The Disaster of De-industrialization

The Disaster of De-industrialization, by Charles Hugh Smith.

By now, we all know what’s happening in Venezuela: hyperinflation, empty stores, a regime in denial.

My contacts in Venezuela tell me that merely posting the black market exchange rate of bolivars to USD can get you arrested. So yes, Venezuela’s regime has gone full Orwell-1984: whatever is true is outlawed.

Odd how the Venezuelan story is almost never mentioned on the media now. Perhaps this has something to do with the invitation to Chavez to visit Australia, by many prominent trendy politically correct leftoids who are given ample media time by the ABC.

Venezuela has been effectively de-industrialized. Capital that should have been invested in the electrical grid and the oil industry has been diverted to other pet projects (and the pockets of regime insiders).

There’s no food in the markets because government-set prices don’t make it worthwhile to grow anything. Farmers take their produce to neighboring countries if they can, where they can actually get paid for producing food.

De-industrialization results when a citizenry is denied access to the tools and capital needed to produce goods, and when government subsidies sap the will to take the risks that are part and parcel of making real stuff.

Because of their huge financialization, the UK, and to a lesser extent the USA, are slowly de-industrializing. After all, why bother making stuff if financial games and manufacturing money mean you just order it all from China? It all works while they accept your money…

De-industrialization is also the result of currency exchange and trade policy. When it becomes cheaper to import goods and services from other nations, the domestic populace loses the will and the skills needed to produce goods and services.

De-industrialization is a gradual process. The loss of key industries is gradual; the loss of supply chains is gradual; the loss of local suppliers and jobbers is gradual; the loss of skilled workers is gradual; the decline of local capital is gradual; the loss of the willingness to get out there and take risks to make real goods in the real world is gradual.