no merchant left standing.

One thing you can count on when it comes to Socialists is that they don’t understand economics.  (It stands to reason that this is one of the main reasons they consider socialism viable, despite all historical evidence to the contrary.)

Venezuela continues on the path its Glorious Leader has chosen for his people: becoming Latin America’s East Germany.  In another five years, there’ll be no private business left standing in the country, and formerly-flush-with-petrodollars Venezuela will be an economic basket case.  As Zimbabwe has shown us—there’s nothing that’ll ruin a country’s economy more quickly than a man in charge who thinks he can suspend the laws of supply and demand with the stroke of a pen.

Funny how creating the New Socialist Man always involves putting the military on the streets sooner or later, huh?  It’s downright scary to think that Chavez is considered a shining example of progressive leadership among the intelligentsia in our own country…

(H/T to Tam.)

9 thoughts on “no merchant left standing.

  1. BobG says:

    And after he runs the country down the drain, he’ll blame it all on the “imperial capitalists”.

  2. Schmidt says:

    But they know how to steal… and the rhetoric is the same.

    This devaluation.. pfff. Czechoslovak communists did a “currency” reform. A “hammer on speculators”.. Meaning, all old money was to be exchanged for new one. Catch was, say for the first 1500 crowns you got 300 new ones, but for the remainder 1/50.. etc. Unless you were a ‘capitalist element’, in which case, you were out of luck..

    Needless to say, private ownership of precious metal was considered treason, etc.

    Funny thing is, that the US gov’t establishment has been doing pretty much the same thing, in essence, albeit stealthily. Dollar used to be worth a lot more…

    http://www.aier.org/research/briefs/1826-the-long-goodbye-the-declining-purchasing-power-of-the-dollar

  3. wolfwalker says:

    I don’t understand economics either, and I’m hardly a socialist.

    Supply and demand, I get. But if supply doesn’t change and demand doesn’t change, then why does it matter what currency you’re using or what numerical price you put on an item? Put another way, why does price-fixing always fail, even when the items involved are domestically produced?

    For that matter, does price-fixing always fail? As I recall my history, the Roosevelt administration imposed rigid wage and price controls during WW2, and we didn’t see economic chaos. Why did it work then? Why won’t it work now in Venezuela? (Note that I am not asking whether it will fail in Venezuela; I know it will. I’m asking why it will fail in practice, when the concept seems sound.)

    • kneil says:

      @wolfwalker:

      The change in the exchange rate means that a Venezuelan merchant will need to pay his foreign suppliers twice as many Bolivars for his next batch of inventory or the foreign supplier will have to accept half his usual price or some combination thereof. Supply and demand most assuredly have shifted.

      This change will ripple through the economy because increased prices on imported good will force consumers to adjust their spending on everything they buy. It will also shift demand between domestic and foreign good that fill similar needs.

      As to WWII, it worked poorly, but was aided by two things.

      Propaganda campaigns urging people to expect and accept a messed up economy and to treat dissention as un-patriotic defeatism.

      Markets will clear always, somehow. It’s like damming a river, you can back the water up for a little while, but it will always find a way forward and people will always find a way to exchange what they have for other things to they prefer. Thus, employers who couldn’t offer higher pay to attract labor started offering benefits instead because it wasn’t technically income. We are still dealing with the resulting mess half a century later.

    • aczarnowski says:

      Price controls are an act of fiat, not reality. They don’t work because they invariably make producing the controlled product a loss for the maker. Only idiots and governments deal with a loss per sale by increasing volume.

      WWII is not a example of price controls working. Shortages were rampant. WWII was simply a case where some extra fiat was accepted with the expectation of payback later (i.e. not being killed by hostile nations). Extraordinary powers are not unusual during periods of war.

    • aczarnowski says:

      BTW: I found The Alpha Strategy by John A. Pugsley worth reading.

      It has kind of a kookie survivalist reputation, but it’s free online and not that long a read. What’s to lose?

      I found the first half was a reasonable and informative summary of economics and the tricks played in its name. The second half is about avoiding inflation and YMMV there.

  4. Rick R. says:

    Wolfwalker,

    Keep in mind that, during a major war where war production demands severely warp the economic framework, you are dealing with an artificial situation.

    Warfare stimulates economies, like arson stimulates home building — and for the same reason. The economic repercussions of major conflict are basically the same as if the governement prints out as much money as they like, and piles all the excess out back, soaked in gasolene. Apply match.

    Roosevelt was able to use tight controls on prices and wages becuase his administration, in large part, controlled all production.

    Now, PAYING for that after the war would have been crippling — if it wasn;t for the fact that the US came out of WWII as pretty much the ONLY inducstrial superpower left intact. We were able to sweat off the inflationary excesses of teh war years by transitioning wartime production rates to consumer goods and export goods (including most especially heavy machine tools to rebuild the rest of the world’s industrial capacity). Failing that need for American industrial might post-war that allowed us to gear back down without a sudden shock, it would have made the 1929 Great Depression look like the 1992 recession.

  5. Wow, Marko, can you call ’em or what? Didn’t you pretty much outline this when Chavez started all this crap in the first place?

    Imma start calling you Magic 8-Ball Kloos.

    tweaker

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