What Makes Venezuela Different

What Makes Venezuela Different, by Ryan McMaken.

So what is it about Venezuela that has led the country to the brink of starvation while Bolivia remains relatively stable and without famine? After all, the Bolivian president, Evo Morales, a self-described disciple of Marx, gave Pope Francis a crucifix shaped like a hammer and sickle during a recent visit by the pontiff.

A bit of history of socialist economies:

Ever since Lenin, political leaders have known that “pure” socialism leads to starvation very quickly. Lenin had attempted to implement total control of the economy by the Soviet state when he came to power. However, after quickly realizing that this would destroy the economy, Lenin backed off and implemented the “New Economic Plan” which allowed for limited market activity, especially in food production.

Every regime that attempts socialism quickly runs up against the calculation problem inherent in socialism. Without markets, how can we know what to produce, or for whom to produce it? What should goods and services cost? Without at least partial freedom for market prices to function, economies grind to a halt very quickly.

Wisely (and fortunately for ordinary people), Lenin allowed his pragmatism as a politician to eclipse his devotion to Marxism. Similarly, after the mass starvation and social upheaval caused by Mao’s hard-core Marxism in China, Deng Xiaoping turned to the pragmatism of “socialism with Chinese characteristics.” It was, in other words, socialism-lite.

In Venezuela, socialism was too pure and doctrinaire, so the failure was epic.

Chávez … did not seem to discriminate when it came to crushing business and business people across the country.

Morales [in Bolivia] was often content to leave small and medium-sized domestic businesses alone — and to allow for a large “informal” (i.e., unregulated) economy. When Morales ignores the informal economy, he is essentially creating “loopholes” in government regulation. And as Ludwig von Mises once observed, “Capitalism breathes through those loopholes.”

The Venezuelan regime, on the other hand, has not been fond of loopholes. …

[A]s Venezuela is now seeing, when retailers are destroyed, there’s no one left to sell, prepare, procure, and process food.

hat-tip Matthew