Venezuela’s Future — and Ours

Venezuelan security forces clash with demonstrators during a protest against President Nicolas Maduro in Caracas, July 22, 2017. (Carlos Garcia Rawlins/Reuters)
The two are not as completely different as we’d like to think.

The United States has resigned in protest from the UN Human Rights Council, which has a long and ignominious record of protecting the world’s worst abusers of human rights. The proximate cause of the U.S. resignation was the council’s unwillingness to act on the matter of Venezuela, where the socialist government of Nicolas Maduro is engaged in political massacres and the use of Soviet-style hunger-terror against its political enemies. Venezuela remains, incredibly enough, not only protected by the Human Rights Council but an active member of it, an honor shared Vladimir Putin’s Russia and its political assassins, the People’s Republic of China and its organ harvesters, and the Castro dictatorship in Cuba with its torturers and al paredón justice.

Venezuela and North Korea could not be more dissimilar in terms of their respective cultures, peoples, and histories. And yet they have arrived in approximately the same place: at the terminus of F. A. Hayek’s “Road to Serfdom.”

I have long argued that about half of our political disagreements are simply cases of failing to agree about the meaning of a word. By “capitalism” libertarians mean the free enterprise of Adam Smith and Milton Friedman, while our friends on the left mean by “capitalism” the shenanigans of the United Fruit Company in Guatemala (it’s always the United Fruit Company!), the crimes of Enron, the purported misdeeds of Halliburton, etc. Libertarians might respond that lobbying the CIA to knock over unfriendly tropical governments is not exactly what we mean by free enterprise, but the conversation rarely advances much beyond that, in part because of the emotional resonances of certain words, e.g. “neocon,” “corporation,” “exploitation,” etc.

Venezuela is what we mean by socialism.

There are many important differences between the U.S. model and the Nordic or Western European models, and tax rates and social spending are only part of that.

Socialism is defined by central planning, which is to say by the subordination of the economy to political discipline. When U.S. progressives talk about socialism, what they usually mean is those nice democratic welfare-statists in Denmark or Sweden, or maybe Germany if they are particularly interested in industrial policy and labor power. European welfare statism has its ups and downs (the occasional bout of right-wing hysteria notwithstanding, it is not obvious that the Norwegians inhabit a post-apocalyptic hellscape; if Oslo represents the end of the world, then Armageddon is shockingly expensive), but those welfare states are attached to largely free economies. Sweden arguably has a more liberal trade regime than does the United States, and most of the Nordic countries had lower corporate tax rates than did the United States until the 2018 tax reform. There are many important differences between the U.S. model and the Nordic or Western European models, and tax rates and social spending are only part of that. We tend to talk about those disproportionately because they are easy to quantify, whereas effectiveness of government and public institutions (which is one place where the Swiss, Canadians, and Germans really outperform the United States) is difficult to evaluate in empirical terms. In spite of our political rhetoric, the debate about whether the top U.S. personal-income-tax rate is going to be 39 percent or 33 percent is not about taking a step toward socialism or a step away from socialism.

Progressives will consider the case of Venezuela or North Korea (the American Left’s longstanding admiration of Castro’s Cuba, and its celebration of Hugo Chàvez only a few years ago, has been memory-holed) and say that the problem with those countries is not socialism but a lack of democracy, political violence and instability, etc. But repression on the Venezuelan model is not extraneous to socialism — it is baked into the socialist cake. Lenin, Stalin, Mao, Castro (and Castro!), Chàvez, Maduro, Honecker, Ho Chi Minh, Pol Pot, the Kim dynasty, Shining Path: No ideology is that unlucky. Violence and oppression is not something that just happens to accompany efforts to impose political regimentation on the economy — which is to say, on private life — but is an inescapable accompaniment to it.

The Venezuelan case is a textbook example of the evolution of socialism. While the Soviets and the Maoists had intricate five-year plans, Venezuela had essentially one big plan: Use the profits from state-run oil companies to fund a massive welfare state, and use the leverage thus gained to fortify support for Hugo Chàvez and his political party until they achieved power sufficient to move Venezuela’s assets and its people around like pawns on a chessboard. The problem is that people are not chessmen. Chàvez et al. turned out to be pretty poor chess players, but even if they had been grandmasters, it would not have been enough. Economies cannot in fact be controlled and managed in the way that socialists imagine, something that is much better understood today (thanks to our deepening appreciation of complexity) than it was when Ludwig von Mises and F. A. Hayek described the limitations of central planning in more qualitative terms.

Venezuela’s inflation rate is difficult to calculate, but it is estimated to have been around 18,000 percent a month in April.

The central planners in Venezuela were arrogant and hubristic, as they always are. (As, indeed, the entire concept of central planning is.) When oil revenues proved insufficient to sustain their program, they printed money; when the foreign-exchange markets responded by devaluing Venezuela’s currency, they enacted controls on foreign exchange; when prices rocketed out of control (Venezuela’s inflation rate is difficult to calculate, but it is estimated to have been around 18,000 percent a month in April), they enacted price controls; when producers declined to produce at those artificially low prices, they seized their assets.

Venezuelans are not fools — they noticed that this wasn’t working as advertised. When the critics began to say so, their newspapers and broadcast facilities were shut down; when they protested individually, they were jailed or assassinated; when they protested en masse, they were massacred. When central planning fails — and it always fails — the result is almost never the relaxation of political regimentation but the redoubling of efforts to impose the plan by increasingly brutal application of force. Sometimes that force takes the form of killings, torture, and beatings. In the old Soviet Union, in North Korea, and in Venezuela, it also has taken the form of politically imposed hunger. The largest share of the 100 million human beings murdered by socialist regimes in the 20th century died of hunger: in the cities, in the countryside, and in the gulags. The Holodomor alone killed between 7 million and 12 million people. Mao’s famine killed between 20 million and 43 million, and many of those deaths happened in places where food production remained at or close to normal rates: Appropriation of economic output for political purposes is always part of the plan.

No one yet knows how many deaths Venezuelan socialism will inflict on Venezuela. But it is a fact that children are starving to death in what was, not so long ago, South America’s wealthiest country. In the 1950s, Venezuela’s GDP per capita was about the same as West Germany’s. (Some of you younger readers may want to read up on why there was such a thing as West Germany. That’s another chapter in the annals of socialism.) Being rich is no prophylactic against tyranny or anarchy.

That’s because being rich is temporary. Countries, like families, can go from shirtsleeves to shirtsleeves — and it need not take three generations. As the Scots say: “The father buys, the son builds, the grandchild sells, and his son begs.” A nation that is not building is on its way to begging. Venezuela is already there.

In a 2006 poll conducted by the University of Chicago, Venezuelans led the world in national pride. One wonders what they would say now, if they weren’t too terrorized to speak. It is difficult to be proud when you are scared, hungry, and miserable.

Funny thing: The second-proudest nation in that poll was the United States.


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