Feel the Bern: Dan Mitchell on the Soviet Union, Cuba, N. Korea and Venezuela

The Texas Grocery Store that Helped Push the Evil Empire on to the Ash Heap of History

October 4, 2015 by Dan Mitchell

Whenever I need to explain the difference between socialism and capitalism, I start by noting that socialism technically is different from Obama-style big-government redistributionism and cronyism.
Socialism involves something more pervasive, involving government ownership of the means of production (which, if you read this postscript, is why Jeremy Corbyn in the United Kingdom is far more radical than previous Labour Party leaders).

It also means eviscerating the competitive price system as a means of determining value and allocating resources, relying instead on politicians and bureaucrats to arbitrarily wield that power (some American politicians favor this latter approach in certain circumstances).

Needless to say, socialism has an unmatched track record of failure. It was such a disaster than only a few supposedly high-ranked academics (see this postscript) thought it worked.

But what about high-ranked communists who grew up under socialism. Did they think it worked?

The Houston Chronicle dug into its archives to produce a story about an incident that may have played a big role in history. It’s about a senior communist functionary who was exposed to a slice of capitalism.

Yeltsin visited mission control and a mock-up of a space station. According to Houston Chronicle reporter Stefanie Asin, it wasn’t all the screens, dials, and wonder at NASA that blew up his skirt, it was the unscheduled trip inside a nearby Randall’s location. Yeltsin, then 58, “roamed the aisles of Randall’s nodding his head in amazement,” wrote Asin. He told his fellow Russians in his entourage that if their people, who often must wait in line for most goods, saw the conditions of U.S. supermarkets, “there would be a revolution.” …In the Chronicle photos, you can see him marveling at the produce section, the fresh fish market, and the checkout counter. He looked especially excited about frozen pudding pops. “Even the Politburo doesn’t have this choice. Not even Mr. Gorbachev,” he said.

This random trip to a typical supermarket may have changed history.

About a year after the Russian leader left office, a Yeltsin biographer later wrote that on the plane ride to Yeltsin’s next destination, Miami, he was despondent. He couldn’t stop thinking about the plentiful food at the grocery store and what his countrymen had to subsist on in Russia. In Yeltsin’s own autobiography, he wrote about the experience at Randall’s, which shattered his view of communism, according to pundits. Two years later, he left the Communist Party and began making reforms to turn the economic tide in Russia. …“When I saw those shelves crammed with hundreds, thousands of cans, cartons and goods of every possible sort, for the first time I felt quite frankly sick with despair for the Soviet people,” Yeltsin wrote. “That such a potentially super-rich country as ours has been brought to a state of such poverty! It is terrible to think of it.”

Since the Soviet Union was mired in poverty at the time, Yeltsin presumably was speculating about the potential wealth of his country.

And the good news is that the rigid communism of the Soviet Union is gone. Heck, the Soviet Union doesn’t even exist. Reagan was right when he predicted  the triumph of freedom, with Marxism being relegated to the “ash heap of history.”

But the bad news is that Russia (the most prominent of the 15 nations to emerge after the crackup of the Soviet Union) is a laggard on economic reform. There was a shift away from close-to-pure communism in the 1990s, to be sure, but the country still has a long way to go before it can be considered capitalist.

Here’s a back-of-the-envelope “statism spectrum” that I created. It’s designed to show that there are no pure libertarian paradises, not even Hong Kong. And there are no pure statist dystopias, not even North Korea (though that despotic regime is as close to pure evil as exists in the world).

Russia, I’m guessing, would be somewhere between China and Mexico.



And this gives me a chance to close with an important point.

Perfect economic policy almost surely is an impossible goal. But that’s fine. We can still enjoy good growth so long as we strive to at least move in the right direction. As I explained back in 2012, the private sector is capable of producing impressive results so long as it has sufficient breathing room to operate.

P.S. If you want a simpler and more amusing explanation of different economic systems, here’s the famous “two cows” approach.

P.P.S. The United States isn’t a socialist nation, but we’re not fully immune to that destructive virus. After all, we have a government-run rail company in America, a government-run postal service, a government-run retirement system, and a government-run air traffic control system, all things that would function far more efficiently in the private sector.

The Horrifying Death Throes of Venezuelan Socialism, Captured in 28 Headlines

April 21, 2017 by Dan Mitchell

 

I wrote last year that Venezuela was entering the “fourth circle of statist hell.”
How else, after all, can you describe a government that is so venal and incompetent that it resorts to confiscating toys in an effort to strengthen its hold on power?

