Venezuela: Let Them Eat Chicken Feet

This Associated Press story about food shortages in Venezuela gave me a laugh. Although the situation is not good for many in that country, how can you not chuckle at this opening line:

Meat cuts vanished from Venezuelan supermarkets this week, leaving only unsavory bits such as chicken feet, while costly artificial sweeteners have increasingly replaced sugar, and many staples sell far above government-fixed prices.

Naturally I found the reference to chicken feet funny. But beyond that, I got a laugh because this effect is so entirely predictable because its cause is so pathetically, blatantly obvious. You have a socialist demagogue soon-will-be complete dictator in Hugo Chavez ruling the country. What do people there expect? Are they entirely ignorant of the world's history (recent history of socialism in particular)? Are they likewise ignorant of basic economic theory? Have they been duped by the rhetoric and promises of the seemingly-always-smiling Chavez?

I do feel bad for anyone in Venezuela who has fought against Chavez' rise to power, and have done so for the right reasons -- those who know his policies violate individual rights, and are destined to lead to economic ruin. But for all the others -- anyone who has supported Chavez even partially, not to mention enthusiastically and fully -- I just can't feel bad for you now that the, uh, chickens (or at least their feet) are coming home to roost.

And its not just meat that is in short supply. The article notes that many other products have seen sporadic shortages in Venezuela for the past several years, such as milk, sugar, coffee, and so on. Why? Chavez has been regulating prices for over 400 products! Price regulation is a cause of shortages. Not only is it anti-market and economically devestating, but it is also morally evil because it violates the rights of individuals to sell products at prices that they set, and the rights of consumers to purchase products that they want through voluntary exchange.

Think about it: There are people in Venezuela who are willing to pay X for a product, say coffee, and other people who are willing to sell it for X. But the government is violating the individual rights of both parties by saying "No. You can only perform this transaction if the price is lower - it cannot be higher than Y." And of course that price Y is in some cases so low that the seller can't even break even, much less make any level of profit (the incentive to produce or acquire the products to sell in the first place).

Why does Chavez do this? Well, my understanding is that he has been elected partially through the votes of the poor, and the poor need food and by definition can't afford (some of) the food at market prices. So because they need it and want it, Chavez will (attempt to) give it to them through force imposed on everyone in the country. This is, infamously, a key axiom of communism and a theory that Chavez has publicly applauded as a goal for his regime: From each according to his abilities, to each according to his needs. Sadly, what ends up happening is food ceases to be available at any price.

Besides trying to help the poor, another goal of Chavez's dictates is to control inflation. But the article states:

Yet inflation has soared to an accumulated 78 percent in the past four years in an economy awash in petrodollars, and food prices have increased particularly swiftly, creating a widening discrepancy between official prices and the true cost of getting goods to market in Venezuela.

And then there are the other side effects that such a system produces, like black markets and people wasting their time (thereby not helping the economy be productive):

The state runs a nationwide network of subsidized food stores, but in recent months some items have become increasingly hard to find.At a giant outdoor market held last weekend by the government to address the problems, a street vendor crushed raw sugar cane to sell juice to weary shoppers waiting in line to buy sugar.

And of course the government inevitably resorts to outright lies to try to fool the people and prevent panic. This happened throughout Soviet history, and has happened in countless other socialist and communist countries. Consider this example from the article:

"They say there are no shortages, but I'm not finding anything in the stores," grumbled Ana Diaz, a 70-year-old housewife who, after eight hours, had filled a bag with chicken, milk, vegetable oil and sugar at official prices.

Here is a similar report from the BBC, this one focused on coffee beans and the shortages in that area. The following quote from Eduardo Bianco, a senior executive at Cafe Madrid, Venezuela's largest coffee producer, tells the story:

"Would you sell your products on the open market if you were sure you were going
to make a loss?"

Good point. But sadly, the nature of the brute force involved here has recently been made clear:

Venezuela's leftwing leader has authorised the use of the National Guard to "find every last kilogram of coffee" being stockpiled by coffee roasters. He even raised the prospect of nationalising the industry as a last resort.

"As far as the law is concerned, we're absolutely within our rights to seize coffee which is deliberately being withheld from sale," insists Samuel Ruh, a government appointed monitor of consumer rights.

"In fact, we have already carried out several successful raids at premises illegally holding thousands of tonnes of coffee."

Note the knee-jerk reaction... government policy violates the rights of individuals and along the way ruins an area of the economy, so obviously we must then nationalize that sector! That will fix it!

And notice the false assumption by Mr. Ruh -- that consumers have a right to coffee. This complete inversion and misunderstanding of individual rights is a root problem here to be sure.

This BBC article does go beyond coffee, noting:

Yet several food stores in Venezuela's capital city Caracas say the coffee raids are not addressing the fact that shops are also running low on sugar, maize, powdered milk and beans. Store managers insist they are not being supplied with new stock from wholesalers and importers, who were also complaining that the prices set by the government are too low.

And then it goes beyond even food-related problems that Venezuela is facing:

His [Chavez'] government's woes are compounded by massive structural problems of a key road bridge linking the capital city, Caracas, to Venezuela's main international airport. The other day, President Chavez admitted that attempts by engineers to save the bridge from collapse had failed. Tens of thousands of motorists now face misery as they try to negotiate a bumpy road from and to Caracas. Trucks carrying goods from the airport now face a four-hour journey to the shops of the capital city, whereas the old route via the bridge took only 90 minutes. A new bridge will not be ready before the year 2010 according to government estimates.

90 minutes turns into 4 hours, and it won't be fixed until 2010 at the earliest. When will the majority of people in Venezuela figure out it doesn't have to be this way?

And lastly, here is a brief item about another industry in Venezuela being increasingly regulated, and partially nationalized: the electricity industry.

Prediction: electricity shortages (e.g., brownouts, blackouts) will increasinly occur in Venezuela as long as Chavez continues in this direction. Any one wanna bet with me on this? LOL