Socialism
for the Uninformed
By Thomas Sowell
By Thomas Sowell
Socialism sounds great.
It has always sounded great. And it will probably always continue to sound
great. It is only when you go beyond rhetoric, and start looking at hard facts,
that socialism turns out to be a big disappointment, if not a disaster.
With national income
going down, and prices going up under triple-digit inflation in Venezuela,
these complaints are by no means frivolous. But it is doubtful if the young
people cheering for Bernie Sanders have even heard of such things, whether in
Venezuela or in other countries around the world that have turned their
economies over to politicians and bureaucrats to run.
The anti-capitalist
policies in Venezuela have worked so well that the number of companies in
Venezuela is now a fraction of what it once was. That should certainly reduce
capitalist "exploitation," shouldn't it?
But people who
attribute income inequality to capitalists exploiting workers, as Karl Marx claimed,
never seem to get around to testing that belief against facts -- such as the
fact that none of the Marxist regimes around the world has ever had as high a
standard of living for working people as there is in many capitalist countries.
Facts
are seldom allowed to contaminate the beautiful vision of the left. What
matters to the true believers are the ringing slogans, endlessly repeated.
When Senator Sanders
cries, "The system is rigged!" no one asks, "Just what
specifically does that mean?" or "What facts do you have to back that
up?"
In 2015, the 400
richest people in the world had net losses of $19 billion. If they had rigged
the system, surely they could have rigged it better than that.
But the very idea of
subjecting their pet notions to the test of hard facts will probably not even
occur to those who are cheering for socialism and for other bright ideas of the
political left.
How many of the
people who are demanding an increase in the minimum wage have ever bothered to
check what actually happens when higher minimum wages are imposed? More often
they just assume what is assumed by like-minded peers -- sometimes known as
"everybody," with their assumptions being what "everybody
knows."
Back in 1948, when
inflation had rendered meaningless the minimum wage established a decade
earlier, the unemployment rate among 16-17-year-old black males was under 10
percent. But after the minimum wage was raised repeatedly to keep up with
inflation, the unemployment rate for black males that age was never under 30
percent for more than 20 consecutive years, from 1971 through 1994. In many
of those years, the unemployment rate for black youngsters that age exceeded
40 percent and, for a couple of years, it exceeded 50 percent.
The damage is even
greater than these statistics might suggest. Most low-wage jobs are entry-level
jobs that young people move up out of, after acquiring work experience and a
track record that makes them eligible for better jobs. But you can't move up
the ladder if you don't get on the ladder.
The great promise of
socialism is something for nothing. It is one of the signs of today's
dumbed-down education that so many college students seem to think that the cost
of their education should -- and will -- be paid by raising taxes on "the
rich."
Here again, just a
little check of the facts would reveal that higher tax rates on upper-income
earners do not automatically translate into more tax revenue coming in to the
government. Often high tax rates have led to less revenue than lower tax rates.
In a globalized
economy, high tax rates may just lead investors to invest in other countries
with lower tax rates.
That means that jobs created by those investments will be overseas.
None of this is
rocket science. But you do have to stop and think -- and that is what too
many of our schools and colleges are failing to teach their students to do.
______________
Venezuela’s Collapse
Brings ‘Savage Suffering’
By Anatoly Kurmanaev and
Maolis Castro
Horrible hospital conditions, dying infants, chronic power outages and empty shelves mark the world’s worst-performing economy
"It feels like this hospital is under siege. We urgently need humanitarian aid.’
—Dora Colmenares, a surgeon at University Hospital of Maracaibo
CARACAS, Venezuela—In
a hospital in the far west of this beleaguered country, the economic crisis
took a grim toll in the past week: Six infants died because there wasn’t enough
medicine or functioning respirators.
Here in the capital,
the crisis has turned ordinary life into an ordeal for nearly everyone. Chronic
power outages have prompted the government to begin rationing electricity,
darkening shopping malls. Homes and apartments regularly suffer water
shortages.
Shortages are common at Caracas supermarkets. Photo: miguel gutierrez/European Pressphoto Agency
“I hoped to buy toilet paper, rice, pasta,” she said. “But you can’t find them.” Her only choice will be to hunt for the goods at marked-up prices on the black market. The government, she said, “is putting us through savage suffering.”
The National
Assembly, now controlled by the opposition, declared a food emergency on
Thursday—an attempt to spur the government of President Nicolás Maduro to, among other things, ease
price controls that have created shortages of everything from medicine to meat.
Inflation in this
oil-rich country is expected to hit a world’s-worst 700% this year, according
to the International Monetary Fund. The economy shrank by 10% last year and is
expected to decline another 8% this year, according to the IMF, the worst
performance in the world. And there is no end in sight.
Economists say Mr.
Maduro’s government needs to reverse course on a decade of economic policies
that dramatically reshaped the economy. The state took over hundreds of
companies, instituted price controls and spent enormous amounts of public
money, causing the country’s budget gap to swell to about 20% of annual
economic output.
Despite the deepening
crisis, there has been little sign of change from a government that blames the
country’s woes on an “economic war” waged by enemies including private firms
and the Obama administration. Calls requesting comment from various government
ministries and agencies weren’t returned.
On Thursday,
progovernment lawmakers said the food shortages were the fault of private
companies hoarding products to try to destabilize Mr. Maduro. Later that night,
the country’s Supreme Court gave Mr. Maduro special powers that allow him direct
control over the budget and a freer hand in intervening in private companies.
Opposition lawmakers said both moves were aimed at preventing them from trying
to limit government intervention in the economy.
In response to
growing food shortages, Mr. Maduro last month created a Ministry for Urban
Farming. He noted that he has 50 chickens in his own home and that his
countrymen also can be taught to farm at home. The move echoes a policy Cuba
implemented after the collapse of the Soviet Union in the early 1990s, which
cut off aid to Cuba.
Mr. Maduro has hinted
at various policy initiatives. This past week, he opened a Facebook account. “I
want to expand my direct presence on social media,” he posted, adding two
pictures.
It didn’t take long
for ordinary Venezuelans to respond. Some welcomed the president to Facebook.
Others asked him to resign. Many asked him to investigate corruption in their cities
and states. Some asked for help buying a car, or getting fertilizer, or finding
food.
José Guerra, an
economist and opposition lawmaker, called it “a big absurdity for a country
that’s in crisis. It shows Maduro doesn’t have his feet planted firmly on the
ground.”
With daily hardships
mounting, one in 10 people are looking for a way to leave the country,
according to polling company Datanalisis. More than a million Venezuelans
already have emigrated over the past decade, according to many estimates.
Leonardo Briceno said
three of the four managers of his Caracas public-relations company quit to
leave the country. Next week, he will become the latest departure when he moves
to the U.S. with his wife and 2-year-old daughter.
“It goes beyond the
crime and economic deterioration,” he said. “It’s imagining a scenario where my
daughter needs a medication and we can’t find it. That scares me the most.”
The crisis is felt
not just in Venezuela’s teeming cities but in places like Toas, a tiny island
of palm trees and crystalline waters in far western Venezuela, home to just
8,000 people.
Last December,
thieves stole 15 miles of underwater power cable connecting the island to the
mainland. The theft severed the island’s telephone connections and idled its
water pumps.
Fisherman Genebraldo Chacin said his children haven’t
bathed or gone to school since then, and they have been eating only one meal a
day. His neighbors say the island is close to starvation.
“Our food rots
without electricity, and it’s sad because it’s so difficult to find food here,”
said Mr. Chacin’s neighbor, Sasha Almarza.
“When we are able to find any in the store, we eat it all the same day.”