I also wrote last year that Atlas was “shrugging” in Venezuela.

But shrugging may soon turn to shrugged. It’s hard to see how Maduro’s despotic regime can hold power much longer. Consider this collection of horrifying stories.
The Washington Post reported:

With inflation spiraling out of control, food and medicine supplies dwindling and violent crimes on the rise, women as young as 27 are seeking out surgeons to avoid unwanted pregnancies. A study by PLAFAM, the biggest family planning clinic in the country, estimates that about 23 percent more Venezuelan women are being sterilized today as compared to four years ago, said the clinic’s director, Enrique Abache. “The financial crisis is one of the main causes for this,” he explained. Years of government mismanagement have fueled what is now a full-blown humanitarian crisis in a country where infant mortality has almost doubled in recent years. …mothers often spend whole days searching for milk powder or diapers. Those who can’t find them are simply forced to go without.

From a story in CapX:

How serious is Venezuela’s crisis? Bad enough that, in 2016, Venezuelans became the top US asylum-seekers… Venezuelan asylum claims increased by 150 per cent from 2015 to 2016. Though Venezuela does not publicly circulate emigration information, estimates suggest that between 700,000 and two million Venezuelans have emigrated since 1999. …Sometimes, from here, it can seem as though the entire population – fed up with shortages of medicine and food, with crime and with the political trajectory of the nation – wants to leave.

Some grim news from the Japan Times:

Julio Noguera…spends his evenings searching through the garbage for food. “I come here looking for food because if I didn’t, I’d starve to death,” Noguera said as he sorted through a pile of moldy potatoes. “With things like they are, no one helps anyone and no one gives away meals.” Across town, unemployed people converge every dusk at a trash heap on a downtown Caracas sidewalk to pick through rotten fruit and vegetables tossed out by nearby shops. They are frequently joined by small business owners, college students and pensioners — people who consider themselves middle class even though their living standards have long ago been pulverized by triple-digit inflation, food shortages and a collapsing currency. …Nearly half of Venezuelans say they can no longer afford to eat three meals a day, according to a recent poll.

The Wall Street Journal opines:

cities around the country…have been hit hard by police, national guard troops and the regime’s paramilitary forces as the dictatorship of Nicolás Maduro tries to contain a wildfire of rebellion. …The government is running out of money to buy imports, and since it has crippled domestic production, privation is growing more profound. …Roving bands of government-sponsored militias terrorize civil society as they have for more than a decade. …a 16-year-old girl politely informed Mr. Maduro that students in her school often faint from hunger. …Mr. Maduro was pelted with stones as he left a military rally in Bolívar state… Meanwhile, Mr. Maduro is doubling down on centralized control of a shrinking food supply. …Those who do not support the regime can be cut off.

The thuggery will worsen according to the Washington Free Beacon:

The socialist leader of Venezuela announced in a speech to regime loyalists his plan to arm hundreds of thousands of supporters after a years-long campaign to confiscate civilian-owned guns. …The Venezuelan government justified the gun bans and confiscations by saying they were needed to combat the country’s violent crime and murder epidemic. However, statistics reported by the nonprofit Venezuelan Violence Observatory show the murder rate in Venezuela increased from 73 murders per 100,000 inhabitants the year the gun ban was instituted to 91.8 murders per 100,000 inhabitants in 2016. …As protests and unrest increase in Venezuela, Maduro’s regime has created a landscape where civilians are disarmed but his supporters are not. The latest round of mass demonstrations in the streets of Caracas have already claimed five lives.

Even zoo animals are suffering, as reported by the Miami Herald:

An apparently malnourished African elephant in a Venezuelan zoo — her ribs showing through her sagging skin — has become the latest symbol the deep economic crisis in what was once one of Latin America’s most prosperous nations. …Ruperta is suffering from diarrhea and dehydration after zoo officials only had squash to feed her for several days. According to the newspaper, when neighbors tried to bring food to the elephant over the weekend, the donations were turned away by zoo officials… in a nation where a grinding economic crisis is forcing many to skip meals and go hungry, Ruperta’s fate has touched a nerve. …Román Camacho, a local reporter who broke the story, said a whistle-blower within the park service alerted him that Ruperta had grown so hungry that she collapsed last Thursday. …Also last year, a horse at a local zoo was reportedly butchered by hungry Venezuelans.

