WashPost Writer: Despite Venezuela's Collapse, Government Giveaways Are a 'Good Idea in General'

In trying to explain the current situation in Venezuela — and doing so fairly well — the Washington Post's Matt O'Brien, in a post at the paper's Wonkblog, also inadvertently identified two reasons why authoritarian socialist tyrants like Huge Chavez and Nicolas Maduro are able to achieve and retain power.

The formula is simple: When you first gain power, garner international and media goodwill by giving stuff away, like housing and gasoline. That wlll earn you props from the likes of O'Brien and liberals everywhere who have come to believe that doing so "is a good idea in general." Meanwhile, you can work in the background to overturn whatever checks and balances your country's political system might have. If the populace finally figures out what you're really up to and rises up in opposition, they can't stop you — even if your party gets blown out in elections and takes over what has become, thanks to you, an impotent legislature.

Here are the relevant passages demonstrating, among other things, that the strategy has worked on O'Brien (links are in original; bolds and numbered tags are mine):

Venezuela is 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. Indeed, Venezuela's ruling party just lost congressional elections that gave the opposition a veto-proof majority, and it's hard to see that getting any better for them any time soon — or ever. [1] 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. [2] 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 [3] — but only as long as you actually, well, have the money to spend. And by 2005 or so, Venezuela didn't.

... Even triple-digit oil prices ... weren't enough to keep Venezuela out of the red [2] 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.

It turns out Lenin was wrong. Debauching the currency is actually the best way to destroy the socialist, not the capitalist, system. [4]

... it's only going to get worse. That's because Socialist president Nicolás Maduro has changed the law so the opposition-controlled National Assembly can't remove the central bank governor or appoint a new one. Not only that, but Maduro has picked someone who doesn't even believe there's such a thing as inflation to be the country's economic czar.

... this will keep going until Venezuela can't even afford to run its printing presses anymore — unless Maduro gets kicked out first. [1]

But for now, at least, a specter is haunting Venezuela — the specter of failed economic policies. [6]

[1] (tagged twice) — The problem with this thinking is the assertion that the Maduro government is in its "death throes." It is, but only if a) the legislature is able to follow through on its promise "to legally remove him from power within six months," and b) if Maduro goes willingly, which is far from assured. When was the last time a committed, entrenched communist — which is what Maduro, as a "Bolivarian socialist," really is — willingly ceded power? Maduro, as would be expected after 15 years of Chavismo, currently has the backing of the nation's military leaders.

[2] (tagged twice) — "Bad luck" had little to do with it. As O'Brien himself noted, Venezuela couldn't sustain its spending frenzy even when the price of oil was in triple digits, and continued down a ruinous path for a whole decade when a sane government would have at least tried to retrench. Even the best of luck would only have bought the country a bit of fiscal time.

[3] — Throwing money at the poor in the form of the pure giveaways just described is not "a good idea in general" if one's goal is to lead a nation to greater prosperity and thereby reduce the number of citizens in poverty. (It's quite effective, though, if your goal is to buy votes.) Doing so when the government has money to spend eventually guarantees that the government won't have money to spend. Even a country as rich as the U.S. has had to essentially run the printing presses for the past seven years, sending this nation ever closer to a fiscal insolvency which, without a course correction, is nowhere near as far away as the establishment in Washington seems to think — all because there is no political will to do anything to rein in the entitlement state.

[4] — This is a critical error. In debauching the currency, the Maduro government is destroying what remains of Venezuela's formerly very impressive capitalist system while advancing its own interests. Yes, a large majority of Venezuelans oppose Maduro, but what can they do beyond hoping that the legislature's moves and public pressure convince him to step down? In Cuba, Fidel Castro destroyed the country's economy and, with his brother succeeding him in everyday rule, has retained ironclad control over that nation's beleaguered people for 55 years.

[5] — So what other laws can Maduro simply "change" as long as he has the military's backing? It would appear that the nation is heading towards a situation analogous to that seen in Egypt in 2013, when what some called the largest political demonstrations in world history by millions of Egyptians in Cairo caused Mohammed Morsi, who had been attempting to impose a sharia law-based dicatatorship on that country, ceded power to the military. There is clearly no guarantee that even that level of public opposition would convince Maduro to go away.

[6] — "Failed economic policies" are a critical element of Venezuela's collapse, but O'Brien should have reminded readers that during their combined 16 years in power, Chavez and Maduro have shut down almost all objective and critical media outlets, and have also jailed key opposition leaders on trumped-up charges. Authoritarian moves such as those by the two Bolivarian socialists were critical in enabling them to begin and continue their attacks on Venezuela's once-free markets and once-free exchange of ideas.

So now a Washington Post writer is alarmed at Venezuela's descent. Where was the Post and the rest of the establishment while all of this was going on? First, they cheered. Then, when they weren't openly applauding, they excused Chavez's authoritarian moves as supposedly necessary measures to solve "income inequality" and maintain order. Finally, as the deterioration became so obvious it couldn't be ignored, they looked around and wondered, "What happened?"

What happened is what anyone with an ounce of sense and a knowledge of the history of doctrinaire socialism and communism could have predicted — and did predict — when Chavez first gained power in 1999: a democratic and humanitarian disaster.

Cross-posted at BizzyBlog.com.

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