The Success of Socialism: Venezuela is near collapse


I “know” Patrick Gillespie only due to a very brief correspondence, via Twitter personal messaging, after I criticized an article of his. He defended his position, but retained a courteous tone, which I appreciated. From CNN’s digital politics e-zine, State:

Venezuela’s dreams are dying

The tragic impact of a country’s collapse.

By Patrick Gillespie | September 2017

Caracas, Venezuela — I think about Deivis Perez every day.

We met on an overcast July day at a children’s hospital in Caracas, Venezuela, the capital. He didn’t say a word when I curled around the door on the dimly lit fourth floor. His big brown eyes just stared at me. I froze and tried to hold in a gasp. Deivis’ skin was splitting open on his swollen face, his body covered in dark brown spots. I wear my emotions on my sleeve and Deivis saw past my thinly-veiled look of calm. Tears began to roll down his face as he buried his head in his hands.

Deivis needed dialysis treatment for his failing kidneys. But instead of getting relief, he got a deadly bacterial infection called sepsis, according to his doctors. The filters in the dialysis machines at the children’s hospital no longer worked. Deivis received contaminated blood twice. He lost 22 pounds in two months. His 14-year-old body looked like that of a 7 or 8 year old. An ulcer in his throat made it too painful to eat so he could only digest liquids.

“I want everyone to see what’s happening with us here. It’s not just what you’re seeing on TV — the protests, the clashes. We are in the hospital suffering,” Deivis’ mother, Sandra Galindez, told me and my colleagues.

Being ‘magazine’ style journalism, Mr Gillespie began with the human interest introduction. That’s always been acceptable in magazine journalism, though I cringe when I see it in what are ostensibly straight news sources. Then he begins the straight journalism section:

Venezuela is in a death spiral that shows no signs of healing. President Nicolas Maduro erased any remnants of democracy in late July, stripping political opponents of power and establishing a new legislature filled with his cronies. Dozens of nations, including the US, labeled Maduro’s regime a dictatorship after the July 30 power grab. More than 120 Venezuelans have died since protests ratcheted up in March that sought – to no avail — to prevent Maduro’s consolidation of power.

But Maduro’s cemented regime still faces the same problems it started years ago: An exodus of its educated class combined with mass shortages of food, medicine, money and — most importantly — time.

Mr Gillespie then gives us some of the statistics, and they are pretty bad. Venezuela, he noted, has the world’s largest proven petroleum reserves, and “was once Latin America’s richest nation.” But the oil industry has been nationalized and badly mismanaged, and the fall of oil prices from over $100 a barrel to slightly under $50 ($WTI was in the low $49.00 range as I was writing this article)¹ has ruined an economy that was almost completely dependent upon oil to bring in export dollars.

My biggest problem with Mr Gillespie’s article is that it almost completely avoids the underlying source of Venezuela’s economic problems. He gives it only the barest of mentions:

In 2013, Maduro succeeded his mentor, the late President Hugo Chavez, who rode a wave of populist fervor to the presidency in 1999. Despite Venezuela’s vast resources, it had become a nation of deep inequality by the 1990s. Chavez promised to end that with his socialist agenda.

Chavez, who is still revered in Venezuela, is perhaps most lauded for making housing affordable for many urban Venezuelans. But in doing so, he began a years-long spending spree, doling out subsidies to the poor while fixing prices on everything from coffee to corn to a tank of gas. He shored up ties with Russia and China while distancing his country from the US. His government also nationalized many industries, then mismanaged them, leaving them to rot.

If you knew nothing other than what you read in Mr Gillespie’s article, you’d think that the problem has been mismanagement, compounded by President Maduro’s authoritarian regime stamping out pro-democracy forces. But the real problem is socialism, the idea that the government can run the economy successfully. In reality, the economy is the aggregate action of all the people, and what socialism ignores is that not all people are equally productive. It is capitalism which provides the tools by which productivity can be increased.²

Think about what has happened in Venezuela: under President Chavez’s “Bolivarian socialism,” a country with the largest crude oil reserves in the world, a country which basically imports dollars, has managed to go belly-up broke. A nation which did not need to be self-sufficient, but received the fruits of the labor of people in other countries, has still managed to have its economy completely collapse.

