since 2005 he has expropriated just over twenty companies, but the level of expropriations in no way compares to that taking place in the culture of government impunity rife in Venezuela where 1,168 foreign and domestic companies were expropriated between 2002 and 2012. The infamous nationalization of foreign oil and gas fields [in Bolivia] is not one of complete state control, but is rather about gaining a controlling share of the profits made by foreign companies which can then be diverted into various social programs.

Morales was often content to leave small and medium-sized domestic businesses alone — and to allow for a large "informal" (i.e., unregulated) economy. When Morales ignores the informal economy, he is essentially creating "loopholes" in government regulation. And as Ludwig von Mises once observed, "Capitalism breathes through those loopholes."

The Venezuelan regime, on the other hand, has not been fond of loopholes. 

These contrasts extend to other socialist regimes in South America as well. In 2014, The Washington Post compared Ecuador's Rafael Correa with Chávez, reporting

Unlike Chávez and his epic battles with Venezuela’s private sector, Correa maintains generally strong ties with Ecuador’s business community and has presided over a sustained period of economic growth and low unemployment. He has kept the U.S. dollar as Ecuador’s currency.

Felipe Burbano, a political analyst in Quito, said Correa is a master of “state activism,” projecting his presidency — and government spending — into every corner of the country of 15 million by reaching out to rural voters, slum residents and others who were often ignored in the past. Correa has plowed the OPEC country’s oil revenue into new schools, health clinics and infrastructure projects, especially new highways, while cutting the poverty rate from 37 percent to 27 percent from 2007 to 2012, according to official data.

Arresting "Class Traitors" in Caracas 

In 2010, The Guardian reported how Chávez had declared a small-time butcher in Caracas to be a "class traitor" and a tool of international capitalists. The butcher, Omar Cedeño was arrested and put on trial for various "capitalist" crimes along with many other small business owners and retailers. 

But, as Venezuela is now seeing, when retailers are destroyed, there's no one left to sell, prepare, procure, and process food. 

In 2011, The Huffington Post reported on Chávez’s war on Jews, who are, it seems, also too "bourgeois" for Chávez's tastes. 

In 2012, Reuters reported on how Chávez was threatening "the rich" with "civil war" if they did not rally to his cause. Use of the term "rich" in Venezuela, of course, can often be similar to how it is used in the United States. It rarely refers to powerful billionaires in practice, but instead to mere upper middle-class people who make things, manage businesses, and keep the economy running. Destroying them is not a smart move for any political leader who wants to avoid mass starvation and a collapse in living standards. 

Naturally, for a true believer like Chávez, a war on a nation's industry does not stop with just butchers and middle-managers. It then proceeds to television stations, radio stations, newspapers, book sellers, and any other business that may be insufficiently "loyal" to the ruling regime. 

Not surprisingly, once all the retailers, media companies, managers, and all other independent business people are crushed, arrested, impoverished, or exiled, the economy ceases to function very well. 

This isn't to say that politicians like Correa and Morales are fans of freedom and free markets. That's unlikely. Both Correa and Morales appear to be traditional power brokers, robbing some groups to make gifts to other groups in order to curry favor with their political power base. Marxism serves a convenient advertising gimmick for the regime, but as with the Chinese state, the Ecuadorian and Bolivian states figured out the economic unworkability of Marxism long ago.

Unfortunately for the people of Bolivia and Ecuador, even this limited non-Marxist economic management by the state guarantees lackluster economic growth, and an endless cycle of corruption. A state that controls the economy also has the power to loot it. 

But, there is a big difference between redistributing wealth and destroying everyone who attempts to create some of it. In order to redistribute wealth, you have to make it first. This is a distinction that the leaders of the Venezuela regime (and their supporters) have apparently long been too foolish to understand. For this, the people of Venezuela are paying a heavy price. 

Ryan W. McMaken is the editor of Mises Daily and The Free MarketSend him mail. See Ryan McMaken's article archives.

You can subscribe to future articles by Ryan McMaken via this RSS feed.

http://mises.org

© 2015 Copyright Ryan McMaken - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules