Posted by Curt on 5 August, 2015 at 7:34 pm. 2 comments already!


Kevin D. Williamson:

There have been a few days of rioting in Venezuela, with the riots directed at groceries and food distributors. The scene will be familiar with anybody with even a casual education in the history of socialism: The shelves are empty, and staples such as milk and rice are nowhere to be found. In a period of only a few years, Venezuela has been reduced from seeing its strongmen swaggering around the world giving out free (“free”) heating oil in poor communities to being a pauper nation with 800 percent inflation and people rioting for food.

The culprit here isn’t simply lower oil prices: You’ll notice they’re not rioting in Oslo or Houston. The culprit is socialism.

There’s a great deal to be said about the moral awfulness of socialism (you can get the CliffsNotes version from me or take a horrifying deep dive with the late Robert Conquest) but it is worth taking a moment to think about the structural issue.

Talk to a Bernie Sanders voter about “socialism” — and they can be very insistent about using the word — and you’ll get paeans to Sweden, which is not a socialist country but a country with large, expensive welfare state. The distinction is not trivial: There is relatively little in the way of state-run enterprise in Sweden; the Swedish government is in fact only a 60 percent partner in the postal service. The Swedish government is, alas, in the casino business, albeit in a more transparent way than American government is. On the Heritage economic-freedom rankings, Sweden isn’t that far behind the United States. It has very high taxes, but taxes are not the only burden that governments put on the economy, not necessarily even the most important, and Sweden outscores the United States on a number of important metrics: free trade, property rights, freedom from corruption, investment freedom, monetary policy, etc. The United States’ small edge in the rankings comes mainly from relatively low taxes and a much less regulated labor market.

If you want to know why that matters, take a look at those empty Venezuelan grocery stores. A highly productive modern capitalist economy can withstand a fair amount of welfare-statism, as Sweden, Canada, Switzerland, the United States, and others demonstrate. What it cannot bear very much of is proper socialism, which is to say government ownership and operation of the means of production. If you’re going to have a welfare state, what you want is one in which your welfare programs simply enable higher levels of consumption among the people you’re trying to help rather than one in which government tries to actually manage enterprises.

The classical example here is food stamps. The federal nutrition program may be rife with fraud and low-level corruption, but it doesn’t have much effect on the actual underlying economic activity of farming, food processing, etc. (To the extent that it distorts real economic activity, it does so mainly at the retail level.) You can live with a little bit of corruption, but you can’t live without food.

The most dysfunctional aspects of the American economy are those in which the government actually operates enterprises (public schools, VA hospitals, housing projects, etc.) or in which its financial role is so pervasive that it is effectively a business manager (Medicaid). Government-run schools in Philadelphia fail for the same reason as government-run groceries in Caracas: Central planning is an impossibility.

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