Cindy Sheehan was unavailable for comment.

Mr Gillespie’s article was truthful enough for what it was, but it lacked the perspective to tell the underlying truth, that Venezuela’s problems stem not just from mismanagement, but from the underlying socialist system itself.³ Presidents Chavez and Maduro used socialist rhetoric to provide subsidies for the less productive, to shore up their political support by the masses, whether the two presidents actually believed their socialist statements or not.4 Their giving rewards to those who had produced little, their holding down the profits of those who were successful in capitalism, their nationalization of major industries, did not make the formerly wealthiest nation in South America more prosperous. Instead, it led to the emplacement of inept managers based on political loyalty, and a dependence upon foreign workers with technical skills while failing to educate Venezuelans to acquire those skills themselves.

Think about it: Venezuela has been in the grip of Presidents Chavez and Maduro’s policies for 18 years now, plenty of time to have raised an entire generation of Venezuelans to take over from foreign nationals in the oil industry, yet the exodus of foreign managers is hurting.

It’s time for journalists, for people, to tell the truth: socialism is not just an authoritarian, anti-democratic political system, but it is a wholly failed economic system.5

Capitalism is the only economic system we have ever seen which has been able to lift more than a small percentage of the population above the subsistence level; socialism, as it has been put into practice, has a sordid history of taking a wealthier people and pushing them back down into poverty.
Cross-posted on The First Street Journal.
¹ – Venezuela’s crude oil reserves are ‘heavier,’ and require a more intensive refining process, which has meant, in commodity prices, that Venezuela’s petroleum sells for roughly $4.00 less per barrel than ‘light, sweet’ crude. Reuters reported, on August 1, that independent oil refiner Phillips 66 has reduced their imports of Venezuelan oil due to declining quality of that petroleum.
² – Under the socialist ‘labor theory of value,’ the value of any product is determined solely by the amount of labor which went into producing it. But if I have a backhoe, I can dig a longer, deeper footing than any ten men can dig just using shovels in the same amount of time. Even ignoring that ten laborers with shovels will have worked harder than I would have operating a backhoe, the labor theory of value holds that the footing the ten men with shovels dug is ten times more valuable than what I would have done, even though the footing I would have dug is longer, and will provide more of the foundation of the building than what the laborers produced. It is the capitalist addition of the backhoe which has increased my productivity ten-fold.
³ – It isn’t just Mr Gillespie: as august a publication as Foreign Policy said:

The contrast with Venezuela’s own past — or the present of some once-struggling neighbors, like Colombia — is stark. In the 1960s, Venezuela was a beacon of transparency and democracy — and wealth. With democratic presidents Rómulo Betancourt, Raúl Leoni, and Rafael Caldera, Venezuela became a role model subsequently copied throughout Latin America, and one that offered refuge for political exiles seeking freedom.

But years of economic mismanagement under former president Hugo Chavez and then Maduro, aggravated by a slide in global oil prices, have poleaxed Venezuela’s economy, giving it the world’s highest inflation and a dearth of food, medicine, and other basic goods,

without ever mentioning socialism.
4Given the vast personal wealth accumulated by the Chavez family, perhaps one might be forgiven for not believing that President Chavez was being honest about his feelings when he stated that “ser rico es malo,” “being rich is bad.”
5It would be a fair criticism of me to note that I have endorsed the idea of a single-payer health care system, but that is because neither Republicans nor Democrats are now willing to abandon the principle that the government should guarantee access to health care for everyone, and I am simply stating that ‘Medicare for all’ is the most efficient way to accomplish that, even though I have also said that our health care quality will be degraded. This does not mean that I am endorsing Bernie Sanders’ plan, because I have not yet read it.

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