The New York Times has noticed:

Venezuela was once one of Latin America’s economic powerhouses… A growing number of Venezuelans are going hungry in a food shortage, and dying from treatable ailments in squalid, ill-equipped hospitals. …Until political prisoners are released, the prospects for a restoration of democratic rule are very dim. …Inflation has soared to an estimated 700 percent, while people in this oil-rich nation are left digging through piles of trash for scraps of food.

Productive people are escaping, Bloomberg reports:

For Venezuelan exiles with money, Madrid has become a home away from home. They are increasingly turning to the Spanish capital as a place to invest as their home country falls further into economic chaos and the political mood turns more sour in U.S. havens such as Miami. The number of Venezuelans arriving in Spain rose more than 50 percent in 2015, according to the Spanish statistics office.

The monetary system is also a disaster reports the New York Times:

President Nicolás Maduro of Venezuela made a baffling announcement…, saying that his government intended to yank the 100 bolívar note from circulation… Venezuelans, who have endured months of chronic food and medicine shortages, mobbed banks and A.T.M.s in a desperate attempt to offload their stacks of the highest denomination bill, which has become so devalued it is now worth roughly 3 cents in American dollars. …the Maduro government…has spent years…imposing arbitrary currency controls that have made a once prosperous economy one of the world’s most dysfunctional. …Venezuela was expelled from the regional trade bloc Mercosur in early December.

The outflow of people is staggering according to Fox:

Along with basic food, medicine and even toilet paper, Venezuela now lacks the materials to meet to the soaring demand for new passports – making it almost impossible for those few Venezuelans with the monetary means of escaping the troubled Latin American nation to do so. While estimates of how many passport requests the socialist government received last year vary from between 1.8 million to 3 million, only 300,000 of the elusive documents were doled out. Everyday, hundreds of people line up outside the passport agency, known as Saime, in the capital of Caracas in the hopes of obtaining one. It’s an ironic, and yet sad situation, for a country that used to be one of Latin America’s wealthiest and one that was used to seeing people flock to, not away from. …Adding to the overall misery are a drastic rise in violent crime – especially in the capital city of Caracas – rolling blackouts and widespread and often times bloody protests against the government. …since Chávez took power in 1999 nearly 2 million Venezuelans have fled the country and hundreds of thousands are marking their time until they obtains the funds and the passport that will allow them to leave.

Government insiders are getting rich, as noted by the New York Post:

Venezuela is no longer a country with a government, institutions and a civil society. It’s a geographic area terrorized by a criminal enterprise that pretends to govern, with a civil society made up of two sets of people: accomplices and victims. More than 30 million of the latter. …The Hugo Chavez-led looting spree began in 2000. …More than $1 trillion has disappeared… Loving parents are putting their children up for adoption because they have nothing to feed them; the elderly are starving; patients with treatable conditions are dying in hospitals that lack basic medicine like insulin and oxygen, where vital equipment has been pilfered and emergency rooms operate without electricity. …Meanwhile, those in power can focus on what they do best: looting the country’s natural-resource wealth and manufacturing and trafficking illegal narcotics. In fact, Maduro just upped his game by appointing Tareck el-Aissami, a drug kingpin, as vice president.

CNN shares some bad news:

Venezuela only has $10.5 billion in foreign reserves left, according to its most recent central bank data. For rest of the year, Venezuela owes roughly $7.2 billion in outstanding debt payments. In 2011, Venezuela had roughly $30 billion in reserves. In 2015, it had $20 billion. The trend can’t persist much longer, but it’s hard to know exactly when Venezuela will run completely out of cash. …The thinning reserves paint a scary financial picture as the country faces a humanitarian crisis sparked by an economic meltdown. Venezuelans are suffering massive food and medical shortages, as well as skyrocketing grocery prices. Massive government overspending, a crashing currency, mismanagement of the country’s infrastructure and corruption are all factors that have sparked extremely high inflation in Venezuela. Inflation is expected to rise 1,660% this year and 2,880% in 2018, according to the IMF.

