Mises Wire

In Socialist Venezuela the Poor Starve to Death While the Politically Powerful Feast

The socialist policies of the Venezuela government continue to impose a living hell on its people. Hyperinflation has turned its currency to literal garbage. Mortality rates have skyrocketed for groups such as infants, pregnant mothers, and the elderly as clinics have shut down and medicine grown scarce. Food has disappeared from store shelves forcing the population to consume pets and zoo animals. A recent poll found that 78% of Venezuelans “reported trouble keeping themselves fed.”

Of course, this is not true for all Venezuelans.

Earlier this week President Nicolas Maduro was seen in a plush Istanbul restaurant lavishly dining on expensive steaks while smoking fine cigars, the check paid for by the wealth his regime has drained from his people. Once again we see that under socialism “all animals are equal, but some animals are more equal than others.”

While the outrage over Maduro’s obtuse opulence is well deserved, it serves as only a gaudy reminder of how socialism actually operates in the real world. The more controlled an economy becomes, the more it benefits those with power.

While less obvious than Maduro’s dinner prepared by celebrity chefs, we’ve seen this play out throughout the country. The regime understands that its survival depends upon keeping the guns of government pointed at the people, and not at themselves. As such, the country has fallen into rule by corruption, with the police and military being offered access to food and supplies in exchange for their loyalty.

Maduro’s government is able to benefit from the trade in a variety of ways. As a South American businessman told an AP reporter last year, a bribe to the right official allows him to sell his goods to the Venezuelan government. He can afford to pay it because the government pays him a higher price than international markets do. The government then takes the food and gives it to the military, who is then able to feed their families and sell the rest — and for dollars as opposed to increasingly worthless bolivars.

It’s been noted that in Venezuela today, black markets in food are “a better business than drugs.” As is the case with any other black market, the business is even better if it comes with the protection of a government badge. Not only is Maduro’s regime active in supplying the black markets of government officers, but they also unleash the police on the bachaqueros — illegal vendors — that compete with them.

This is not the only way that those with state privilege are able to profit from the horrors of socialism.

As the Miami Herald reported recently, those close to Maduro — including his stepsons — have been able to exploit the government’s currency exchanges at rates that don’t take into consideration the hyperinflation going on within the country. It has resulted in $1.2 billion money-laundering case filed in Miami:

In the Miami federal case, prosecutors charge that a network of Venezuelan businessmen and executives with the national oil company PDVSA managed to quickly turn $42 million worth of bolivars into $600 million in U.S. dollars by simply making a “loan” to the state-owned firm. PDVSA tapped into the government exchange to pay off the loan in a few months and, according to federal court records, funneled the windfall back to the ring. Its members then hid the money in Europe and the U.S. and bought up mansions from Cocoplum to Wellington in South Florida.

Russell Dallen, a Miami businessman who manages a capital investment company and formerly owned a newspaper in Venezuela, dubbed the government currency scheme a “perpetual money machine.”

“That’s one of the reasons why Venezuela has not changed this [government exchange] system,” said Dallen, a financial investor who has closely followed the money-laundering case.

This corruption, of course, is not unique to Maduro’s regime — but simply a byproduct of the socialist system he inherited. Hugo Chavez may still remain popular among many within the country, but his own corruption has enabled his daughter to enjoy a life of luxury. Her wealth has been estimated in the billions, so she can even afford more houses than Bernie Sanders and nicer outfits than Alexandria Ocasio-Cortez. 

Socialism is sold to the idealistic and naïve as a way to end the inequality that exists in a free market. In reality, it only changes the way in which power and privilege is consolidated. On the market, wealth is acquired through voluntary exchange and serving the desires of consumers — one of the many ways it makes us more humane. In socialism it’s acquired through force and brutality. As F.A. Hayek explained in The Road to Serfdom, the result is the worst rising to the top.

For the people in Venezuela, their future will not be improved by simply replacing Maduro for a more modest socialist leader. It can only come by rejecting the very ideology that has eroded away the country’s wealth for decades. Until then, those with political power will continue to live at the expense of their neighbors.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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