How Socialism Ruined Venezuela Rafael A
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The A PUBLICATIONustrian OF THE MISES INSTITUTE Vol. 3, No. 5 September – October 2017 PAGE 4 How Socialism Ruined Venezuela Rafael A. Acevedo and Luis B. Cirocco The Austrian | September/October 2017 | 3 The ustrian [email protected] • @jeffdeist with nothing but hostility for markets and private prop- A PUBLICATION OF THE MISES INSTITUTE erty. And unlike Brazil and Guatemala, Venezuela has no From the publisher real libertarian movement or institutions to speak of. 3 Jeff Deist – From the Publisher Nationalized oil, from the fields to the refineries to the Jeff Deist gas stations, has always been the source of the nation’s 4 How Socialism Ruined Venezuela, by Rafael A. Acevedo and Luis B. wealth. Other industries were allowed to languish. With Cirocco W hen our Venezuelan friends Rafael Acevedo and Luis oil prices spiking in the late 1970s, and again in the 2000s, Cirocco arrived at Mises University this summer, we were Venezuelan leaders were able to buy off the public with Mises Institute Membership; 9 welfare, food, and housing, however meager. But with the Coming Events all prepared to hear their firsthand accounts of how crony socialism ruined that beautiful country. We were not fully collapse of crude oil prices in 2008 and 2014, along with 12 A World in Disarray, by David prepared, however, to grasp the severity of the humanitar- the death of Hugo Chávez and his phony “new constitu- Gordon ian crisis. It is unfolding as we speak, with only superficial tion,” the whole rotten system has been exposed. coverage from American media outlets. 15 Healthcare in the Crosshairs, by Michel Accad, M.D. The two men’s personal stories were heartbreaking: would their children ever 18 The Myth of ”Nazi Capitalism,” by have a chance to visit Disney World, or even “In a socialist economy it is only the government’s Chris Calton just a neighboring country, as they had value judgments that count, and the people are done as boys? Would their aging parents deprived of any means of making their own value be able to buy over-the-counter basics like judgments prevail. … Where there is no business aspirin, much less badly-needed prescrip- tion medicines? Would they ever be able to at all, business can be neither good nor bad.” evict squatters from their property, squat- Ludwig von Mises, Human Action ters who enjoy the implicit support of the redistributionist Maduro government and an indifferent police force? How many precious Formerly The Free Market, 1983–2014. toiletries could they realistically get through Published 2017 (six times per year) by All that is left now is a slide into currency debasement, the Mises Institute under the Creative an airport inspection on their return? And would any US riots, and horrific shortages of food and medicine. Venezu- Commons Attribution-NonCommercial cash, which counts as “hard” currency by Venezuelan stan- elans may have a revolution, but without an intellectual 4.0 International License. http:// dards, be seized from them by customs officials? creativecommons.org/licenses/by-nc/4.0/ revolution they are doomed to remain mired in the pov- With the Venezuelan military controlling food distribu- Cover image courtesy of DJANDYW.COM erty of bad ideas. Socialism is absurd in theory, but mur- & DJANDYW.TV AKA ANDREW WILLARD tion, and favorable currency exchange rates offered only derous in practice. via Flickr.com. Page 6 image courtesy of A. to select allies of the regime, corruption and black markets Davey via Flickr.com. are rampant. Cronyism is the order of the day, and every- Can it happen here? The short answer is yes, and polls Publisher: Jeff Deist one lives in fear of speaking openly even to neighbors. indicate a disturbing percentage of Millennials would Editor: Ryan McMaken The landscape may be lush and tropical, but the mood is support an openly socialist candidate. Many of the same Managing Editor: Judith F. Thommesen decidedly Soviet. Occupy Wall Street protestors now fill the ranks of Antifa Design/Layout: Kathy White Contributing Editors: As with all socialist systems, present-day Venezuela and the alt-Right, fighting each other in the streets over David Gordon preferred versions of collectivism. We may not be able to Joseph T. Salerno is marked by vicious poverty and a parasitical yet gilded Mark Thornton ruling class. Sold to gullible westerners as egalitarianism save Venezuela, but we can save America from its own Mises Institute and concern for average people, socialism always makes intellectual vacancy. The material prosperity all around 518 West Magnolia Avenue ordinary citizens far worse off while destroying any hope us is not guaranteed, and it will not simply persist regard- Auburn, AL 36832-4501 for upward mobility. It is truly the ideology of the 1%. 