Venezuela Demonstrates Failure of Socialism

Venezuela is the South American nation that has lurched way over to the socialist/communist left in recent years. Venezuela has been ruled since 1998 by a cabal that has leaned heavily toward the tyrants in Cuba. recently reported:

As Venezuela grapples with economic turmoil and widespread protests, a law that effectively prohibits companies from firing workers continues to restrict the country’s ability to compete in the global economy.

Anti-government protests led by university students and other groups escalated last month, with tempers flaring over shortages of basic goods like toilet paper and medicine.

…Venezuela entered a recession late last year and has seen inflation climb above 50% … In December, Standard & Poor’s downgraded Venezuela’s credit rating another notch below investment grade. The decision was “based on the growing radicalization of economic policy over the last two months in the context of a sustained decline in international reserves and the continued high levels of political polarization,” the firm wrote in its report.

Moody’s also downgraded the South American country, saying it’s faced with a “materially higher risk of an economic and financial collapse” due to government policies that have “exacerbated” Venezuela’s problems.

Those policies, particularly a strict 2012 labor law that requires companies to seek government approval for to fire employees, are weighing on Venezuela’s economy, said Diego Moya-Ocampos, senior Latin American analyst for IHS Global Insight. (end of excerpt)

These Euro-type labor laws, on top of 16 years of increasingly hard-left socialist policies including nationalization of the private oil companies that fueled the nation’s wealth for many decades, always lead to economic stasis and eventually ruin. Because when companies are not allowed to hire and fire workers as needed the companies stagnate or fail due to high costs and new companies decline to invest out of fear of the laws. Would you invest your own money in a company if you were not allowed to hire and fire employees as you needed them? Of course not.

50% inflation? Amazing. Financial collapse? Typical. Yet over and over we are told that socialism will create utopia. This is the opposite of the truth. Venezuela even has some of the largest oil reserves in the world yet look at that sentence… “with tempers flaring over shortages of basic goods like toilet paper and medicine.” This is classic socialism/communism. Even a nation with a natural “gift” from God like huge oil reserves has severe economic problems under socialism. It should be thriving, and indeed Venezuela was thriving before the radicals took over.

In fact less than one year after the Venezuelan government nationalized the oil companies the entire industry infrastructure from drilling equipment to pipelines had deteriorated dramatically. Reported Associated Press on December 10, 2010:

CARACAS, Venezuela – U.S. officials detailed declining conditions in Venezuela’s oil industry in memos released by WikiLeaks, saying the country’s growing economic problems are taking a toll on President Hugo Chavez’s popularity.

In one confidential document dated Oct. 15, 2009, the U.S. Embassy said “equipment conditions have deteriorated drastically” since the government expropriated some 80 oil service companies earlier that year. It said safety and maintenance at the now state-owned oil facilities were in a “terrible state.” (end of AP excerpt)

Today, 5 years after nationalization, it would take many years to recover the equipment in that industry. This demonstrates the destructive power of state control.

At the same time socialism claims that it is out to “help the poor”. Yet why has Venezuela’s crime rate skyrocketed? Aren’t “the poor” supposed to be happy under socialism? Yes, theoretically, but they are not. Because socialism always produces the opposite of its rosy promises. In fact socialism and violence usually go hand in hand.

And then the socialists steal or rig elections, like the 2012 Venezuelan presidential election which the leftists won by a razor-thin margin after widespread fraud was reported. This is like Obama stealing the 2012 president election by sending the IRS after the Tea Parties to stop them from participating.

Meanwhile the former leader of Venezuela Hugo Chavez, who died in 2013, had accumulated a $2 BILLION personal fortune built up from nothing at the time that he was first elected president in 1998. Yet “rich Republican” former US president George W. Bush is worth just $30 million today in a nation vastly wealthier than Venezuela.

So you can rest assured that socialism is not concerned with “income equality” or “spreading the wealth around” as they claim. It is about stealing wealth and concentrating it in the hands of a few political elites at the top while the middle class sinks into poverty, which is happening in Venezuela today, and the poor get poorer as they are doing under Obama. In fact the middle class always shrinks and usually disappears under socialism/communism. Reported about Venezuela:

“The stringent regulatory burden is contributing to a shortage of basic goods and the whole economic mess,” Moya-Ocampos said. “It has played a role in leading Venezuela to three years of economic contraction.”

In a recent report on the developments in Venezuela, Moya-Ocampos wrote that its economy is projected to contract by 1.7% this year and 0.9% in 2015. The country will also continue to face higher inflation and shortages of goods, while the ongoing protests are likely just the first wave of a political crisis, he added. (end of excerpt)

Yes, don’t forget rampant inflation, another hallmark of these state-controlled economies. Because when the government makes economic decisions that contravene the natural laws of economics as these leftist governments do over and over it results in a natural economic reaction like inflation. Meanwhile Associated Press reported about the government setting and controlling rents:

Venezuelan lawmakers have approved measures that expand rent controls and require landlords to offer to sell their properties to any renters who have been living in a home for more than 20 years. The revised law … requires landlords to register their homes and says those who violate the controls may be fined up to $7,000. … Aquiles Martini, president of Venezuela’s real estate chamber, said the measures undermine private property rights and will represent “the death of renting… No one will invest their savings in a home to rent out, nor will new homes be built to rent,” Martini told reporters. (end of AP excerpt)

More disaster. It is important to remember that two of the most elementary laws of economic freedom are that A) the government should never set wages or prices (i.e, rents); and B) that private property must be respected and encouraged, not sold off under government duress as in the above example. This type of rent-control law represents a death knell for private property rights, and even for decent rental housing, in Venezuela. Free markets are the answer.

Rent control is typical socialist/communist theory. Because while it appears on paper that controlling rents would be beneficial, it is merely a way to artificially keep rents down for some people but always leads to the destruction of housing and, in the long run decay and abandonment, which harms all people.

Because if you own an apartment building and the government says that you can only charge a certain amount for rent and cannot charge the amount that you need to maintain the property, then the property is going to degrade; you are going to defer maintenance and the apartment supply is going to shrink from decay and abandonment. This has happened over and over and over, all over the world. This actually ends up increasing rents through the law of supply and demand (lower supply of decent housing equals higher rents for the housing that remains).

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