
Venezuela’s death spiral is getting worse - JumpCrisscross
https://www.washingtonpost.com/news/wonk/wp/2016/08/08/venezuela-is-stuck-in-a-death-spiral-and-its-only-getting-worse/
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jimmywanger
I've been following this fairly closely.

It seems that the main thing that causes this is government control of
production, and price controls.

The Nordics (held up often as a "good" model of socialism) is a welfare state.
They increase taxes on the rich, and redistribute the money to the poor to
narrow societal inequality. They do _not_ mess around with the basic laws of
supply and demand, or nationalize production mechanisms.

A socialist government sets price caps for certain goods, and nationalizes
companies who refuse to produce for less than their costs, i.e. nationalizing
production mechanisms. Also they messed around with currency exchange rates.

Econ 101 will tell you that if you set artificially low price controls on
goods, you will run into shortages, as there is no incentive to produce. And
if you nationalize factories and replace talented employees with party hacks
who toe the line, production will drop further, exacerbating the problem.

Venezuela was able to avoid this for a while by importing goods with oil
money, but even when oil prices were high, they had shortages of goods.
[https://foreignpolicy.com/2015/06/10/venezuelas-last-hope-
le...](https://foreignpolicy.com/2015/06/10/venezuelas-last-hope-leopoldo-
lopez-maduro/) (search for "during the Chavez years")

Now they can't afford to import food or raw materials anymore, because they
have no hard currency reserves, and 100 bolivars (the largest denomination
bill they have) is worth roughly ten cents, and the government won't change
them into dollars at any rate unless you're connected.

To their surprise, you can't just decide to product food and start up
factories after a multiyear hiatus. You can't spin up crops, and agricultural
and industrial institutional knowledge has been lost, or has fled the country.

------
gozur88
This is the typical "disease" of South and Central American democracy. Voters
want to have a Northern European welfare state. And who could blame them? But
they don't have the economy they need for a Northern European welfare state.

Eventually Maduro will be replaced in a coup, or there will be a communist
revolution. After a few years the government will transition to (mostly) free
market democracy again, and we'll see a repeat of the whole cycle.

~~~
Randgalt
Venezuela has the largest oil reserves in the world and they still failed.
That's a special kind of insanity.

------
Randgalt
Socialism - the plague that keeps on killing. They'll keep trying it until
they kill everyone. I remember when hipsters were praising Chavez's miracle.
Where's Sean Penn now? Disgusting.

~~~
pkulak
Capitalism has failed spectacularly before, and socialism is succeeding in
many places right now. And beyond that, I can't think of any pure example of
either that has succeeded. Somewhere in the middle is usually what ends up
working the best.

~~~
paulddraper
Where has capitalism failed spectacularly?

I can only think of counterexamples. Though triggered by speculation, after
the first few months, the Great Depression was sustained by increased tariffs
and the government crowding the private market. The 2008 recession was caused
by the government meddling in loans.

And on the other side...communism has failure after failure: China, USSR,
North Korea. Socialism too, ranging from mild (rampant unemployment in France
and Spain) to severe (Greece's finances, or the reoccurring South American
crises).

What spectacular failures were you thinking of?

~~~
abawany
Just asking: how would you classify the US Recession of 2008 (esp. if the
taxpayer-funded bailouts had not been done), the 1929 US Depression, and the
world wealth imbalance? As for Venezuela, what role do you think the oil
market price collapse and the US embargo had on their economy? Also, it is
unusual that you classify Greece as socialist - one almost imagines that for
you, socialism is synonymous with failure.

~~~
paulddraper
> it is unusual that you classify Greece as socialist

[http://www.cnbc.com/2015/07/01/greek-disaster-is-all-
about-s...](http://www.cnbc.com/2015/07/01/greek-disaster-is-all-about-
socialism.html)

In fact, up until the debt crisis, the Panhellenic _Socialist_ Movement
(PASOK) was Greece's largest political party. Naturally, it has fallen out of
favor since then.

------
DigitalJack
It wouldn't be a death spiral if it wasn't.

------
vondur
I'm honestly surprised that the US hasn't gotten involved yet. It's now at the
point where it is a humanitarian crisis.

~~~
PhantomGremlin
Hate to be cynical about it, but ...

Sorry. That's so 20th century. The USA used to openly meddle there all the
time. E.g. Panama wouldn't even exist without our help.

Then we decided to be a little more subtle. Well, that didn't work so well.
Quite the thing about 30 years ago was Iran-Contra[1], where we were trying to
fight the communists in Nicaragua. But I guess that was the wrong kind of
help. A real domestic political shitstorm ensued. The crap was all over the
airwaves for literally years. And, lo and behold, Daniel Ortega is now back in
charge.

No matter what the USA could do in Venezuela, there would be plenty of anti-
American wailing, gnashing of teeth, and propaganda that would immediately
erupt. Domestically, from all the banana republics in Central and South
America, and from countless countries all over the world.

Not worth it for the USA. Very little upside.

And it really, really sucks for all the people who are literally starving in
Venezuela right now.

And, besides, how are Iraq and Afghanistan working out, lately? Anybody know?
There should be some really stable democracies there by now, considering the
billions, nay trillions of dollars, we've spent there recently in "nation
building".

[1]
[https://en.wikipedia.org/wiki/Iran%E2%80%93Contra_affair](https://en.wikipedia.org/wiki/Iran%E2%80%93Contra_affair)

~~~
geezerjay
> There should be some really stable democracies there by now

Why would anyone ever assume that?

I mean, the country was essentially started from scratch after the 2003
invasion, the constitution of Iraq was ratified in 2005, and 5 years later the
coalition forces abandoned Iraq and left the fragile regime to fend off for
themselves. This happened in a moment in time when 3 or 4 neighboring regimes
were interfering directly in Iraq and the past ruling class, civilian and
military, (i.e., the ones who actually had any experience running things) was
banned and forced without any option beyond mobilizing for a rebellion.

No wonder Iraq succumbed into a civil war a couple of years after the US
abandoned it.

