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Socialism has repercussions

Patrick Quinlan

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Before Hugo Chavez rose to the Presidency of Venezuela in 1999, the country already had problems. Inflation had been over 100 percent in 1996, and while it was still one of the strongest economies in Latin America, it wasn’t doing “well.” Political scientist Javier Corrales, just a couple of months into Chavez’s presidency, went so far as to call Venezuela a nation “in ruins.”

So imagine how bad things are now. Less than two decades after businesses have been nationalized, government spending has exploded while, predictably, revenues have dropped significantly, and people protest and riot in the streets against socialist President Nicolas Maduro. Peruvian journalist Alvaro Vargas Llosa wrote that Venezuela now has “an economic growth rate of negative 10 percent, a painful shortage of basic stuff (including toilet paper), and the highest crime rate in the world.” Food is scarce, so much so that the average Venezuelan spent more than 35 hours a month waiting to buy groceries. And once they finally are able to purchase those much-needed foodstuffs? Well, a National Survey of Living Conditions study conducted by three universities found 72 percent of Venezuelans lost an average of 19 pounds in 2016.

According to the Daily Caller, Venezuelan’s useless currency is now being replaced by “Bitcoin and rare Pepes.” Yes, you read that right; crypto-currency and memes are replacing paper currency because of how worthless the government-backed Bolívar has become.

Despite having the world’s largest proven oil reserves, Venezuela has devolved from a relatively prosperous country — with problems of course, what country doesn’t have those — into the metaphorical garbage can that it is today. But what could possibly have brought about its meteoric crash? Why are people starving?

Well, you could say that it was the nationalization of businesses — including the entire food industry — that caused this economic meltdown. But then again, that only happened in 2015, and Venezuela’s problems started well before that. Maybe it’s the Venezuelan government’s commitment to raising minimum wages periodically. Of course, according to the Mises institute, there’s no better way to scare off employers from hiring people than doing that. These two factors no doubt played a role in exacerbating the crisis, but they weren’t the cause of it. That honor lies with the expected 1,600 percent expected inflation rate.

Chavez, and later Maduro, along with their commitment to “helping workers” at the expense of businesses, also encouraged the central bank to print huge sums of money, a policy which has continued to this day in the form of massive expansionary policies that quite obviously aren’t working. Pair this with the capital controls implemented by Chavez in 2003 to, ironically enough, prevent the rich from leaving the country with large sums of money, and now the poorest Venezuelans are prevented from being able to move away from the economic garbage can they are trapped in.

The lesson to be learned here is a simple one: central economic planning fails. Mass wealth redistribution, capital controls, nationalization of industry and minimum wage hikes are not only nonsensical within the realm of economic theory but also have real world consequences, to the detriment of all but those fortunate enough to be in positions of power.

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The independent student newspaper of Western Illinois University. Serving Macomb since 1905.
Socialism has repercussions