Chávez Shuts Down Shops

Until a few years ago, Venezuelan dictator Hugo Chávez was sometimes described as the benevolent kind but in recent years, his reign has grown ever more authoritarian. He abolished presidential term limits, withdrew Venezuela from both the World Bank and the International Monetary Fund in 2007, nationalized the oil industry and built relations with countries as Iran, Libya and Syria — not exactly the most friendly of nations.

In Venezuela, opposition against what may turn out be a president-for-life is mounting however. Protests are far from an unusual sight in the streets of Caracas. Tens of thousands of Venezuelans have already abandoned the country: artisans, engineers, lawyers, managers and scientists all fled socialism en masse last year. So much as one million people are estimated to have left the country since Chávez came to power. The exodus sabotages the country’s future and no industry is hit harder than oil on which the Venezuelan economy still thrives primarily.

Unsurprisingly, the voice of the opposition is silenced. Dozens of radio stations and two television networks have been pulled off the air already with Chávez attempting to pass legislation that will further penalize “media crimes.”

Last week, amid enduring economic hardship, Chávez devaluated the currency, cutting the exchange rate of the bolivar against the dollar by half for oil incomes and for goods deemed nonessential in order to bolster the state coffers. Currency controls have been imposed to prevent capital flight while inflation is likely to sour.

Earlier today, authorities backed by soldiers closed dozens of retail outlets for price gouging after a shopping frenzy had plagued the nation in reaction to the currency devaluation. Thousands of shoppers mobbed stores during the past week to snap up imported television sets and computers, worried that their savings would lose value soon. Chávez responded by sending troops to monitor prices in shopping districts. So much as seventy retailers were shuttered while raids continue this very day.

It is the typical cycle of government intervention at work: regulation is passed “for the common good”; the regulation fails, or works only temporarily; the private sector takes a beating; the economy turns down — at which point more regulation is proposed to save society from the supposed ills of the “free market.”

Chávez’ struggle against free-market capitalism and what he calls the “imperialism” of American businesses operating overseas is well recorded as are his numerous social programs. As is typical of any movement that begins by “redistributing” wealth, Caracas ends up distributing sacrifices these days. The industrialists were first to fall victim to the new regime. Then came the journalists and the independent thinkers, many of whom fled the country in response. Shopkeepers and entrepreneurs in general are next as today’s news amply demonstrates. In all likelihood, the persecution of his minority will fail however, finally undermining Chávez’ crusade against free enterprise because there are simply too many retailers.

Sadly, the Venezuelan people will bare the burden in the end as their country is internationally isolated and their standard of living declining sharply — all, Chávez insists, because of that evil, American capitalism.

Comments

  • “It is the typical cycle of government intervention at work: regulation is passed “for the common good”; the regulation fails, or works only temporarily; the private sector takes a beating; the economy turns down—at which point more regulation is proposed to save society from the supposed ills of the “free market.””

    No Nick, its a typical circle of authoritarianism, where government actions goes unchecked by media or parliamentary/electorate power, hence government interventions workout miserably, especially with Chavez creativity at annoying the surrounding world. The fault here lies in Chaves personal politics, not interventions as such.

  • […] its a typical circle of authoritarianism, where government actions goes unchecked by media or parliamentary/electorate power, hence government interventions workout miserably […]

    OK. Could you give me some examples then of government intervention in the economy that did “work”. (According to whatever standard. According to mine, government intervention is not only impractical; it is immoral, but let’s focus on the “practical” part.)

  • I was more refering to your spin of goverment interventions as a direct result of Chavez authoriatian policies; i.e that the shortsighted actions of a extremely populist politician are an indicator of the intervention system as a whole, though I made a lousy attempt to bring the idea forward. As for goverment interventions the typical reason for their failure is that they are rushed in as a result of a perceived desperate situation. Proper gorverment economic action goes longterm and are based on proper planning for a longer period of time. One example would be the taiwanese, south korean and Jpanese ecopnomies in the 50,60 and early 70’s where the goverment used bvarious methods short of massive fionacing to support the industry (though there are diferent schools of thought on this I admit)

    Or we could do as you did a couple of weeks ago and quote this newsweek article:

    http://blog.newsweek.com/blogs/wealthofnations/archive/2009/12/15/bolivia-s-revolution.aspx

  • One example would be the taiwanese, south korean and Jpanese ecopnomies in the 50,60 and early 70’s where the goverment used bvarious methods short of massive fionacing to support the industry […]

    Look how that worked out. Japan has been in stagnation for over a decade now. Taiwan and South Korea are still relatively prosperous on the other hand, especially the latter though I must admit an ignorance as to their economic policies of late. Is the government still very much involved there?

  • “Look how that worked out. Japan has been in stagnation for over a decade now. Taiwan and South Korea are still relatively prosperous on the other hand, especially the latter though I must admit an ignorance as to their economic policies of late. Is the government still very much involved there?”

    I have no idea. My point however, as in regard to Japan, was that various forms of intelligent forms of government intervention (that is not pumping in massive amounts of money willynilly) may have a positive effect in certain situations (look at how they screwed it up later for a negative example). I’m not claiming it to be a universal remedy, far from it. What I am claiming is that one cannot claim it poison in every single situation that has occurred, is occurring and will occur in the future.

  • My point however, as in regard to Japan, was that various forms of intelligent forms of government intervention […] may have a positive effect in certain situations

    True. In some cases, it has helped, but those cases are rare and in the end, as Japan amply demonstrates, limited government intervention is followed by massive government intervention which brings about stagnation.

    My point, referring back to the “typical cycle of government intervention at work” is that no government has ever limited itself to play just a tiny role, economically. Whenever a government started to intervene in the economy, it never retreated. Rather it always produced more regulation.

  • “Rather it always produced more regulation.”

    So why did many governments decrease their regulation levels prior to the current recession? It’s not a one way street or a viscous circle, its the democratic ebb and flow. The main problem in this case is that the regulations are not just poorly thought out: they are motivated by pure populism n order to steady a faltering regime. They can barely be counted as an economic policy.

  • So why did many governments decrease their regulation levels prior to the current recession?

    They did?

    They can barely be counted as an economic policy.

    Yet they can have enormous economic percussions.

  • “They did?”

    Yes. The Swedish goverment for instance started a slow but exsting deregulative process that came to a halt during the current crisis.

    “Yet they can have enormous economic percussions.”

    Of course. My point is that the goal s not to help turning the economy around, it is to help himself (or his particular bolivarian ideology). It’s still an idiotic policy.

  • The Swedish goverment for instance started a slow but exsting deregulative process that came to a halt during the current crisis.

    I can’t speak of Sweden, but if I look at my own country, it, too, “deregulated” for years, privatizing many industries and even health care to a large degree (all good stuff of course) yet at the same time, its expenditure didn’t decrease. Rather, the Dutch Goverment actually spends more money today than it did twenty years ago. And that’s inflation-adjusted.

    My point is that the goal s not to help turning the economy around […]

    Sure. An awful lot of regulation is passed that is not supposed to hurt the economy, but it does.

  • “Sure. An awful lot of regulation is passed that is not supposed to hurt the economy, but it does.”

    Yes whatever. You’re still missing the point but I don’t think we are going further with this.

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