A dour column from Real Clear World:

Socialist economic policies and government corruption have destroyed a once-thriving economy sitting on the world’s largest oil reserves. …Index of Economic Freedom…looks at the economic freedom of countries throughout the world. In that period of time, Venezuela’s score has declined the most out of any country, going from 59.8 to 27.0 (on a scale of 1-100). It is now in second-to-last place, right behind Cuba and better only than North Korea. …The World Health Organization estimates that there are shortages for 75 percent of necessary medications and medical supplies such as antibiotics, vaccines, and scalpels. Blackouts resulting from a crumbling energy infrastructure are a daily occurrence. The death of newborns has become a common phenomenon… All the while, Venezuelan government officials have been using oil revenues to line their own pockets.

The Washington Post opines on the disaster:

Venezuela, which was once Latin America’s richest country, has become an unwilling test site for how much economic and social stress a modern nation can tolerate before it descends into pure anarchy. …Venezuelans have struggled with mounting shortages of food, medicine and other consumer goods, as well as triple-digit inflation that has rendered the national currency, the bolivar, worthless. … President Nicolás Maduro, an economically illiterate former bus driver, …also closed Venezuela’s borders with Colombia and Brazil, on the theory that traders were hoarding currency in those countries. …the president is doing his best to blame the United States for the fiasco… Venezuelans no longer believe such nonsense. A survey released this month by pollster Alfredo Keller showed that only 1 percent said the United States was to blame for the country’s crisis, while 76 percent blamed Mr. Maduro and the regime founded by Hugo Chávez. …Only 19 percent said they still supported the regime.

Investor’s Business Daily piles on:

Want to lose weight fast? …Just move to Venezuela. There, the new Socialist Diet has caused the population to lose millions of pounds in 12 months. Unwillingly, of course. …A new study of Venezuela’s stunning decline under Hugo Chavez’s socialist model…reports that the average Venezuelan lost 19 pounds in the last year. Today, the 2016 Living Conditions Survey finds, 32.5% of Venezuelans eat only once or twice a day, up from 11.3% just one year ago. And 93.3% of all people don’t earn enough to buy sufficient food. …Bring socialism to your country, and you bring misery. It’s the one thing that socialism produces an abundance of. …formerly middle-class Venezuelans scavenge for food — some even stooping to dumpster diving and eating formerly beloved pets just to stay alive — socialists allied with Maduro have changed nothing. …rule of law has been rejected for the rule of one tyrant. Children aren’t spared; they’re dying by the hundreds from curable diseases, a lack of medicine, electricity outages and no incubators for newborns.

Some heartbreak from the New York Times:

Kevin Lara Lugo…died on his 16th birthday.He spent the day before foraging for food in an empty lot, because there was nothing to eat at home. Then in a hospital because what he found made him gravely ill.Hours later, he was dead on a gurney, which doctors rolled by his mother as she watched helplessly. She said the hospital had lacked the simplest supplies needed to save him on that day last July. … Inflation has driven office workers to abandon the cities and head to illegal pit mines in the jungle, willing to subject themselves to armed gangs and multiple bouts of malaria for the chance to earn a living. Doctors have prepared to operate on bloody tables because they did not have enough water to clean them. Psychiatric patients have had to be tied to chairs in mental hospitals because there was no medication left to treat their delusions. Hunger has driven some people to riot — and others into rickety fishing boats, fleeing Venezuela on reckless journeys by sea. But it was the story of a boy with no food, who had gone searching for wild roots to eat but ended up poisoning himself instead, that seemed to embody everything that had gone wrong in Venezuela.

Peak socialism, as reported by Foreign Policy:

A fleet of rundown Venezuelan oil tankers carrying some 4 million barrels of oil and other fuels is wallowing in the Caribbean Sea. Not because of bad weather, or mechanical problems, but because Venezuela’s state-owned oil company, Petróleos de Venezuela SA, doesn’t have the cash to get them to their final destinations. …it’s doubly bad news for Venezuela, a country in dire economic straits and full-fledged crisis, with a political impasse, looting, dangerous food and health supply shortages, and massive protests. Venezuela is massively reliant on oil exports to bankroll government services. But the cash-strapped country can’t even find the money to service the vessels that carry its exports. …Venezuela, once Latin America’s most powerful petrostate, is on the brink of collapse after decades of economic mismanagement.

