How Venezuela Struck It Poor | Hacker News Reader

How Venezuela Struck It Poor

foreignpolicy.com

62 pointsdsr1225 comments

It seems like Venezuela was hit with a perfect storm of extremely unforgiving factors. The combination of the erosion of rule of law, populist leaders who are ignorant of economic management, and the resource curse keep driving Venezuela into a downward spiral. I have a feeling things will get even worse before they get better.

Perfect storm makes it sound like there was any randomness involved in Venezuela's downfall. However it was predictable from the start. It's been known for a long time that socialism always leads to extreme poverty. As we say in Russia, don't step on the same garden rake twice and expect a different result.

I think it’s just American propaganda to blame this on socialism. You had a politician with a miltary background who knew nothing about oil destroy an oil company. Norway is fairly socialist - distributing the gains of oil amongst it’s people, and it’s doing quite well.

What you had in Russia was statism not socialism - power and wealth were concentrated in the communist party rather than shared with the people.

And there is that meme again, people fail to understand what socialism is. Social policies or redistribution don't make a socialist state.

Norway is a liberal democracy. The workers don't own the means of production there.

And the Soviet Union was indeed a socialist state. Statism and socialism aren't mutually exclusive, and being both is exactly the point of a dictatorship of the proletariat. That it didn't bring what it promised is just one more tired argument. Scotsmen are never true socialists for some reason.

All in all, Venezuela's woes aren't all to blame on socialism, but you can't really help but point out that it's a direct application of the principles layed out in The Road to Serfdom. The State grew by violating private property to redistribute it, scared off any outside investment, consolidating into an all-in policy on oil. And that investment had to be controlled, which means loyalty became more important than competence to recruit oil industry officials. And the rest was just one market fluctuation away.

The workers didn't own the means of production in Venezuela either. Businesses there are 90% privately or publicly owned.

This is why I wouldn't blame it on socialism per se. It was the stated goal of the socialist government however to get there. And I'd rather argue that this aim partly caused the outcome.

In fact I feel this is the main miscommunication that causes the "it wasn't real X" debate. People use the term X to refer both to the goal and the method of implementation.

While in theory that’s true, Venezuela also has strong government-imposed price controls backed by a violent militia.

Nation owned is still publicly owned, not ran by workers.

This is exactly the same thing that happened to originally collectivist farming in Soviet Russia - it quickly got nationalized or virtually nationalized by centrally mandated quotas.

“Giving it to the people” is code for government ownership.

>> It's been known for a long time that socialism always leads to extreme poverty

I don't think this is a well known, or even considered true. Take the biggest socialist countries, Russian and China. Compare them to what the conditions were like in those countries before socialist states took over. You will see massive improvements.

Exactly. Not to mention the Soviets were able to beat the US in almost all steps of the space race, starting with the first satellite as soon as 1957! I'd say what the soviet style of economic development was very good for was rapid industrialization from the ground up.

I'm sympathetic to this position, but I don't know if it's the whole story. Russia, before the revolution, was a country of extremes. On the one hand, there were farmers who were living in a similar manner to 5th century peasants. On the other, there were some of the largest industrial complexes in the world.

I think the Soviets did achieve incredible things, but I think that's largely the result of abandoning profit as the sole criterion of whether an activity is worthwhile: capitalist societies tend to spend most of their productive labour on keeping profitable hamster-wheels spinning (like the housing market, for instance).

I have yet to meet an ex-Soviet citizen who is not of this opinion.

It's only far away leftists/communists that are still of this opinion. They still preach that political decision making should be independent of economic and market factors (in other words: they should be elected/conquer power (social democrats/marxist view) and make decisions ignoring economic reality).

And of course, please ignore that they were largely singing the praises of Chavez and Maduro when this problem was just getting started. Sentences like "Finally a leader that stands up to big banks" and so on were common.

So not only were they singing the praises of these disastrous leaders. They were explicitly calling out the cause of this economic destruction as the best thing ever. And of course, now the consequences become more clear, they must distance themselves from it just like they distance themselves from the fact that the biggest communist state to ever exist voluntarily started a bigger holocaust than Nazi Germany ...

