Socialists Must Own Up to Venezuela

Friday, January 26, 2018
The International Monetary Fund sees Venezuelan inflation spiraling to 13,000 percent by the end of this year. (VPITV)

Suppose you want to buy a laptop today. It costs $1,000, but before you can buy it, a more urgent need comes up. You decide to save up $1,000 and buy the computer a year from now.

On a sunny day in January 2019, you pull your $1,000 from the bank and go to buy that laptop. At the store, you stop and stare in disbelief at the price tag: $73,670 — the very same laptop at the very same store.

This would, of course, never happen in the United States. In fact, in most countries in the world, 7,267 percent inflation is a bizarre fantasy.

Not so in Venezuela, where a can of Coke that cost one bolívar last January would cost 74 bolívares today — if you can find a can of Coke. Venezuelans are suffering badly under increasingly desperate shortages of practically all staples of everyday life.

How did this happen? And, most important of all, can it happen here?

These questions are not just a matter for policy wonks. They are a matter that we should all pay attention to. There are many people in Europe and North America who share the same ideology as the Chavista political leadership in Caracas. So long as there are those who believe in socialism, we will always run the risk that they will do to us what their ideological brethren did to Venezuela.

The answer to how Venezuela fell into the dungeon of social and economic misery starts with establishing that the country really is the victim of a cynical, full-scale experiment in socialism. This is not as obvious as it may seem: there are still many people out there who will push back on the notion that the once-great nation on the northern coast of Latin America is actually a good example of socialism at work.

In fact, as Venezuela falls apart, leftists scramble to either distance themselves from the country — it was not socialist after all — or find a suitable scapegoat that can serve as an excuse for the atrocities of the “Bolivarian revolution.” In June last year, for example, the Socialist Worker newspaper blatantly claimed that socialism was never implemented in Venezuela. On the contrary, they said, the Venezuelan crisis was “an acute crisis of capitalism.”

Others cannot so easily dispose of Venezuela as a socialist project. Britain’s Socialist Party, one of the most resilient leftist organizations in Europe, blames the crisis in Venezuela on a “capitalist counterrevolution.”

Perhaps they also blame sunburn on the absence of rain.

In a eulogy over Hugo Chávez in 2013, the Socialist Project, a Canadian publication, blamed the country’s growing problems on resistance from capitalists and government bureaucrats. They echoed a 2007 piece in the International Socialist Review that praised Chávez for his "spectacular results."

What spectacular results are they talking about? The International Socialist Review gives a list of examples:

  • social expenditures doubled as share of GDP;
  • subsidized food for the poor;
  • tax-paid health care for the poor;
  • subsidized college education for low-income families;
  • a higher minimum wage.

All these measures are well within the realm of what progressive politicians in Europe and North America often claim as achievements or aspirations. The US War on Poverty, for example, created Medicaid (tax-paid health care for the poor), substantially expanded food stamps (de facto subsidized food), and tripled the share of income that Americans get from government handouts.

Federal student loans fill the function of college subsides, and raising the minimum wage is a popular item on Democrats’ political to-do list, proceeding in states and municipalities across the nation.

Hugo Chávez’s political rap sheet is longer, but these reforms were instrumental to his socialist transformation of Venezuela. They were also the reforms that were most widely applauded by socialists looking to Venezuela for inspiration. In fact, while many socialist commentators want to weigh in on the “true” nature of Venezuelan socialism, the global left is practically unanimous in its praise for the aforementioned reforms.

Therefore, it is fair to ask: if those reforms were good-enough socialist back then, and if they remain in place in Venezuela today, then why should we not look to Venezuela to learn what socialism does to a country?

To achieve their goals, the socialists in Caracas have used extensive price regulations, forcing businesses to sell everything from toilet paper and food to cars and electricity under production cost. The unsurprising consequence has been dramatic shortages pushing the country to mass starvation, alongside epidemic crime and rampant black-market trade. Mob rule has de facto replaced law and order.

This downside of the socialist project makes socialists either scramble for scapegoats or outright deny that Venezuela is socialist. Yet the policies that created the shortages were exactly the policies that advanced socialism. To provide more products to more people — especially essentials like food — the Chávez regime imposed price controls and even took over private businesses. The former aimed at making consumer products “affordable”; the latter was motivated by an ambition to eliminate “capitalist greed,” also known as profits.

At the end of the day, socialism is all about economic redistribution. The degree of misery imposed by socialism is proportionate to the degree of redistribution. Venezuela is socialist; they just happened to go a bit further in their ambitions than other socialist nations, like the Scandinavian welfare states. Logically, the consequences have been more extreme. But that is, really, all there is to the Venezuelan tragedy: more of a bad ideology.

Sign up here to be notified of new blogs from Sven Larson, PhD and AIER.

Sven Larson, PhD

Sven R Larson, Ph.D., is an American political economist with 20 years of experience in public policy. He is a research consultant, legislative advisor and the author of numerous policy papers, referee journal articles and books, including The Rise of Big Government: How Egalitarianism Conquered America (Routledge, Oct., 2017). Follow @Larson4Liberty.