More on insider corruption, exposed by the Washington Post:

Formerly a stable, sophisticated, middle-income country awash in oil wealth, Venezuela has experienced a dizzying downward spiral over the past two years. Today, Venezuela’s is arguably the world’s worst-run economy. Food shortages are pervasive, and food prices are rising fast — a deadly combination that has left millions unable to find enough to eat. …Why doesn’t the army rebel? …we have the genuinely shocking answer: Far from rebelling, Venezuela’s armed forces actively profit from their countrymen’s hunger.This year, President Nicolás Maduro granted the armed forces virtually unlimited authority over the nation’s food imports and distribution. Domestic food production is down sharply in the wake of a botched land reform program, meaning imports now account for most of the nation’s food. But putting the military in charge of this delicate domain has led to an explosion of corruption, as well-connected officers mercilessly prey on every part of the distribution chain, from the initial contracts and the foreign currency needed to fund them to storage, transportation and distribution. …A government that bills itself as radically pro-poor in fact drips with contempt for the poor.

More tragic sadness, this time from Reuters:

Struggling to feed herself and her seven children, Venezuelan mother Zulay Pulgar asked a neighbor in October to take over care of her six-year-old daughter, a victim of a pummeling economic crisis. …”It’s better that she has another family than go into prostitution, drugs or die of hunger,” the 43-year-old unemployed mother said… With average wages less than the equivalent of $50 a month at black market rates, three local councils and four national welfare groups all confirmed an increase in parents handing children over to the state, charities or friends and family. …the trend highlights Venezuela’s fraying social fabric and the heavy toll that a deep recession and soaring inflation are taking on the country with the world’s largest oil reserves. …most economists pin the responsibility on socialist policies introduced by former president Hugo Chavez, which his successor Nicolas Maduro has doubled down on… Two-thirds of 1,099 households with children in Caracas, ranging across social classes, said they were not eating enough in a survey released last week by children’s’ rights group… In some cases, parents are simply abandoning their kids. Last month, a baby boy was found inside a bag in a relatively wealthy area of Caracas and a malnourished one-year-old boy was found abandoned in a cardboard box in the eastern city of Ciudad Guayana, local media reported. …There are also more cases of children begging or prostituting themselves

Even Vox is aware of the problem:

…new data capturing the woes of the once well-heeled South American nation is shocking: According to new results from an annual national survey, nearly three-quarters of respondents reported losing an average of 19 pounds between 2015 and 2016. …Shortages of food, medicine, and many basic items abound in what was once the richest country in South America per capita in the 20th century. Malaria is ravaging a country that was the first in the world to eliminate the disease in its populated areas. Now there’s evidence that the economic chaos is translating into a malnutrition crisis… Alejandro Velasco, a scholar of Latin American history at New York University, believes Chávez’s model of socialism…”strangled the already meager productive apparatus of Venezuela,” he explained during an interview in January. …Chávez’s spending regime also left the country acutely vulnerable to emergency. Ricardo Hausmann, director of the Center for International Development at Harvard’s Kennedy School, notes…that Chávez’s government.. “over-spent and quintupled the public foreign debt.”

The Economist has given up on Venezuelan statism:

Every weekday morning, a queue of several dozen forlorn people forms outside the dingy headquarters of SAIME, Venezuela’s passport agency. As shortages and violence have made life in the country less bearable, more people are applying for passports so they can go somewhere else. …As desperation rises, so does the intransigence of Venezuela’s “Bolivarian” regime, whose policies have ruined the economy and sabotaged democracy. The economy shrank by 18.6% last year, according to an estimate by the central bank, leaked this month to Reuters… Inflation was 800%. …In 2001 Venezuela was the richest country in South America; it is now among the poorest.

Venezuela is even begging at the UN according to the Associated Press:

Venezuela’s President Nicolas Maduro has asked the United Nations for “help” boosting medicine supplies as he struggles to combat crippling shortages. …acknowledging that Venezuela needs outside help is a telling sign of how far the nation sitting atop the world’s largest petroleum reserves has fallen under Maduro. …Venezuelans…have been suffering from widespread shortages and triple-digit inflation… OAS Secretary General Luis Almagro is pushing to expel Maduro’s government from the group for breaking the country’s democratic order and violating human rights. Maduro’s government disavowed a landslide loss to the opposition in legislative elections in 2015, and then suspended a recall campaign seeking to force him from office before the 2018 election.

