Socialism Always Fails: Venezuela Edition

Without naming any names, we know some UD professors who welcomed Venezuela’s socialist revolution because they thought it would help the poor. What they didn’t understand is that the best system for eliminating poverty is free enterprise, not socialism. Now, after 17 years of socialism, the poor are not being helped by the fact that Venezuela stands “on the brink of a complete economic collapse.”

The only question now is whether Venezuela’s government or economy will completely collapse first.

The key word there is “completely.” Both are well into their death throes…Incumbents, after all, don’t tend to do too well when, according to the International Monetary Fund, their economy shrinks 10 percent one year, an additional 6 percent the next, and inflation explodes to 720 percent. It’s no wonder, then, that markets expect Venezuela to default on its debt in the very near future. The country is basically bankrupt.

That’s not an easy thing to do when you have the largest oil reserves in the world, but Venezuela has managed it. How? Well, a combination of bad luck and worse policies. The first step was when Hugo Chávez’s socialist government started spending more money on the poor, with everything from two-cent gasoline to free housing. Now, there’s nothing wrong with that — in fact, it’s a good idea in general — but only as long as you actually, well, have the money to spend. And by 2005 or so, Venezuela didn’t.

As Margaret Thatcher said long ago, “The problem with socialism is that you eventually run out of other people’s money.”

Even triple-digit oil prices, as Justin Fox points out, weren’t enough to keep Venezuela out of the red when it was spending more on its people but producing less crude. So it did what all poorly run states do when the money runs out: It printed some more. And by “some,” I mean a lot, a lot more. That, in turn, became more “a lots” than you can count once oil started collapsing in mid-2014. The result of all this money-printing, as you can see below, is that Venezuela’s currency has, by black market rates, lost 93 percent of its value in the past two years.


Now you might have noticed that I talked about Venezuela’s black market exchange rate. There’s a good reason for that. Venezuela’s government has tried to deny economic reality with price and currency controls. The idea was that it could stop inflation without having to stop printing money by telling businesses what they were allowed to charge, and then giving them dollars on cheap enough terms that they could actually afford to sell at those prices. The problem with that idea is that it’s not profitable for unsubsidized companies to stock their shelves, and not profitable enough for subsidized ones to do so either when they can just sell their dollars in the black market instead of using them to import things. That’s left Venezuela’s supermarkets without enough food, its breweries without enough hops to make beer, and its factories without enough pulp to produce toilet paper. The only thing Venezuela is well-supplied with are lines.

Socialism has failed everywhere it’s been tried. Venezuela is just the latest addition to a very long list.

And yet, on the eve of the Iowa caucuses, we have this:


Socialism at this point has become a kind of religion. Its supporters adhere to it on the basis of faith alone, impervious to fact or reason.

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Nebraska Keeps Killing School Choice Bills

From the Hit and Run blog:

Hundreds of restless parents and kids rallied outside Nebraska’s state capitol last week to widen the options their state’s public school system. Nebraska is one of seven states with no charter schools, no vouchers, nor any other publicly funded alternatives—and it’s been this way for a while.

Our nation has a lot of problems, but perhaps the most unfathomable failure in the entire country is our inability to wrench education away from the failed and failing state educational monopoly. We know that the teachers’ unions that today control the government school system would not relish real educational competition.  But, given that there is currently a lot of fashionable talk about “income inequality” maybe we can hope that the time may be ripe to focus on the role of our often dysfunctional government schools in widening the labor market skills gap.

Network TV: No Credibility

Check out this risible piece of scaremongering which apparently aired on Good Morning America back in June, 2008. The video segment predicted that seven years later, in 2015, the world would see New York City under water, $9.15 for a gallon of gas, and $12.99 for a carton of milk. The reason? CLIMATE CHANGE, of course.

Lessee, the last time we bought gas we paid all of $1.44 per gallon. We’ll just go on record right now and predict that if, God forbid, we ever do see $9 gas and $13 milk, the cause will be Big Government, not the environment.

And make no mistake; the predictions in the video were not just an honest attempt at forecasting that failed to materialize. Even in 2008, such apocalyptic forecasts had no grounding in real science or economics. No, this is agitprop, pure and simple.

Usually, network television’s agitprop displays a bit more subtlety. But in this case they went pedal to the metal, probably because 2008 was an election year. Can’t wait to see what they cook up this year.

Thomas Jefferson said that the man who reads only newspapers is worse educated than the man who reads nothing. We would update that formulation by saying that anyone who gets news only from television is worse informed than someone who gets no news at all.

