Socialism at Work in Venezuela

One of the most interesting professors I ever had in college was an guy in the economics department. He never stuck to the textbook, probably because he was assigned to teach intermediate microeconomics – a topic that could put anyone to sleep. It was frustrating to study for his exams, but the fascinating content of his lectures always made up for it.

One of his favorite topics was on how he participated in trying to manipulate the stock price of Volvo on the Swedish stock exchange back in the ’70s. The entire thing was illegal, of course, and he ended up getting a brief vacation courtesy of the Swedish government, but that did not stop him from going back to the financial markets trying to make a buck or two.

Rumor has it he eventually did it – legally – and retired in some Spanish Mediterranean village. That was sad, because that economics department needed a colorful professor like him. Not only was he an interesting lecturer in general, but he was also an absolute anti-socialist. I doubt capitalism has ever had a more passionate supporter in academia than this man.

One of the more useful things I learned from him (intermediate microeconomics is not useful…) is that economists and others are wrong when they claim you cannot create laboratories for economic theories. The entire Soviet empire was a big, full-scale laboratory for central economic planning. This professor was right, of course, and sadly a lot of people refuse to learn the lessons from those enormous experiments. Socialism is still a major problem in our world, despite close to a century of utterly discouraging experimental results.

Or, in plain English: don’t bother a socialist with the facts from the Soviet experiment – he has already made up his mind. For this very reason, socialism is a resilient delusion.

A tragic example of this in our time is Venezuela. There, socialists led by the now-defunct Hugo Chavez have transformed a reasonably well functioning country into an unending series of social and economic tragedies. One of the most telling examples is from the country’s health care system – heavily dominated by government regulations and funding – to which we will get in a moment. First, let us get a street view of the Bolivarian brand of socialism that so many people in europe and North America admire. USA Today has the story:

Thousands of Venezuelans lined up outside the country’s equivalent of Best Buy, a chain of electronics stores known as Daka, hoping for a bargain after the socialist government forced the company to charge customers “fair” prices. President Nicolás Maduro ordered a military “occupation” of the company’s five stores as he continues the government’s crackdown on an “economic war” it says is being waged against the country, with the help of Washington.

Yes, economic war… Apparently, socialists believe that the free market is a war machine. That aside, though, this is a typical maneuver by the Venezuelan government. They have imposed price controls on a slew of markets, in the name of “fair” pricing, with the only result being shortages, rationing and Soviet-style lines of customers trying to get their hands on groceries.

There is another reason why they do this: inflation. More on that in a moment. First, let’s get back to the streets of the socialist nightmare:

Members of Venezuela’s National Guard, some of whom carried assault rifles, kept order at the stores as bargain hunters rushed to get inside. “I want a Sony plasma television for the house,” said Amanda Lisboa, 34, a business administrator, who had waited seven hours already outside one Caracas store. “It’s going to be so cheap!” Televisions were the most in-demand item in the line outside one Caracas store, though people waited more than eight hours for fridges, washing machines, sewing machines and other imported appliances.

And why are they imported? Because no one can run a serious business anymore in Venezuela.

Images circulating online as well as reports by local media appeared to show one Daka store in the country’s central city of Valencia being looted. “I have no love for this government,” said Gabriela Campo, 33, a businesswoman, hoping to take home a cut-price television and fridge. “They’re doing this for nothing but political reasons, in time for December’s elections.” Maduro faces municipal elections on Dec. 8. His popularity has dropped significantly in recent months…

As has Obama’s, which is going to have serious repercussions for the Democrats in next year’s mid-term election. But you don’t see Obama deploy the U.S. Army at Best Buys to boost his popularity numbers. Some of his supporters might want him to do that, but we are still a country where the rule of law prevails. We have not degenerated to the destructive Venezuelan levels of authoritarianism.

I could, however, imagine seeing scenes like this in Greece in the near future. Or Spain. It would probably start with supermarkets and clothes stores, but that doesn’t really matter. Once you have created economic and social chaos in a country, there is no rule of either law or common sense anymore.

And now for the inflation part of the story:

…with shortages of basic items such as chicken, milk and toilet paper as well as soaring inflation, at 54.3% over the past 12 months. Economists are expecting a devaluation soon after the election, likely leading to even higher inflation.

Five years ago Venezuela was wrestling with inflation in the 25-30 percent bracket. This is a country spinning completely out of control.

[President] Maduro … appeared on state television Friday calling for the “occupation” of the [Daka store] chain, which employs some 500 staff. “This is for the good of the nation,” Maduro said. “Leave nothing on the shelves, nothing in the warehouses … Let nothing remain in stock!” The president was accompanied on television by images of officials checking prices of 32-inch plasma televisions. Daka’s store managers, according to Maduro, have been arrested and are being held by the country’s security services.

And what is president Maduro going to do to make sure the shelves in the Daka stores are being replenished? We already know that socialism is little more than state-sanctioned looting, and we also know that you can only take other people’s money and property once. Then you have to start being productive on your own, and that is when things go really wrong for socialists. When the Soviet communists had looted the private farms, confiscated whatever the bourgeoisie had and plundered every part of the private sector, they had to start producing food for the people.

Lenin, perhaps one of the least mentally deranged in the Soviet communist leadership, allowed a partial return to private-sector farming, a nod of admission that capitalism and freedom will always trump socialism, tyranny and central economic planning.

But don’t waste any oxygen on trying to tell this story to the delusional leaders of Venezuela. Their policy of state-sanctioned looting will continue until the country is little more than a pile of rubble. USA Today again:

[Critics] are adamant that government price controls, enacted by Chávez a decade ago, are the real cause for the dire state of the economy. With such a shortage of hard currency for importers and regular citizens, dollars sell on the black market for nine times their official, government-set value. Prices, at shops such as Daka, are set according to this black market, hence the government’s crackdown. Chávez often theatrically expropriated or seized assets from more than 1,000 companies during his 14-year tenure. This, among other difficulties for foreign firms, led to a severe lack of foreign investment in the country which, according to OPEC, has the world’s largest oil reserves.

Socialists can point a gun to someone’s head and demand his money. But they don’t know how to make an honest buck.

Nor do they know how to make health care work properly. Here is a story from the Associated Press on the Venezuelan health care system:

Evelina Gonzalez was supposed to undergo cancer surgery in July following chemotherapy but wound up shuttling from hospital to hospital in search of an available operating table. On the crest of her left breast, a mocha-colored tumor doubled in size and now bulges through her white spandex tank top. Gonzalez is on a list of 31 breast cancer patients waiting to have tumors removed at one of Venezuela’s biggest medical facilities, Maracay’s Central Hospital. But like legions of the sick across the country, she’s been neglected by a health care system doctors say is collapsing after years of deterioration.

This is a state-controlled health care system, funded in large part through a government-run program. The private segments of the system are under constant pressure from the socialist government for making money – “profiteering” – on providing health care to willingly paying patients. Or, in the words of The Economist a while back:

The government says the private clinics are profiteers, trafficking in illness, and the president keeps threatening to nationalise them all. Let’s hope he doesn’t, because public hospitals are in a much worse state, despite official claims that giant strides have been made in recent years.

The Associated Press again:

Doctors at the hospital sent home 300 cancer patients last month when supply shortages and overtaxed equipment made it impossible for them to perform non-emergency surgeries. Driving the crisis in health care are the same forces that have left Venezuelans scrambling to find toilet paper, milk and automobile parts. Economists blame government mismanagement and currency controls set by the late President Hugo Chavez for inflation pushing 50 percent annually.

Let’s sum up that list:

1. Overtaxed medical equipment. Please note, American readers, that Obamacare includes a tax on medical equipment.

2. Price controls. In a feeble attempt to put out the inflation fire they themselves have started, the Venezuelan government has created a system of price dictates. The only tangible effect is that supply stops at what the dictated price motivates sellers to bring to the market. You don’t even need to take intermediate microeconomics to figure this one out…

3. Currency manipulation. The Venezuelan government is fixing its currency’s exchange rate in order to sell a lot of state-produced oil from state-seized oil wells. The currency fixing, however, forces them to use a monetary method called currency sterilization, which – to make a long story short – floods the domestic economy with money. If at the same time you regulate free markets to the point where they stop functioning; if you create massive government entitlements for work-free income; then you have a recipe for high inflation.