Bloomberg notes that an oil-rich nation even has shortages of gas:

…drivers lined up at filling stations amid a worsening shortage of fuel. While Petroleos de Venezuela SA says the situation is normalizing and blamed the lines on transport delays, the opposition says the company has had to reduce costly fuel imports as it tries to preserve cash to pay its foreign debt. …As the company’s crumbling refineries fail to meet domestic demand, imports have become a financial burden because the country buys fuel abroad at market prices only to sell it for pennies per gallon at home. … “It’s unbelievable that this is happening in an oil producing country.” …The hunt for gasoline is just the latest headache for consumers after years of severe economic contraction and triple-digit inflation have produced shortages of everything from bread to antibiotics.

The Miami Herald reports the government is making it even harder for hungry people to get fed:

Facing a bread shortage that is spawning massive lines and souring the national mood, the Venezuelan government is responding this week by detaining bakers and seizing establishments. In a press release, the National Superintendent for the Defense of Socioeconomic Rights said it had charged four people and temporarily seized two bakeries as the socialist administration accused bakers of being part of a broad “economic war” aimed at destabilizing the country. …The government said bakeries are only allowed to produce French bread and white loaves, or pan canilla, with government-imported flour. …The notion that bread could become an issue in Venezuela is one more indictment of an economic system gone bust. The country boasts the world’s largest oil reserves but it has to import just about everything else. …President Nicolás Maduro launched “Plan 700” against what he called a “bread war,” ordering officials to do spot checks of bakeries nationwide.

And there’s always more bad policy, as Reuters reports:

Venezuela’s socialist President Nicolas Maduro announced on Sunday a 50 percent hike in the minimum wage and pensions, the fifth increase over the last year… “In times of economic war and mafia attacks …we must protect employment and workers’ income,” added Maduro, who has now increased the minimum wage by a cumulative 322 percent since February 2016. …critics say his incompetence, and 17 years of failed socialist policies, are behind Venezuela’s economic mess. They say the constant minimum wage hikes symbolize Maduro’s policy failures… Venezuela’s inflation hit 181 percent in 2015, according to official data, though opponents say the true figure was higher. There is no official data for 2016, but…inflation was more than 500 percent in 2016, while the economy shrank 12 percent.

Which means, per the AP, more people want to leave:

Venezuelans for the first time led asylum requests to the United States as the country’s middle class fled the crashing, oil-dependent economy. Data from the U.S. government’s Citizenship and Immigration Services show that 18,155 Venezuelans submitted asylum requests last year, a 150 percent increase over 2015 and six times the level seen in 2014. …The vast majority leaving are middle-class Venezuelans who don’t qualify for refugee status reserved for those seeking to escape political persecution, according to Julio Henriquez, director of the Boston-based nonprofit Refugee Freedom Program, which has been drawing attention to the trend. “The pace at which requests are increasing is alarming,” said Henriquez, whose group obtained the still-unpublished data in a Feb. 8 meeting between U.S. officials and immigration lawyers.

And the government is engaged in more looting, MSN reports:

General Motors said it has been forced to stop operating in Venezuela on Wednesday after one of its plants was illegally seized by local authorities. The seizure, in the country’s industrial hub of Valencia, comes amid a deepening economic and political crisis that has sparked weeks of deadly street protests. …The auto giant did not provide any details about its plant being seized, other than saying it “was unexpectedly taken by authorities, preventing normal operations.” It said other assets, “such as vehicles,” had also been stripped from the site. …Venezuela’s car industry has been in freefall, hit by a lack of raw materials stemming from complex currency controls and stagnant local production, and many plants are barely producing at all. Venezuela’s government has taken over factories in the past. In 2014 the government announced the “temporary” takeover of two plants belonging to U.S. cleaning products maker Clorox Co.

Last but not least, here’s a column from the Week:

Venezuela cannot wake up from its socialist nightmare. …across the country, people are starving. Venezuela, a beautiful, oil-rich country, once one of the wealthiest nations in the Southern Hemisphere, is only sinking further into economic devastation and chaotic, corrupt authoritarianism. …Meanwhile, the economy keeps rotting. Venezuela has topped Bloomberg‘s Economic Misery Index, a benchmark whose title is self-explanatory, for three years running. The economy shrank by 18 percent last year, with unemployment at 25 percent, and inflation slated to be 750 percent this year and 2,000 percent the next…there are outbreaks of scabies, a disease easily prevented with basic hygienic practices; hospitals are running out of even basic drugs. Caracas is the murder capital of the world. Corruption has infected the country wholesale even as it has created a new class of kleptocratic oligarchs linked to the security services. …The whole of Venezuelan society is breaking down at a fundamental level. …It is truly heartbreaking. …And I blame socialism. …And now it’s Venezuelans, especially the poorest and more marginal among them, who are paying the price for this madness.

