Supporters of socialism have taken to suggesting that the
human tragedy unfolding in Venezuela has nothing to do with socialism, rather
it’s the result of the dictatorships of former President Hugo Chavez and his
successor Nicolas Maduro. In their view, dictatorships lead to the deprivation we’re
witnessing, not socialism. They’re confusing types of government and economic
theories.
Dictatorships or authoritarian regimes don’t always lead to
economic misery. We only have to look to Venezuela’s south to see that’s true.
Chile was under a dictatorship for 17 years, yet President Pinochet pursued
free market economic policies that, in spite of the (inexcusable) tyranny and
unchecked power, lifted huge numbers of Chileans out of poverty, the exact
opposite of what is taking place under Maduro.
Socialism does inevitably lead to what we’re seeing in
Venezuela. It is an economic theory characterized by the government owning and
operating the means of production. Chavez followed the playbook of a socialist
economy to the letter. Socialism came first; his dictatorship came second. He
referred to it as a socialist revolution and drew parallels with it to the
liberation struggle of Simon Bolivar, even renaming the country the Bolivarian
Republic of Venezuela. His political party was named the United Socialist Party
of Venezuela. His government nationalized businesses, including foreign owned
companies. It also shut down private businesses, most notably media companies
that were critical of his agenda.
Some supporters of socialism suggest that Venezuela’s plight
is the result of low oil prices. If oil were the root cause, why don’t we see
the same poverty and economic strife in other countries that are as dependent
or even more dependent on oil than Venezuela? The real problem with Venezuelan
oil is not its price, but socialism.
PdVSA, the state oil company, used to be reasonably well run
prior to Chavez’s socialist revolution. People were hired based on talent and
skills and the government operated it in a relatively hands-off fashion. After
socialism, the inevitable happened. Economic policies led to overall higher
unemployment and scarcity, and political cronies wanted jobs for themselves or
their family members. Families of opposition party members and others were
kicked out of PdVSA and the politically connected, but not talented, replaced
them. This accelerated following a strike by managers and employees who wanted
an election, concerned about Chavez’s heavy-handed rule. In 2003, 19,000 were
dismissed and replaced by loyal party members.
Productivity at PdVSA has tanked as a result and its
productivity is a fraction of what it used to be. In 1998, a year before Chavez
was elected, it produced 3.4 million barrels a day. In May last year, it barely
produced 1.5 million barrels in the entire month. Chavez’s socialism lowered
its productivity to a level not seen since the 1950s. Worse still, over many
years Venezuela has given away huge amounts of oil to Cuba, helping prop up the
Castro regime, but not the citizens of Venezuela.
Socialism’s apologists will tell you that while they don’t
support authoritarian socialism, democratic socialism is a good thing and
doesn’t lead to what we’re witnessing in Venezuela. I lived under democratic
socialism in New Zealand and the results were not good.
Here are just a few examples of what this economic theory
wrought on the country. During the oil crisis of the 1970s, the government
simply banned people from driving on certain days to reduce petrol consumption.
When product innovations in margarine were made in the mid-1900s, the
government, to protect dairy farmers, required you to obtain a prescription for
it from your doctor. New Zealand only had two television channels until the
mid-1980s and both were state run – this is straight out of the Venezuela
playbook, which as noted has shut down many media companies and largely
controls what remains.
Fortunately, an economic crisis in 1984 brought on from
decades of socialist policies resulted in a new government in New Zealand. Some
inspired leaders from its left-wing Labour Party reversed course and pursued
more free market policies. (I delivered a detailed
speech on this subject last year.)
Supporters of democratic socialism often point to “the
Nordic countries “, but there too the story is very similar to that of New
Zealand. Sweden went further than most other Nordic countries with its
socialist experiment, but it too reversed course around the time of New
Zealand’s reforms. There are similar crazy things its government did, in line
with the examples above from New Zealand. But the story of Sweden’s
success has not been a socialist tale, rather it’s a free market one. The
country’s school voucher system is straight out of Milton Friedman’s playbook.
Sweden’s healthcare reforms took it away from a failing government run system
to one with significant private sector involvement. Its government has
partially privatized its postal service and privatized or sold its stakes in
dozens of other businesses.
Recalling that socialism is characterized by government
ownership and operation of the means of production, Sweden has self-evidently
moved away from this failed economic system in a big way. The same is true of
other Nordic countries. Denmark has also adopted a popular school voucher
system. And the governments of Denmark, Finland and Norway privatized or sold
stakes in dozens of businesses in recent decades. Their relatively strong
economies are not a result of their socialist history, but in spite of it. Lest
there be any confusion, in 2015 Denmark’s current prime minister, Lars Lokke
Rasmussen, went so far as to say:
"I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy."Socialism is failing Venezuela just as it failed the Nordic countries, New Zealand and every other country that has attempted it. Kaitlin Bennet (@KaitMeriox) summed it up well on Twitter last month:
2 comments:
Well said
@WayneI am a major contributor to the Venezuelan economy by dint of buying a bottle of their excellent rum every couple of months.
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