Venezuela's Road to Serfdom

Fire of Liberty

Here's further proof of why Hugo Chavez's Marxist style revolution in Venezuela is bound to end in a failure much like that of the Soviet Union. The folks of Venezuela are venturing down their own "Highway to Hell" especially after the most recent shortfall of goods in the stores after the government initiated its horrific price controls on various staples like coffee, sugar, and beans thus leaving "the people" to go without because Comrade Chavez thinks he knows better. Just look at what the Financial Times had to say about Chavez's most recent escapade in socialist economics:

President Hugo Chávez introduced caps on the prices of basic goods three years ago, in theory to ensure lower costs for the poor. But while prices have since been lifted periodically to offset rising output costs, suppliers say the increases have been too slow. In some cases, production costs exceed the official price.

Coffee processors, for example, buy beans at 6,200 bolívars per kilogramme, equivalent to $2.48 (€2, £1.50), while roasting and packaging costs raise the cost to 7,440 bolívars. The government is preparing an official retail price of 7,400 bolívars.

Gaetano Minuta, head of the Mérida coffee producers’ association, said that the new official price for coffee would lead not only to financial losses but possibly to the loss of this year’s harvest.

“There are more than 30,000 tonnes of beans in the coffee-producing zone that are on the brink of being lost because of the government’s refusal to allow us to live in dignity,’’ he told local media. In an effort to shift some supplies to market, National Guardsmen on Wednesday began raiding private coffee warehouses near Caracas.

Samuel Ruh, head of the consumer protection agency, said 300 tonnes of seized coffee would be distributed through Mercal, the government-run retail chain. Supplies of powdered milk and chicken have also become scarce.

Economists have long predicted that price controls would lead to shortages of controlled goods and foster a black market for some products.

Since the imposition of foreign exchange controls, a black market has blossomed in which the “parallel’’ dollar sells at about 2,500 bolívars, a premium of almost 20 per cent over the official rate of 2,150 bolívars.

One day these folks who want to keep the price of goods down would stop imposing the heavy hand of the government and just make way for the markets. Now I know this is my rudimentary economics but if you let markets take their course, then people going to the stores will have a greater impact on how many goods are available and the level of the good's prices. With an active market economy with a broad selection of goods to choose between the folks going to the will either buy less of this or that good because they deem it too expensive or will simply seek out an alternative good that serves the same purpose but with a quasi "command economy" like the one being imposed by Chavez will only stifle competition between various companies because they are forced to charge a set rate that ignores how much the company put into the product to get it to the market.

Hopefully this recent incident will spark the people in the streets of Caracas and throughout Venezeula to realize that Chavez's forays into economics are leading them down a path of ruin. I hope this will be the start of the end of El Jefe II maniacal rule but then again he'll probably find a way to blame it on the US and wiggle away from the clutches of "the people" once again but his luck running near empty.