Venezuela an abject lesson in the evils of socialism
31 January 2019
By Nyunggai Warren Mundine AO
Venezuela’s socialist experiment is approaching its inevitable demise with Nicolás Maduro’s presidency on its last legs.
Venezuela is in an economic and political crisis because of socialism. In 1998 Hugo Chavez was elected President. In time he took control of the courts and legislature, re-wrote the Constitution and began his socialist revolution. Government seized private property including media, oil and power companies, mines, farms,, banks, factories and even small businesses like grocery stores.
Twenty years on Venezuela’s economy has collapsed with massive hyperinflation and huge shortages of power, food and medicine. People are so hungry they’ve resorted to eating their pets and local zoo animals. Over 3 million people have fled the country.
Socialism always leads to poverty. Venezuela is suffering just like the communist countries in Eastern Europe, Asia and Central America. Many of the world’s poorest countries are ones that embrace or have in the past embraced socialism. African countries widely adopted socialist economics after shedding their colonial past as did India and Sri Lanka.
In a free market economy, individuals can set up their own businesses. In socialist countries government either owns or controls all industry. Karl Marx described this as controlling the “means of production”.
Imagine living in a country where government controls all farming, banking and manufacturing.
Imagine if the only place you could buy food was from a government owned shop. Imagine if you had to rely solely on government for your clothes, car and housing.
In socialist countries government decides what and how much gets produced. In a free market economy, businesses produce things people want to buy and compete with each other to do so. This encourages innovation and ensures the shelves are always full. Everyone’s quality of life improves.
Venezuela is poor because it faithfully implemented socialist ideology. Poverty is the natural consequence of a system that stifles innovation and freedom.
The Left claim Nordic countries are examples of prosperous socialism. This is a myth. Nordic economies are driven by free markets, private sector business and free trade. People own private property and invest capital. Nordic governments don’t control the means of production.
Bernie Sanders pushed this myth during his 2015 election campaign. It prompted Danish Prime Minister Lars Løkke Rasmussen to publicly rebuke it. He said:
"I know that some people in the US associate the Nordic model with some sort of socialism. Therefore I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy …The Nordic model is an expanded welfare state which provides a high level of security for its citizens, but it is also a successful market economy with much freedom to pursue your dreams and live your life as you wish”.
Rasmussen was spot on. Having a generous social safety net isn’t the same as a socialist economy. In fact, a free market economy is essential for the social safety net.
How do Nordic countries raise the tax revenue to fund social programs? Their citizens earn good incomes because of the jobs and opportunities provided by the private sector; their companies make good profits because the free market system enables them to prosper.
Socialists have it back to front. Governments don’t create prosperity. The free market creates prosperity which, in turn, allows governments to provide things like health care, childcare, aged care and support for the unemployed.
Venezuela can’t afford to help its poor because it has crippled private business. Chávez made laws capping the price of basic goods like flour, cooking oil and toiletries to make them more affordable for poor people. So Venezuelan businesses reduced or stopped producing these goods because it became uneconomical to do so.
Now there are huge shortages. And any goods that are on the shelves are unaffordable anyway due to hyperinflation.
Venezuela has massive oil resources. Early in its socialist revolution the government paid for things with oil money but eventually wealth reserves run out. And with a now nationalised industry there’s no incentive for investors to inject the capital necessary to generate new production or keep the industry strong. So oil production has steadily declined as have government oil revenues.
Don’t be so naïve to assume Australia could never be brought to its knees by socialism. Our current prosperity won’t shield us. Venezuela was once the wealthiest country in South America.
The socialist movement in Western politics is growing. The US Democrats, once dominated by free market supporters and whose 1993 Presidential campaign coined the slogan “It’s the economy, stupid”, is increasingly dominated by shrill socialists who think government generates wealth.
The socialist-Left is determined to bring its model to countries like Australia and history tells us there’s almost nothing it won’t do to achieve this. Including overturning democracy.
Colin Powell once said “bad ideas don’t die simply because they are intrinsically bad. You need people who will stand up and fight them, put themselves at risk, point out the weaknesses, and drive stakes through their hearts.” Venezuela is a live example.
This article was first published in the Daily Telegraph on 30 January 2019.