334.321.2100 | Fax: 334.321.2119 less of what our politicians do. All of us bear the burden of [email protected] | mises.org Sadly, Messrs. Acevedo and Cirocco inform us that the doing everything in our power to make sure our children The Mises Institute is a nonprofit “opposition” party in Venezuela offers only a different flavor and grandchildren never know the horrors of socialism in organization. Contributions are tax- of socialism, and a different gang to run it. The country’s America. nn deductible to the full extent of the law. Note: the views expressed in The Austrian are intellectuals, mostly professors educated at prestigious not necessarily those of the Mises Institute. universities in the US and Europe, are doctrinaire statists Je Deist is president of the Mises Institute. 4 || September/October November/December 2017 2015 | The | The Austrian Austrian The Austrian | September/October 2017 | 5 And, ultimately, the lesson we learned is that social- major barriers to trade such as quotas, anti-dumping ism never, ever works, no matter what Paul Krugman, or laws, or safeguards. How Socialism Ruined Joseph Stiglitz, or guys in Spain like Pablo Iglesias say. Other economic controls were few as well. ere It was very common during the years we suered were just a few state-owned companies and virtually no under Hugo Chavez to hear these pundits and econo- price controls, no rent controls, no interest-rate con- mists on TV saying that this time, socialism is being done trols, and no exchange-rate controls. Venezuela right. is time, the Venezuelans gured it out. ey were, and are wrong. by Rafael A. Acevedo and Luis B. Cirocco On the other hand, there was a time when this coun- try was quite prosperous and wealthy, and for a time Ven- ezuela was even referred to as an “economic miracle” in many books and articles. However, during those years, out of the ve presidents There was a time when this we had, four were dictators and generals of the army. Our civil and political rights were restricted. We didn’t have country was quite prosperous freedom of the press, for example; we didn’t have univer- and wealthy, and for a time sal surage. But, while we lived under a dictatorship, we could at least enjoy high levels of economic freedom. Venezuela was even referred A BRIEF ECONOMIC HISTORY OF to as an “economic miracle” VENEZUELA in many books and articles. e economic miracle began a century ago, when from 1914 to 1922, Venezuela entered the international oil race. In 1914, Venezuela opened its rst oil well. Fortunately, the government did not make the mistake of attempting to manage the oil business, or own the wells. e oil wells were privately owned, and in many cases were owned by private international companies Of course, we weren’t free from the problems of a that operated in Venezuela. It wasn’t totally laissez-faire, central bank, either. In 1939, Venezuela created its own of course. ere were tax incentives and other so-called central bank. But, the bank was largely inactive and concessions employed to promote exploration and exploi- functioned primarily defending a xed exchange rate tation of oil. But most industries — including the oil with the US dollar. industry — remained privatized. Moreover, during this period, tax rates in the country MOVING TOWARD MORE were relatively low. n order to understand the disaster that is unfolding in Venezuela, we need to journey through the most INTERVENTIONISM recent century of our history and look at how our institutions have changed over time. What we will In 1957, the marginal tax rate for individuals was 12 Despite the high levels of economic freedom that nd is that Venezuela once enjoyed relatively high levels of economic freedom, although this occurred percent. ere was certainly a state presence, and the existed during those years, government legislation under dictatorial regimes. public sector absorbed 20 percent of GDP. But, govern- started to chip away at that freedom. Changes included ment spending was used mainly to build the country’s But, when IVenezuela nally embraced democracy, we began to kill economic freedom. is was not all at once, of the nationalization of the telephone company, the basic infrastructure. course. It was a gradual process. But it happened at the expense of the welfare of millions of people. creation of numerous state-owned companies, and e area of international trade was relatively free as state-owned banks. at happened in 1950. e Ven- During this year’s Mises University, Rafael Acevedo and Luis B. Cirocco spoke to students of their experiences in Venezuela and how well — and very free compared to today. ere were ezuelan government thus the nation’s long history of growing socialism has impacted the lives of ordinary people. This article is adapted from their presentation. taris that were relatively high, but there were no other began sowing the seeds CONTINUED ON NEXT PAGE 6 | September/October 2017 | The Austrian The Austrian | September/October 2017 | 7 ACEVEDO AND CIROCCO, CONTINUED of destruction, and you our full professor needed to pay almost one year’s salary Nevertheless, a new pro-market leadership must can see the continued for a new sedan.