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Video: The Power of the Market (Revised)

This first episode in the Free to Choose series follows a somewhat different narrative than does the corresponding chapter in the book, although the general thrust of ideas is quite similar.

(This post has been bumped since our students are currently reading the book.)

Some highlights:

15:50. The Lesson of the Pencil. Producing even as humble a product as a pencil requires an incomprehensible amount of cooperation and coordination among thousands of people all over the world. Remarkably, the price system effectively coordinates their activities without anyone planning or overseeing the entire process.

21:40. History shows that the best system for reducing poverty is the free market.

25:20. Dr. Friedman summarizes the three major functions of prices in incentivizing and coordinating economic activity.

FDA Delenda Est

Since the Kefauver-Harris Amendments of 1962, the Food and Drug Administration has been tasked with approving for sale only drugs proven to be both safe and effective. Medical research, however, is an imperfect science. And FDA bureaucrats can make poor decisions due to incompetence, or because they are unduly influenced by political considerations. As a result, two types of errors can occur. First the FDA can mistakenly approve a drug that is not safe and effective. Second, the FDA can fail to approve a drug that is, in fact, safe and effective.

The first type of error imposes greater costs on the FDA than does the second. If the FDA approves a drug, and then people are harmed or die from taking the drug, the incident will generate very bad publicity, and the FDA bureaucrats will come under fire from elected officials and the public. The second type of error generally creates much less controversy. We rarely hear about drugs that never make it to market, even if people die who could have been saved by those drugs.

In order to avoid the backlash from approving a harmful drug, the FDA has the incentive to err on the side of excessive strictness, so that the FDA ends up delaying or deterring beneficial drugs. That’s why it takes something like 10 years and $1 billion to bring a new drug to market. In many cases, people die waiting for drugs to be approved. Or the high costs deter the pharmaceutical companies from developing the drug in the first place. As a result, people die.

But this arrangement serves the interests of the FDA bureaucrats. They get in trouble only for mistakenly approving drugs, not for rejecting them. That’s right; people die so that bureaucrats can have an easier life. Remind us again how socialism is ‘compassionate.’

Writing at the website of the Hoover Institution, law professor Richard Epstein offers just the latest story of the FDA’s obstructionism and interference with personal autonomy.

Earlier this month, the Food and Drug Administration rejected the application of Biomarin Pharmaceutical to market its drug Kyndrisa (drisapersen) for use in the treatment of Duchenne muscular dystrophy. The FDA, as is often the case when it rejects a drug application, listed all sorts of technical reasons why the data presented was not sufficient to establish by respectable scientific means that the drug in question was safe and effective in its intended use. Without question, much evidence from the clinical trials revealed serious complications from the drug’s use, including blood-platelet shortages that were potentially fatal, kidney damage, and severe injection-site reactions. But the no-treatment alternative could prove far worse.

Duchenne is a rare but fatal genetic disorder that attacks only young boys, roughly 1 in 3,500 to 5,000. Typically, it first manifests itself between two and five years of age. With time, it relentlessly weakens the skeletal muscles that control movement in the arms, legs, and trunk. Most of its victims are wheelchair-bound between the ages of seven and 13. By 20, many have died.

The source of the problem is the absence from the cell of the key chemical dystrophin, which is needed to control muscular movement. The proposed treatment is known as “exon-skipping,” which allows the body to produce the needed quantities of dystrophin. At present no drugs are on the market to fix the genetic defect. But other drugs are also under investigation. If the door is closed for drisapersen, it remains ajar for an unnamed drug produced by Sarepta Therapeutics, which will be reviewed by the FDA shortly. But, based on early rumblings from the FDA, it is likely that this drug too will be kept from the marketplace.

As might be expected, the decision by the FDA has left parent groups and their physicians tied up in knots. You can get a sense of their frustration by looking at the desperate petition of a mother whose son has the disease. Tonya Carlone wrote a public letter to the FDA pleading for the drug to be allowed on the market: “This medication has allowed my son, Gavin, to be able to ride a 2 wheel bike, to play on a soccer team, to run and play with his healthy 10 year old peers. Dr. Craig McDonald of UC Davis Medical Center and a Duchenne expert of over 30 years, has stated that he has never seen a boy with Duchenne at the age of 10 have as much function as Gavin.”

All irrelevant, says the FDA.

In a free society, no mother of a child with a deadly disease should ever have to write a desperate letter begging government bureaucrats to allow access to a drug that might save the child. The decision on which drugs free citizens will use should be made by those citizens and their doctors. No government bureaucrat should have anything to do with that decision. The FDA’s drug approval process is incompatible with basic principles of human freedom and personal autonomy, and should be completely abolished.

