In A Critique of Interventionism, Ludwig von Mises laid out the case that government attempts to “improve” this or that market outcome wind up creating additional problems that the government then attempts to solve with additional market restrictions. If the bureaucrats are allowed to persist in their interventionist approach ad infinitum, the result is pure socialism with its corresponding basket-case economy.
Government or any organization of coercion can at first achieve what it sets out to achieve through intervention. But whether it can achieve the remoter objectives sought indirectly by the intervention is a different question. And it must further be determined whether the result is worth the cost, that is, whether the intervening authority would embark upon the intervention if it were fully aware of the costs. An import duty, for instance, is surely practical, and its immediate effect may correspond to the government’s objective. But it does not follow at all that the import duty can realize the government’s ultimate objective. At this point the economist’s work commences. The purpose of the theorists of free trade was not to demonstrate that tariffs are impractical or harmful, but that they have unforeseen consequences and do not, nor can they, achieve what their advocates expect of them. What is even more significant, as they observed, protective tariffs as well as all other production restrictions reduce the productivity of human labor. The result is always the same: a given expenditure of capital and labor yields less with the restriction than without it, or from the beginning less capital and labor is invested in production.
- Interventionism, Chapter 3, “Restrictions of Production”
I seriously doubt that either Hugo Chávez or Nicolás Maduro ever read Mises (and if they did, it’s obvious they didn’t understand him), but their destructive experiment in “21st Century Socialism” might easily be viewed as a large-scale attempt to prove just how right the Austrian economist was. For example, on government attempts at price controls, Mises wrote:
Price intervention aims at setting goods prices that differ from those the unhampered market would set. When the unhampered market determines prices, or would determine prices if government had not interfered, the proceeds cover the cost of production. If government sets a lower price, proceeds fall below cost. Merchants and producers will now desist from selling – excepting perishable goods that quickly lose value – in order to save the goods for more favorable times when, hopefully, the control will be lifted. If government now endeavors to prevent a good’s disappearance from the market, a consequence of its own intervention, it cannot limit itself to setting its price, but must simultaneously order that all available supplies be sold at the regulated price. Even this is inadequate. At the ideal market price supply and demand would coincide. Since government has decreed a lower price the demand has risen while the supply has remained unchanged. The available supply now does not suffice to satisfy the demand at the fixed price. Part of the demand will remain unsatisfied. The market mechanism, which normally brings demand and supply together through changes in price, ceases to function. Customers who were willing to pay the official price turn away in disappointment because the early purchasers or those who personally knew the sellers had bought the whole supply. If government wishes to avoid the consequences of its own intervention, which after all are contrary to its own intention, it must resort to rationing as a supplement to price controls and selling orders. In this way government determines the quantity that may be sold to each buyer at the regulated price. A much more difficult problem arises when the supplies that were available at the moment of price intervention are used up. Since production is no longer profitable at the regulated price, it is curtailed or even halted.
- Interventionism, Chapter 4, “Interference with Prices”
The Venezuelan government has been slapping price controls on everything from toilet paper to televisions, and the result has been nothing but empty store shelves from Caracas to Maracaibo. Naturally, this has resulted in further interventions, such as nationalizing toilet paper producers and even fingerprinting grocery shoppers to enforce rationing.
An essential element of any interventionist government policy is to blame everyone else for the problems that inevitably result. This is easy enough to do, as Mises pointed out:
The fact that the system functions poorly is blamed exclusively on the law that does not go far enough, and on corruption that prevents its application. The very failure of interventionism reinforces the layman’s conviction that private property must be controlled severely. The corruption of ‘the regulatory bodies does not shake his blind confidence in the infallibility and perfection of the state; it merely fills him with moral aversion to entrepreneurs and capitalists.
- Intervention, Chapter 5, “Destruction Resulting from Intervention”
This approach is on full display in Venezuela. The government has rounded up the usual suspects, pinning the blame on anyone but itself. For example, The Guardian reports Maduro has blamed shortages on his domestic political opposition, claiming they are working with “the CIA to destabilise his government, sabotage the oil industry and trigger power cuts.”
Following diligently in his idiot predecessor’s footsteps, Maduro has resorted to the printing press in the vain hope that he can inflate away all of the problems his government has caused. The result is an official annual inflation rate of 63.4%, the highest in Latin America (and that’s just the official number published by the government – you can bet the real rate is much higher). Maduro blames the inflation he created on “hoarders” (naturally) and even political protests.
To anyone with a basic understanding of economics, the causes of Venezuela’s economic problems are clear. To writers at The Guardian and the BBC, however, they remain a mystery. Take a BBC article titled, “What’s Behind Venezuela’s Economic Woes?” In an attempt to get to the root cause of the economic problems plaguing the country, Irene Caselli occasionally manages to point out both cause and effect, but generally fails to connect the two in any meaningful way.
For example, she correctly points out that the Venezuelan government imposed foreign exchange controls in 2003, causing a black market for dollars. But then she quotes analysts who blame that black market for the creation of “a dual economy” which create unspecified “distortions.” The black market may be a symptom of Venezuela’s ills, but the disease is the government’s economic intervention.
On the issue of shortages, those same currency controls are mentioned (correctly) as a causal factor for reduced supplies of imports, but the last word on the matter is the Venezuelan government’s blame of “businessmen who are trying to boycott the system.” As if the business community’s inability to sell at a loss in perpetuity qualifies as a “boycott.” No mention is made of the government’s price controls on most staple goods, which is the real reason basic items have all but disappeared from Venezuelan shelves.
The BBC’s sad confusion over the state of affairs in Venezuela is summed up nicely in the section titled, “What Is the Government Doing?” The answer? Seizing a chain of electronics stores, granting President Maduro dictatorial powers, and imposing further price controls.
In short, the Venezuelan government is proving Mises right.