Let’s close with a video on the tragic situation in Venezuela.



I wonder if Bernie Sanders still thinks this is a system worth supporting?

P.S. I have to confess that this huge collection of 28 stories accumulated because I was dating someone who is a fervid supporter of Maduro’s government (a lovely but misguided lass), and I decided that it wouldn’t be very diplomatic for me to write about the mess in that country. Now that the relationship is over, there’s no downside if I vent my spleen on that cesspool of corrupt statism.

The Economic Misery of Cuban Communism

September 4, 2016 by Dan Mitchell

 

Communism should be remembered first and foremost for the death, brutality, and repression that occurred whenever that evil system was imposed upon a nation.

Dictators like Stalin, Mao, Pol Pot, the North Korean Kim dynasty either killed more than Hitler, or butchered higher proportions of their populations.

But let’s not forget that communism also has an awful economic legacy. The economic breakdown of the Soviet Empire. The horrid deprivation in North Korea. The giant gap that existed between West Germany and East Germany. The mass poverty in China before partial liberalization.

Today, let’s focus on how communism has severely crippled the Cuban economy.

In a column for Reason a few years ago, Steven Chapman accurately summarized the problems in that long-suffering nation.

There may yet be admirers of Cuban communism in certain precincts of Berkeley or Cambridge, but it’s hard to find them in Havana. …the average Cuban makes only about $20 a month—which is a bit spartan even if you add in free housing, food, and medical care. For that matter, the free stuff is not so easy to come by: Food shortages are frequent, the stock of adequate housing has shrunk, and hospital patients often have to bring their own sheets, food, and even medical supplies. …Roger Noriega, a researcher at the conservative American Enterprise Institute in Washington, notes that before communism arrived, Cuba “was one of the most prosperous and egalitarian societies of the Americas.” His colleague Nicholas Eberstadt has documented that pre-Castro Cuba had a high rate of literacy and a life expectancy surpassing that in Spain, Greece, and Portugal. Instead of accelerating development, Castro has hindered it. In 1980, living standards in Chile were double those in Cuba. Thanks to bold free-market reforms implemented in Chile but not Cuba, the average Chilean’s income now appears to be four times higher than the average Cuban’s. …In its latest annual report, Human Rights Watch says, “Cuba remains the one country in Latin America that represses virtually all forms of political dissent.”

The comparison between Chile and Cuba is especially apt since the pro-market reforms in the South American nation came after a coup against a Marxist government that severely weakened the Chilean economy.

Chapman points out that the standard leftist excuse for Cuban misery – the U.S. trade embargo – isn’t very legitimate.

The regime prefers to blame any problems on the Yankee imperialists, who have enforced an economic embargo for decades. In fact, its effect on the Cuban economy is modest, since Cuba trades freely with the rest of the world.

Since the U.S. accounts for nearly one-fourth of world economic output, I’m open to the hypothesis that the negative impact on Cuba is more than “modest.”

But it still would be just a partial explanation. Just remember that communist societies have always been economic basket cases even if they have unfettered ability to trade with all other nations.

Writing for the Huffington Post (hardly a pro-capitalism outfit), Terry Savage also explains that Cuba is an economic disaster.

…the economic consequences of a 50-year, totalitarian, socialistic experiment in government are obvious today. Cuba is a beautiful country filled with many friendly people, who have lived in poverty and deprivation for decades. Socialism in its purest form simply didn’t work there. I was immediately reminded of that old saying: “Capitalism is the unequal distribution of wealth – but socialism is the equal distribution of poverty.” Once-magnificent buildings are literally crumbling, plaster falling and walls and stairways falling apart, as there are no ownership incentives to maintain them – or profit potential to incent their preservation. …Every Cuban gets a ration book and an assigned “bodega” in which to purchase the low-cost, subsidized food. The one I visited looked like an empty warehouse, with little on the shelves. If the rice, beans, eggs, and cooking oil are not in stock, the shopper must return the following week. Allowed five eggs per month, the basics barely cover a starvation existence. …the economic results of their 50-year rule have been abysmal. Cuba became a protectorate of the old Soviet Union (remember the Cuban missile crisis) -and that worked until the early 1990s, when the USSR fell apart. No longer receiving aid from its protector, Cuba entered a long period now remembered as “the special times” – when Cubans were literally starving, when there was electricity only two hours per day, and people turned any patch of dirt into a garden to survive. Cubans bear the scars of that terrible time, and for many the current situation is still not that much better.