As the Associated Press story explains, part of the acute problem in health care is related to the government’s currency manipulation:

The government controls the dollars needed to buy medical supplies and has simply not made enough available. “I feel like I’ve been abandoned,” Gonzalez, 37, tells a bright-eyed hospital psychologist trying to boost her morale. Her right eye is swollen by glaucoma diagnosed two years ago but left untreated when she had trouble getting an appointment. Doctors not allied with the government say many patients began dying from easily treatable illnesses when Venezuela’s downward economic slide accelerated after Chavez’s death from cancer in March. Doctors say it’s impossible to know how many have died, and the government doesn’t keep such numbers, just as it hasn’t published health statistics since 2010.

Typical socialist tactic. When things turn for the worse under their regime, they hide the facts and double down on their destructive policies.

Almost everything needed to mend and heal is in critically short supply: needles, syringes and paraffin used in biopsies to diagnose cancer; drugs to treat it; operating room equipment; X-ray film and imaging paper; blood and the reagents needed so it can be used for transfusions. Last month, the government suspended organ donations and transplants. At least 70 percent of radiotherapy machines, precisely what Gonzalez will need once her tumor is removed, are now inoperable in a country with 19,000 cancer patients – meaning fewer than 5,000 can be treated, said Dr. Douglas Natera, president of the Venezuelan Medical Federation.

Instead of fixing the problem, the socialist government ignores it. Why? Because otherwise they would have to admit that socialism is not working. And what is more important for a politician than to pretend that his socialist policies are working? Certainly not people’s lives, right…?

And now for the finale:

The country’s 1999 constitution guarantees free universal health care to Venezuelans, who sit on the world’s largest proven oil reserves. President Nicolas Maduro’s government insists it’s complying. Yet of the country’s 100 fully functioning public hospitals, nine in 10 have just 7 percent of the supplies they need … Venezuela’s 400 private hospitals and clinics are overburdened and strapped for supplies, 95 percent of which must be imported, said Dr. Carlos Rosales, president of the association that represents them. The private system has just 8,000 of the country’s more than 50,000 hospital beds but treats 53 percent of the country’s patients, including the 10 million public employees with health insurance.

Let’s repeat that number:

The private system has just 8,000 of the country’s more than 50,000 hospital beds but treats 53 percent of the country’s patients

What does that tell you about government efficiency?

But wait – it gets even better as the AP story continues (with emphasis added):

Rosales said insurers, many state-owned, are four to six months behind in payments and it is nearly impossible to meet payrolls and pay suppliers. Worse, government price caps set in July for common procedures are impossible to meet, Rosales said. For example, dialysis treatment was set at 200 bolivars ($30 at the official exchange rate and less than $4 on the black market) for a procedure that costs 5,000 bolivars to administer. … At Maracay’s 433-bed Central Hospital, mattresses are missing, broken windows go unrepaired and the cafeteria has been closed for a year. Paint peels off walls and rusty pipes lie exposed. In the halls, patients on intravenous drips lie recovering on gurneys. “We have some antibiotics but they aren’t usually appropriate for what you are specifically treating,” said Dr. Gabriela Gutierrez, the surgeon caring for Gonzalez. There is no anesthesia for elective surgery.

But who cares? After all, Venezuela is a socialist country, and that’s what matters, isn’t it??

Medical students quietly showed AP journalists around to avoid alerting government supporters, who bar reporters from recording images in public hospitals. Broken anesthesia machines and battered stainless-steel instrument tables, some held together with tape, filled one of five idled operating rooms. Foul odors and water from leaky pipes continue to seep into the rooms, doctors said.

But wait there’s more!

In August, cancer patients protested at the eight-month mark since the hospital’s two radiotherapy machines broke down. The machines remain out of order. Half the public health system’s doctors quit under Chavez, and half of those moved abroad, Natera said. Now, support staff is leaving, too, victim of a wage crunch as wages across the economy fail to keep up with inflation. At the Caracas blood bank, Lopez said 62 nurses have quit so far this year along with half the lab staff. … Dengue fever … is making a worrisome comeback. The number of women dying in childbirth has also risen, to 69 per 100,000 in 2010 from 51 in 1998.

Let’s blame it all on Bush.

Seriously – how many of these stories do we need before socialists will wake up from their delusion and stop ignoring facts, experience and the horrors created by their warped ideology?