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Venezuela's collapse is a warning to Americans enamored with socialism
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The world is hardly paying attention, but the nation of Venezuela is in full-collapse. Its economy has imploded, and its politics are in turmoil. The nation is beset with shortages of critical goods, and the beer supply has run out. Soldiers patrol the streets, tasked with restoring order while also selling food. It's a mess that was created by ardent socialism run amok.
Highlights
CALIFORNIA NETWORK (https://www.youtube.com/c/californianetwork)
5/23/2016 (8 years ago)
Published in Americas
Keywords: Venezuela, socialism, economy, Bernie Sanders, free market, collapse
LOS ANGELES, CA (California Network) - Venezuela was once considered a socialist paradise. The country's oil belonged to the people, so the government sold the nation's oil and distributed those profits to the people by various means. This distribution of wealth made Venezuela a model socialist state.
However, the price of oil has since fallen to dramatic lows. The government noticed that prices began rising on many commodities. Inflation was turning into hyperinflation. In a bid to keep the people clothed and fed, the government implemented price controls.
Price controls and hyperinflation are a sure recipe for shortages. Price controls reduce the incentive to produce because the profits are minimized. People will naturally prefer to produce things that generate a higher profit. Add hyperinflation, and the price controls will no longer keep up with the daily rise in prices. The result is people stop producing the commodity altogether.
With lines and shortages reminiscent of Soviet Russia, riots have ensued, spurred on by the nation's right-wing party which now controls the national assembly. Police and soldiers have been sent into the streets to preserve order and sell food at the same time.
History has demonstrated that socialism cannot work if it begins to interfere in markets. Limited socialism, such as the various degrees of democratic socialism found in Scandinavia and the United States, work by redistributing taxes to the poor, and can only accomplish this by leaving markets free. When the free market is too heavily regulated by the state, which is allowed in more traditional forms of socialism, then the markets become suppressed and their natural mechanisms of equilibrium fail. The result is miserable people and a lot of chaos.
It is one thing to tax the wealthy or to nationalize an abundant resource and distribute its profits to the people. It is another thing to micromanage the economy from a presidential office. The former can work if corruption is minimized. The latter always fails, even with the most honest custodians.
Venezuela provides a caveat to American voters, especially the youth. As Americans increase their flirtation with social democracy and candidates like Bernie Sanders, who will be followed by other, more radical candidates, they will need to be educated enough to draw a distinction between free market social democracy and socialism. When candidates begin to seriously suggest manipulating prices of essential commodities, a line is crossed that no nation can afford to pay.
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