So Cuba was a basket case that was subsidized by the Soviet Union. When the Evil Empire collapsed and the subsidies ended, the basket case became a hellhole.

The good news, if we’re grading on a curve, is that Cuba has now improved to again being a basket case.
But that improvement still leaves Cuba with a lot of room for improvement. It may not be at the level of North Korea, but it’s worse than Venezuela, and that’s saying something.
My friend Michel Kelly-Gagnon of the Montreal Economic Institute echoes the horrid news about Cuba’s economy.

As anyone who has spent any amount of time in Cuba outside the tourist compounds can tell you, socialism, particularly the unsubsidized version that we have seen since the fall of the Soviet empire, has been a disaster. …The hospitals which supposedly offer free care only do so quickly and effectively to the politically connected, friends and family of staff members, and to those who pay the largest bribes… That “free” university education that many Cubans get in technical fields is rarely worth much more than what students pay for it. There are few books in the country’s schools, and those that can be found are years, if not decades old. The country’s libraries are empty… The guaranteed jobs that all Cubans have are fine, until you realize that the average salary is in the range of $20 a month. Worse, the food and other staple allotments that Cubans have long felt entitled to, have shrunk over the years. Tourists often marvel at how thin and healthy Cubans look. Sadly many of them are outright hungry.

Though Michel includes a bit of optimism in his column, pointing out that there’s been a modest bit of economic liberalization (a point that I’ve also made, even to the point of joking about whether we should trade Obama for Castro).

Communist Cuba, beset with an oppressive bureaucracy, an anachronistic cradle-to-grave welfare state, a hopelessly subpar economy, and widespread poverty, is gradually shifting to private sector solutions. Starting when Raul Castro “temporarily” took over power from his brother Fidel six years ago and culminating with the Communist party’s approval of a major package of reforms…, Cuba has taken a series of increasingly bold steps to implement free market reforms. These range from providing entrepreneurs with increased flexibility to run small businesses, and use of state agricultural lands by individual farmers, to the elimination of a variety of burdensome rules and regulations. Ironically, there is a lot that Canadians…can learn from that shift.

And there’s a lot the United States can learn, particularly our President, who is so deluded that he said there are (presumably positive) things America can learn from Cuba.

One common talking point from Cuban sympathizers is that the country has done a good job of reducing infant mortality. But, as Johan Norberg explains, that claim largely evaporates upon closer examination.



The bottom line is that communism is a system that is grossly inconsistent with both human freedom and economic liberty.

And because it squashes economic liberty (thanks to central planning, price controls, and the various other features of total statism), that ensures mass poverty.

Amazingly, there are still some leftists who want us to believe that communism would work if “good people” were in charge. I guess they don’t understand that good people, by definition, don’t want to control the lives of others.

 

P.S. No analysis of Cuba would be complete without noting the bizarre fetish of some leftists to wear t-shirts celebrating the homicidal racist Che Guevara. What’s next, baseball caps featuring Kim Jong-un. Computer screen savers featuring Hermann Göring? Pol Pot bobble head dolls?

There are some sick weirdos in this world to defend any form of coercive statism.


P.S. Here’s my only communist-themed joke (other than the video of Reagan’s jokes about communism).

P.P.S. At the advice of a reader, let me add one more point. Probably the most amazing indictment of communism is that living standards in Cuba when Castro took power were about even with living standards in Hong Kong. Today, the gap between the two is enormous.

 

The Brutal Impact of North Korean Statism

December 19, 2011 by Dan Mitchell

 

One hopes that the dictator of North Korea suffered greatly before he died. After all, his totalitarian and communist (pardon the redundancy) policies caused untold death and misery.

But let’s try to learn an economics lesson. In a previous post, I compared  long-term growth in Hong Kong and Argentina to show the difference between capitalism and cronyism.

But for a much more dramatic comparison, look at the difference between North Korea and South Korea. Hmmm…, I wonder if we can conclude that markets are better than statism?

 

And if you like these types of comparisons, here’s a post showing how Singapore has caught up with the United States. And here’s another comparing what’s happened in the past 30 years in Chile, Argentina, and Venezuela.