Friday, January 6

Venezuela: The beginning of the economic end

Publius Pundit is reporting of increasing shortages in Venezuela. And so the beginning of the end is at hand. Oil prices may be able to sustain the fool's ambitions, but nothing can stop the actions of the economic "Invisible Hand." Chavez is getting his Economics 101 lessons--I suspect he will get an "F" regardless. Pay attention to this, as it is economics playing out according to basic rules. We have hundreds of years of history as proof of what works and what doesn't--but some refuse to get it. Lives are lost because of misplaced ideals and collective philosophy.

Artificial price controls are a no-win situation for the producers, and the net result has been rationing of coffee and other goods due to inevitable shortages.

These shortages occur in every communist country - and it makes me recall that it was price controls that took down the Soviet Union, following decades of stories about factories that made thousands of left shoes - and no right ones - among other things. All of that was a function of price controls. Mess around with prices and watch it all come down.

But Hugo Chavez would have you believe that to support him to is to tap a bottomless well of free goodies, cost-free, accountable only to him. And that the only reason there is any cost at all for things is the 'greed'’ of merchants. Caracas Chronicles has an awfully good piece on this very issue here. These shortages, and the causes of them, completely misunderstood by the Venezuelan government and anyone who thinks populism is the answer, are showing up the lie of that myth. As economists say: anything that can’t go on, won’t.

Publius Pundit is also linking to various related stories--Miami Herald on electrical shortages, Associated Press explaining economic dynamic, FT with more on food shortages, and more on world coffee prices.