Venezuela’s death spiral is getting worse | Hacker News Reader

Venezuela’s death spiral is getting worse

washingtonpost.com

I've been following this fairly closely.

It seems that the main thing that causes this is government control of production, and price controls.

The Nordics (held up often as a "good" model of socialism) is a welfare state. They increase taxes on the rich, and redistribute the money to the poor to narrow societal inequality. They do _not_ mess around with the basic laws of supply and demand, or nationalize production mechanisms.

A socialist government sets price caps for certain goods, and nationalizes companies who refuse to produce for less than their costs, i.e. nationalizing production mechanisms. Also they messed around with currency exchange rates.

Econ 101 will tell you that if you set artificially low price controls on goods, you will run into shortages, as there is no incentive to produce. And if you nationalize factories and replace talented employees with party hacks who toe the line, production will drop further, exacerbating the problem.

Venezuela was able to avoid this for a while by importing goods with oil money, but even when oil prices were high, they had shortages of goods. https://foreignpolicy.com/2015/06/10/venezuelas-last-hope-le... (search for "during the Chavez years")

Now they can't afford to import food or raw materials anymore, because they have no hard currency reserves, and 100 bolivars (the largest denomination bill they have) is worth roughly ten cents, and the government won't change them into dollars at any rate unless you're connected.

To their surprise, you can't just decide to product food and start up factories after a multiyear hiatus. You can't spin up crops, and agricultural and industrial institutional knowledge has been lost, or has fled the country.

This is the typical "disease" of South and Central American democracy. Voters want to have a Northern European welfare state. And who could blame them? But they don't have the economy they need for a Northern European welfare state.

Eventually Maduro will be replaced in a coup, or there will be a communist revolution. After a few years the government will transition to (mostly) free market democracy again, and we'll see a repeat of the whole cycle.

Venezuela has the largest oil reserves in the world and they still failed. That's a special kind of insanity.

Socialism - the plague that keeps on killing. They'll keep trying it until they kill everyone. I remember when hipsters were praising Chavez's miracle. Where's Sean Penn now? Disgusting.

Capitalism has failed spectacularly before, and socialism is succeeding in many places right now. And beyond that, I can't think of any pure example of either that has succeeded. Somewhere in the middle is usually what ends up working the best.

Failed at what exactly? Killing people? Various forms of Socialism are responsible for approx 100 million deaths in the 20th Century. Capitalism has brought more people out of poverty than any other system in human history. After all, Capitalist countries have to build walls to keep people out while extreme Socialist countries build walls to keep them in.

Also worth remembering that capitalism is not an -ism dreamed up by some theorist. 'Hey, guys, I've invented capitalism!'. As Tom Sawyer understood very well when painting his aunt's garden fence, it's the intuitive natural inclination of all peoples to want to trade goods and services with others.

One thing it has failed at is being sustainable. We'd already need multiple earths to sustain this thing. Capitalist countries have caused their share of deaths as well. Capitalism by itself fails at providing equal opportunities, you need socialism for that. Capitalism fails at a lot of things.

Where has capitalism failed spectacularly?

I can only think of counterexamples. Though triggered by speculation, after the first few months, the Great Depression was sustained by increased tariffs and the government crowding the private market. The 2008 recession was caused by the government meddling in loans.

And on the other side...communism has failure after failure: China, USSR, North Korea. Socialism too, ranging from mild (rampant unemployment in France and Spain) to severe (Greece's finances, or the reoccurring South American crises).

What spectacular failures were you thinking of?

Just asking: how would you classify the US Recession of 2008 (esp. if the taxpayer-funded bailouts had not been done), the 1929 US Depression, and the world wealth imbalance? As for Venezuela, what role do you think the oil market price collapse and the US embargo had on their economy? Also, it is unusual that you classify Greece as socialist - one almost imagines that for you, socialism is synonymous with failure.

That tax is still being paid by capitalism. It is a tax on income made, or future income going to be made (that is when a country debt fund the shortfall in tax revenue).

> it is unusual that you classify Greece as socialist

http://www.cnbc.com/2015/07/01/greek-disaster-is-all-about-s...

In fact, up until the debt crisis, the Panhellenic Socialist Movement (PASOK) was Greece's largest political party. Naturally, it has fallen out of favor since then.

It wouldn't be a death spiral if it wasn't.

I'm honestly surprised that the US hasn't gotten involved yet. It's now at the point where it is a humanitarian crisis.

Hate to be cynical about it, but ...

Sorry. That's so 20th century. The USA used to openly meddle there all the time. E.g. Panama wouldn't even exist without our help.

Then we decided to be a little more subtle. Well, that didn't work so well. Quite the thing about 30 years ago was Iran-Contra[1], where we were trying to fight the communists in Nicaragua. But I guess that was the wrong kind of help. A real domestic political shitstorm ensued. The crap was all over the airwaves for literally years. And, lo and behold, Daniel Ortega is now back in charge.

No matter what the USA could do in Venezuela, there would be plenty of anti-American wailing, gnashing of teeth, and propaganda that would immediately erupt. Domestically, from all the banana republics in Central and South America, and from countless countries all over the world.

Not worth it for the USA. Very little upside.

And it really, really sucks for all the people who are literally starving in Venezuela right now.

And, besides, how are Iraq and Afghanistan working out, lately? Anybody know? There should be some really stable democracies there by now, considering the billions, nay trillions of dollars, we've spent there recently in "nation building".

[1] https://en.wikipedia.org/wiki/Iran%E2%80%93Contra_affair

> There should be some really stable democracies there by now

Why would anyone ever assume that?

I mean, the country was essentially started from scratch after the 2003 invasion, the constitution of Iraq was ratified in 2005, and 5 years later the coalition forces abandoned Iraq and left the fragile regime to fend off for themselves. This happened in a moment in time when 3 or 4 neighboring regimes were interfering directly in Iraq and the past ruling class, civilian and military, (i.e., the ones who actually had any experience running things) was banned and forced without any option beyond mobilizing for a rebellion.

No wonder Iraq succumbed into a civil war a couple of years after the US abandoned it.

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