Actions
Have Consequences! Ask Venezuela, by Tyler
Durden, 6/9/17 Authored by Bill Bonner via InternationalMan.com,
Let’s
turn to an economy getting doomier by the day: Venezuela. Actions have
consequences. In public policy, it is impossible to say what the
consequences will be. There are too many delusions and too much
smoke.
Take a policy said to
eradicate city rats. Its real purpose is to reward a large political donor who
owns a pest control firm. It ends up killing the pigeons.
Often, policies with
clear and obvious purposes end up producing outcomes completely at odds with the
stated objectives. Prohibition, for example, increased the number of drunks.
The War on Drugs fattened drug dealers’ profits.
The
War on Poverty has
made poverty respectable… even attractive… to poor people. The War on Terror has probably made a million otherwise sane and
sensible Muslims yearn to blow up something with a U.S. flag on it.
Most often, these
outcomes are not exactly surprises. Look more closely and you will often find,
hidden behind the promises… a pest control firm!
News reports, for
example, tell us that U.S. arms dealers are about to get a $110 billion payday.
President Trump announced a weapons deal with the Saudis – the biggest in
history
Into
the Abyss
Although the exact consequences
of public policies are obscure, the patterns are familiar. Win-lose deals always reduce total
human satisfaction. Win-lose deals – unless they are imposed by petty criminals
or local bullies – require government insistence. Otherwise, no one would take
the losing side.
So the more government
there is… the more active, ambitious, and overbearing it is… the more win-lose
deals subtract from the sum of human happiness.
A month ago, as many as
a million of these disappointed people demonstrated against the government of
Nicolás Maduro in Venezuela. It was the “Mother of All Protests,” they said. What was their beef? Inflation
is running at about 700% a year. Last year, GDP plunged 19%. Food staples –
beans, rice, bread – are disappearing. Families cross the border into Colombia to
buy toilet paper. Hospitals have no medicine, no equipment, not even rubber
gloves and disinfectants. Sometimes, they have no electricity. Deaths of
premature babies have increased 10,000% in the last five years. How
did a country make such a mess of itself?
Win-Lose - In a sense, the country was a
victim of its own good luck… and then a victim of its own bad judgment. The good luck happened in 1914 when the
first oilfield was drilled. The money followed. By the 1950s, with a basically
market-oriented government, Venezuela rose to become the world’s fourth-richest
country in terms of GDP per capita.
Today, the country has
the largest proven oil reserves in the world – 297 billion barrels of the stuff
compared to 267 billion barrels in Saudi Arabia.
But good luck allows you to
make bad judgments. With the oil wealth flowing, Hugo Chávez, who described
himself as a Trotskyist two days before his inauguration as president in 2007 –
could impose win-lose deals on the whole economy. Key industries were
nationalized. Price controls were put in place. Wealth was redistributed.
Win-lose deals can
redistribute wealth but only to the extent win-win deals create it. Take away
the win-win deals, and the wealth soon runs out… as it did in Cuba and the
Soviet Union. Now the tank is about empty in
Venezuela, too.
Banana Republic - It doesn’t matter what you call
it – government is always a means for the few to exploit the many. The few use every resource available to
them to keep the hustle going, with special attention given to manipulating the
gullible mob.
The typical citizen
rarely has any idea of what is going on and doesn’t have much curiosity about
it. As long as he has credit for a new pickup and a champion who promises to
smite his enemies, the common man will go along with almost anything.
But the Venezuelan auto
industry has been ruined. And there’s no credit available. So there are few new
pickups on the streets, and much of the public has turned against the
government.
Not surprisingly, the
policies that destroyed Venezuela delighted U.S. economists and politicians –
who were eager to impose win-lose deals of their own.
In 2007, Nobel
Prize-winning economist Joseph Stiglitz praised the “positive policies” in
health and education of the Chávez government.
And in 2011, Bernie
Sanders wrote: These days, the American dream
is more apt to be realized in South America, in places such as Ecuador,
Venezuela and Argentina, where incomes are actually more equal today than they
are in the land of Horatio Alger. Who’s the banana republic now?
Sanders had no idea what was
really going on in Venezuela. But he was right about what was going on
in the U.S. It was on its way to becoming a banana republic.
Only
without the bananas. Or the republic
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