Venezuela’s murder
rate has climbed to 90 per 100,000 residents, according to the Venezuelan
Violence Observatory, a nongovernment group that focuses on crime. That would
be the world’s second-highest rate after El Salvador, and far exceeds the U.S.
rate of about four per 100,000.
The plunge in the
price of oil has hurt Venezuela more than just about any other oil-producing
nation. Oil accounts for 96% of its export earnings and funds about half its
federal budget.
For years, the
federal budget accounted for oil at $40 a barrel, even in years when the actual
price was about $100. The excess money was put into an off-budget fund outside
congressional oversight. It was spent, and large sums are believed to have been
stolen, according to former Venezuelan government officials and investigators
in the U.S. who are probing corruption. The country’s rainy-day oil-savings
fund stands at $3 million, compared with funds in some other oil-rich nations
that total hundreds of billions of dollars.
Not only did the
country fail to save, it borrowed heavily. It now has a foreign-debt load of
about $110 billion.
Alejandro Arreaza,
Latin American economist at
Barclays, says market data
indicates Venezuela has about an 85% chance of defaulting in the next 12
months. He said he thinks the government will pay the $1.5 billion that is due
Feb. 26, and will do all it can to honor the $5 billion in principal and
interest payments due in October and November. To avoid a messy default and a
seizure of oil assets by creditors, he said, Venezuela may have to cut imports
further and possibly move to restructure its debt.
“They already have
political problems on the domestic front,” Mr. Arreaza said, “and they want to
avoid opening an international front.”
A shortage of dollars
because of currency controls and declining oil revenues has hit the economy
hard. Widespread nationalizations and price controls have gutted the private
sector, leaving the country more dependent on imports.
Venezuela used to
export rice, coffee and meat. It now imports all three. It even imports its own
bank notes, ordered from European firms and flown in on 747 jets.
The number of private
companies in the country shrank by 20% between 2006 and 2014, according to
Datanalisis. Multinationals such as
Clorox Co. have simply left.
Others including Ford Motor Co. and Oreo-maker Mondelez
have written down the value of their local businesses to zero.
A complicated system
of exchange rates makes the country either one of the world’s cheapest or most
expensive—depending on the rate used. At the official rate of 6.3 bolivars per
dollar, a McDonald’s Happy Meal costs $146. At the widely used black-market rate,
where a dollar fetches more than 1,000 bolivars, it costs just 89 cents. That
makes the country dirt cheap for savvy travelers and those who earn dollars,
but unaffordable for the poor who can’t access greenbacks.
The crisis is especially
acute in what was once a centerpiece for the socialist country, its health-care
system. Medical associations and health-care specialists say preventable deaths
have been on the rise because of lack of medication, equipment and doctors. The
country’s leading trade group for drugstores says 90% of medicines are scarce.
On a recent day at
the University Hospital of Maracaibo, in Venezuela’s second-largest city,
patients lay on bare beds in rooms with dirty floors. There was no running
water, medicine, cleaning supplies or food. Feces floated in the toilets.
Medical staffers there said gang members roam the halls, forcing underpaid and
harassed doctors to lock themselves in the offices to avoid assaults.
During the past week,
six infants died at the Central Hospital in the western city of San Cristóbal,
according to officials with the city’s child-protection services office and the
union that represents hospital workers. The babies died because of a shortages
of medicine and functioning respirators for underdeveloped lungs, the officials
said.
“Until the problem of
a lack of supplies and imports is resolved, the neonatal situation here is only
going to get worse,” said Karelis Abunassar, the child-protections chief. She
said an inspection of a packed maternity ward found just 11 working incubators
and seven respiratory machines, insufficient for the number of premature babies
born there.
Calls to the Health
Ministry weren’t returned. An administrator at Central Hospital said directors
weren’t available to comment.
—Lorena
Evelyn Arraiz in San Cristóbal, Sheyla Urdaneta in Toas, Mayela Armas and Kejal
Vyas in Caracas and Sara Schaefer Muñoz in Bogotá, Colombia contributed to this
article.
