Venezuela: Poster Child For Socialism

There is no more recent example of the many theoretically apparent pitfalls of socialism coming to life than in Venezuela. The South American nation is but the latest example on the long list of countries to have fallen victim to the siren’s song of a socialist utopia. While over the past decade journalists like Michael Moore, politicians like Bernie Sanders and economists like Joseph Stiglitz have praised the so-called socialist “economic miracle” in Venezuela, with hyperinflation now leading to starvation and millions fleeing the country, it is inarguable that these praises were premature and wholly unwarranted.

Unfortunately, economist turned political hack Paul Krugman still to this day carries on the tired line that the Venezuelan government simply “mismanaged” and are corrupt, and will not admit that this situation arose from problems inherent to socialist ideals and policy. I aim to show how feeble this line of thinking is. What’s more, what may be the final months of the Maduro government are serving as a reminder of how even socialist regimes ironically rely heavily on the successes of capitalism to maintain the last vestiges of their socialist society.

Political Philosophy Has Consequences

The Bolivarian Revolution, led by the late Venezuelan President Hugo Chavez, began in 1999 under the guise of snuffing out imperialism, corruption, and inequality. In practice, this meant implementing nationalist politics and a state-run socialist economy. With a slogan like, “Motherland, socialism, or death,” it would seem that the Bolivarian Revolution should have been seen for what it was from the very outset – the beginning of the end for the Venezuelan economy. The failure of the aforementioned journalists, politicians, and economists to foresee economic and political ruin as the necessary outcome of such a “revolution,” despite the long list of historical evidence that would make such optimism clearly undeserved, speaks not only to their ideological bias but also to their poor understanding of the very foundations of economic and institutional success.

Many still to this day will not admit that the devastation witnessed in Venezuela is a problem inherent to Socialism. They claim that Venezuela is not a model of “true socialism”, but of autocracy, and blame the ills of the government and economy on corruption. However, it has long been evident that the historical correlation between the rise of tyrannies and state-run socialist economies are actually causal relationships. As Mises stated, “The idea that political freedom can be preserved in the absence of economic freedom, and vice versa, is an illusion.” Decades before Venezuelan’s were planning their revolution Mises had already observed that “Tyranny is the political corollary of socialism, as representative government is the political corollary of the market economy.” To suggest otherwise is to ignore economic and political history.

In lieu of capitalism, socialism puts the fate of individuals in the hands of bureaucracies. Bureaucracies cannot be managed by economic calculation like businesses in a capitalist economy and are therefore destined for bloat, inefficiency, and mismanagement. As Mises wrote, “Bureaucratic conduct… is conduct bound to comply with detailed rules and regulations fixed by the authority of a superior body. It is the only alternative to profit management. . . . Whenever the operation of a system is not directed by the profit motive, it must be directed by bureaucratic rules.”

The alternative philosophy of economic and political liberalism, which originated from the age of enlightenment and places the rights of the individual over that of society at large, has thus been in the crosshairs of socialist do-gooders and unabashed tyrants since its origins. The relationship between political philosophy and material wellbeing is not a mystery given that the political philosophy of a nation is the foremost determinant of its economic policies. A political philosophy rooted in foundational principles of private property rights and individualism promotes the market exchange and innovation that allows for an abundance of material comforts like food, shelter, and medicine. Only a legal framework built on the sovereignty of private property rights allows individual citizens to own the means of production, to negotiate and depend on enforceable contracts and gives rise to the capital accumulation and investment that causes entrepreneurship and capitalism to flourish.

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Troy Vincent is a 2011 graduate of Mises University and has a BS in economics and public policy from Indiana University. Since 2013 he has worked in energy economics for private sector research and ...

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