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Time to Lower the Drinking Age

Until about 30 years ago, most states set their legal drinking age at 18. Then the federal government used constitutionally-dubious extortion–threatening to withhold highway funds–to coerce the states to raise the drinking age to 21. Despite the higher drinking age, 18-20 year olds who want to drink can always find a way to obtain alcohol.

But the problem with the drinking age is not just that it’s ineffective at reducing consumption. Perversely, the drinking age creates incentives that make alcohol consumption by young people less responsible. Specifically, the drinking age incentivizes binge drinking, and drives youth drinking underground, out of sight of older, more responsible adults.

In a recent article in Commentary magazine, John Steele Gordon provides a concise summary of the issue.

[T]he main consequence of this law has been to drive college-age alcohol consumption underground, which has in all likelihood increased that consumption and probably actually increased drunk driving. Unable to drink in public at bars and restaurants, where the owners and the other patrons would exert a restraining influence, college-age people drink in dorm rooms, basements, and fraternity houses. The result has been a marked increase in binge drinking. U.S. News and World Report reported that, “The CDC… found that young people between the ages of 12 and 20 drink 11 percent of all the alcohol consumed in the U.S., and more than 90 percent of this alcohol is consumed during binge drinking.”

That last statistic is quite remarkable. Not a lot of casual drinking among the young. They drink to get shit-faced. The reason is that prohibition, whether of drugs or alcohol, always increases the intensity of consumption. That’s because there’s no point to breaking the law just to nurse a light beer for an hour. If you’re going to run the legal risk, might as well make it worthwhile by getting hammered. That explains binge drinking, and also why Prohibition during the 1920s increased the consumption of hard liquor relative to beer and wine.

The same holds true for drugs. People often argue that we can’t legalize drugs because hard drugs like heroin are too dangerous. What they don’t understand is that hard drugs are themselves the product of prohibition. If drugs were decriminalized, people could meet their needs with milder opiates rather than resorting to heroin. Indeed, a major contributor to America’s current heroin epidemic is the government’s counterproductive crackdown on opioid painkillers.

For years, treatment centers saw few heroin addicts. But that started changing in the mid-2000s and took off a few years later after a government crackdown on opioid painkiller abuse. Unable to get pills, many addicts turned to heroin, the painkillers’ chemical cousin.

As usual, the better policy involves more freedom, not less. Time to bring the drinking age back down to 18, or preferably, eliminate it altogether.

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New Jersey lifts licensing laws for shoveling snow

Here is the story from Fox News:

Just days ahead of an expected blizzard on the East Coast, New Jersey has officially repealed a nonsensical rule banning the shoveling of snow without a license.
Gov. Chris Christie on Tuesday signed a bill making it legal for New Jersey residents to offer snow shoveling services without first registering with their town. Last year, two entrepreneurial teens going door-to-door and offering to shovel snow for a small fee were stopped by local police in Bound Brook.
The cops told the two boys, Matt Molinari and Eric Schnepf, they were not allowed to solicit businesses without a permit.
In Bound Brook, that license costs $450 and is only good for a period of 180 days.
After the story made national headlines, state lawmakers began working on a solution.
Republican State Sen. Mike Doherty, who sponsored the so-called “right-to-shovel” bill, said it was incredible that some towns wanted teens to pay expensive licensing fees just to clear snow off driveways.

Having the “right to shovel” in New Jersey? It seems pretty reasonable but they might not want to push things too far.  Who knows where it could lead?  You might have people thinking they should be free to pump their own gas.

Blizzard 1, Ecologists 0

But it does not take a scientist to size up the effects of snowless winters on the children too young to remember the record-setting blizzards of 1996. For them, the pleasures of sledding and snowball fights are as out-of-date as hoop-rolling, and the delight of a snow day off from school is unknown.

”I bought a sled in ’96 for my daughter,” said Dr. Michael Oppenheimer, a scientist at the nonprofit Environmental Defense Fund. ”It’s been sitting in the stairwell, and hasn’t been used. I used to go sledding all the time. It’s one of my most vivid and pleasant memories as a kid, hauling the sled out to Cunningham Park in Queens.”


At least part of the reason for the recent warm winter is La Nina, the chilly air in the equatorial Pacific that has been pushing the vast stream of cold air north along the border of the United States and Canada. This has been allowing space for warm winds from the south to expand into the Northeast, including New York. And Dr. Oppenheimer, among other ecologists, points to global warming as perhaps the most significant long-term factor.