Not that I expect this will convince you of the problems with ignoring economics, but I do hope this can at least make you VERY careful in considering such ideas and give at least some time to looking for problems.

China is an awful example. State-directed socialist policies led to one of the worst losses of life in human history.

Life expectancy went up during communist rule. See https://www.google.co.uk/publicdata/explore?ds=d5bncppjof8f9... There are plenty of capitalist states and policies that have resulted in huge amounts of loss of life.

China, when it was actually socialist and redistributing wealth, took itself back 100 years and probably produced more human suffering than any other event in world history. So yea, perfect example. Then they reformed and decided to maintain the propaganda but in actuality become capitalist, they became the biggest success story in history. Today, China is more capitalist than the USA. They provide less social services to their people. A few wealthy people control the means of production, and use it to get returns which they invest in more production.

Russia hung on for a while, caused the second largest amount of human suffering in history (only second because they had way less people to start with), and eventually economically collapsed despite having incredible natural resources. They rebuilt along capitalist principles and were doing well until recently. I've read some very interesting articles which talk about how it is almost mathematically impossible to create a smoothly functioning planned economy the way Russia was trying to do it. I wish i could remember where they were. They had smart people who really tried. When the incentives are not lined up properly for the workers and managers to benefit directly from their own production, it is just too hard to control all the variables.

It's worth noting that many modern proponents of democratic socialism have learned these lessons already and reject state control as the sole means of 'worker ownership'. Socialism and Co-operation are on a collision course. We are working more towards co-operative ownership, mutualisation and municipal ownership based solutions which take the best of liberal markets, where appropriate, and combine them with fair worker and community ownership models.

What’s the definition of markets being appropriate, and what’s your course of action when you decide they ceased to be?

Basically wherever there's not a natural monopoly, otherwise markets are generally appropriate. Examples of natural monopolies generally include things like water, rail and healthcare where competition does not easily take place either because of its reliance on exclusive access to limited natural resources, space or just the vast upfront cost of entering into competition because of infrastructure. Where there is, sometimes the state is the right thing to run it (either directly or maybe as a part of an independent body which receives state funding) - sometimes it's better broken down into municiple level entities and run at the local level.

Would you be open to exploring the idea that natural monopolies are in fact anything but natural, being instead a result of government intervention?

They are not. Please read up the story on forests and lumber business in the United Kingdom.

Also what happened to certain kinds of river transport when cities happened to privatize parts of rivers with tariffs.

Or desirable farmland in the United States more recently. (vs bisons)

Usually what happened is that the strongest choke point or first mover on a truly limited resource gets to monopolize or.

Could you provide some links?

I have explored it and came to the conclusion that it cannot be correct. In the absence of government intervention, companies are free to basically form their own government. They would control labour and resources, hence power, and so create the rules. This is exactly equivalent to large companies lobbying government in their favour, except you cut out the middle man.

Look at the City of London (not to be confused with city London that surrounds it https://en.wikipedia.org/wiki/City_of_london#Elections ) for example. In the square mile, businesses put forward representatives and vote on them, who become aldermen. This is the kind of arrangement you encourage without government intervention. Now you might think "the City of London is pretty successful" - and you'd be right it is a lovely tourist spot, but it is also a hive of massive, global corporations with rents that are totally unaffordable for the majority of people working in the area and office space that is prohibitively expensive for anyone looking to start-up in the area. Trust me, nobody is pulling themselves up by their bootstraps in the City - it's all about climbing greasy poles.

Great reminder that populists on both sides, not just the right wing ones, are dangerous.

Some definitions for 'populist'

" (Government, Politics & Diplomacy) a political strategy based on a calculated appeal to the interests or prejudices of ordinary people" and

" the political doctrine that supports the rights and powers of the common people in their struggle with the privileged elite"

Unfortunately use of the emotive and clichéd word 'populist' shuts down any further discussion, a bonus point for most people who use it.

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