The New York Times, January 15, 2000.

We’re not sure exactly what ‘ecology’ is, but it must be one of those soft majors, like sociology.


Breaking: Earth Not Yet a ‘Total Frying Pan’


“An Inconvenient Truth” had its world premiere at the Sundance Film Festival on Tuesday night before an enthusiastic audience that gave the former vice president and his movie a big standing O.

Among the film’s lessons: Earth’s glaciers are melting, the polar bears are screwed, each year sets new heat records. Al Gore sometimes flies coach. He also schleps his own bags.

The morning after his debut as leading man, Gore pronounces this whole Sundance thing “a most excellent time.”… He’s palling around with Larry David of “Curb Your Enthusiasm,” who says, “Al is a funny guy.” But he is also a very serious guy who believes humans may have only 10 years left to save the planet from turning into a total frying pan.

The Washington Post, January 26, 2006.




Larry David was right!

Oh, and if Al Gore flies coach, then I am Marie of Rumania.

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Socialism is Divisive, Not Unifying

Some people might harbor the delusion that socialism is unifying and conducive to social harmony, but in reality, socialism breeds resentment and conflict. In a free market, resources are allocated by the impersonal mechanism of the price system: Adam Smith’s Invisible Hand. Socialism, however, replaces the impersonal with the personal; someone must decide who gets what, where, when and how. In particular, deliberate rationing of goods and services follows inevitably from socialism’s tendency to create shortages. The goal of contemporary socialism, aside from increasing the power of the political class, is to relieve the consumer of the burden of having to pay market price. But pricing below cost creates a shortage, and a shortage leads to conflict that would not exist in a free market.

California’s water shortage, for example, is not created by the weather; it’s created by the refusal of politicians to price water at cost. The inevitable shortage has spawned douchebag ‘water snitches’ to run around and report their neighbors to the authorities for ‘wasting’ water, where ‘waste’ is defined as any use of water not approved by the politicians.

In a free market, in contrast, there would be no need for snitching or enforcement. A free market deters people from using too much water by–get this–charging them for the cost of the water. When people pay for the water they use, they can be free to use as much water as they’re willing to pay for. But when you are not fully paying, how much water you use becomes everyone’s business, and the ‘water wars’ ensue.

Now consider the following ‘fat shaming’ note that somebody distributed around the London subway.

fat_shaming1The hateful notes offended lots of people and caused much outrage. Even the police became involved. Professional ‘bio-ethicists,’ however, have argued that fat shaming is actually the right thing to do. And why would they say that? Because socialized medicine.

If 1 in 5 U.S. adults smoke [sic], and 1 in 3 are [sic] obese, why not just get off their backs and let them go on with their (probably shortened) lives?

Because it’s not just about them, say some health economists, bioethicists and public health researchers.

“Your freedom is likely to be someone else’s harm,” said Daniel Callahan, senior research scholar at a bioethics think-tank, the Hastings Center….

[There is a] burden to everyone else of paying for the diabetes care, heart surgeries and other medical expenses incurred by obese people, noted John Cawley, a health economist at Cornell University….

[P]ublic health officials shouldn’t shy away from tough anti-obesity efforts, said Callahan, the bioethicist. Callahan caused a public stir this week with a paper that called for a more aggressive public health campaign that tries to shame and stigmatize overeaters the way past public health campaigns have shamed and stigmatized smokers.

National obesity rates are essentially static, and public health campaigns that gently try to educate people about the benefits of exercise and healthy eating just aren’t working, Callahan argued. We need to get obese people to change their behavior. If they are angry or hurt by it, so be it, he said.

Feel the love!

Notice that the motivation for getting nasty with fat people is rooted entirely in the socialization of heath care costs. Socialism is the reason why “your freedom is likely to be someone else’s harm.” And that leads to the conclusion that you’ll just have to give up your freedom. Even the subway hate-notes mentioned “wasting NHS [National Health Service] money to treat your selfish greed.”

In contrast, a free market in health care and health insurance would give wider deference to individual freedom.

From an economist’s perspective, there would be less reason to grouse about unhealthy behaviors by smokers, obese people, motorcycle riders who eschew helmets and other health sinners if they agreed to pay the financial price for their choices.

When you’re paying your own way, you can do what you want. But under socialism, your behavior becomes everyone’s business. And that inevitably creates resentment and conflict.

Socialism doesn’t construct a more civil society in which everyone sits around holding hands and singing kumbaya. More like a bitter and resentful war of all against all, fighting an endless battle over the rationing of public resources.

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