I still haven’t listened to the podcast (I’m about to go to bed), but does this mean there is a massive black market using some other form of currency like USD or some other currency to buy basics?
So there is no real domestic production of the basics needed to survive in Venezuela, it is all imported? Why hasn’t this crisis created incentives for domestic production?
Are there efforts to smuggle in basics from neighboring nations and sell them on the black market?
It seems like this crisis would create incentives to import goods legally or illegally, and it would create incentives for domestic production. Are either of those things happening?
So does the state control whether individuals can import goods, a business can’t just say ‘I will pay X for Y amount of butter’? If the negotiation does not come to the prices the state wants, the negotiation is not legal?
The health care markets in the Western European nations are not operating as a command economy and it is a gross simplification to say that the govenrments “set” the prices.
One is a market negotiation among the economic actors that are generally free to do other things, the other is the straight diktat.
To see these things as 100 per cent identical is to take an extremely simplitic view à la the American libertarnians…
This has been the case for many years in Venezuela.
How do you imagine a domestic production can occur under a condition of the predator state that is simply declaring prices below the potential cost of the production and has been seizing the private properties and the private assets for its own uses?
There is no rational actor that would be willing to undertake investment in the productive assets in these conditions.
And who pays for the cost of the goods smuggled?
The Venezuela is showing a particular kind of vampire state run by a particular band of true incompetents, not even competent in the mediocre economics of the socialist economy.
I’m surprised no one has mentioned “Dutch disease”, part of the “resource curse” that disrupts an economy when it discovers vast new wealth. It’s frequently mentioned in threads about medieval Europe that Spain and Portugal suffered this economic disease as a result of their gold and silver imports from the New World. Countries more recently affected include 19th-century Australia (gold rush) and various countries that discovered fossil fuel wealth including (and hence the name) the Dutch. Paul Krugman even identified London’s power as a financial center as a form of Dutch disease to which Brexit was a reaction.
Of course, Dutch disease is not the full explanation for Venezuela’s severe woes. And do ignore it altogether if it conflicts with your lamentations about the evils of socialism.
It is nonsensical to raise this as an explanation for the problems of the Venezuelan economy as there is no argument of “discovery of vast new wealth” - the oil exporting is not new to the Venezuelan economy at all, it has been part of their economy ince the 1920s. It is not a matter of full explanation, it is a matter of making obfuscation and the excuses.
The collapse of the Venezuelan economy is 100 per cent a result of a particularly stupid and retarded Chavista subsidy-socialism command economy regime, combining a predator state and the most incompetent forms of nationalizations and siezures.
The blame falls fully on the Chavism version of socialism.
Of course one can see that other communist or hard left socialist economies have not had the complete destruction like the Venezuelan case, which is indeed a special case of the predatory incompetence of the Chavism.
Prices for medical care and drugs aren’t really following an usual supply and demand scheme. They’re mostly unelastic. It’s not because heart surgery is really cheap this year that you’ll have one, and you’ll be ready to give anything you own for a life saving drug.
I remember recently reading about the negociations over the price of a new drug for some relatively common disease. It actually was significantly better than previous drugs for this same ailment. The pharma company producing it (which had in fact just bought the small company that created it just to get its hands on this specific patent) wanted to sell it at “price of currently existing less efficient drugs times X”. Which is a perfectly arbitrary way of determining a price and has not much to do with supply and demand.
This is compounded by the fact that in most western nations, people just don’t pay directly for their medical care/drugs. Be them paid for by their private insurance of by the public healthcare system, the actual price of the service/product is mostly irrelevant or unknown to them. And on top of it, people don’t really have the expertise to determine whether or not they could substitute another, cheaper, kind of medical care/drug assuming alternatives exist.
So, as a result you have something like a monopoly and monopsone situation. There’s only one seller (the company owning the patent) and only one buyer (the state running the healthcare system), and neither has any alternative.
This is still on topic (I think), but here is my understanding of how medical prices work in most western nations.
The government sets up a commission to look into it, and says that they will pay a certain amount for each procedure. As a result, medical suppliers are stuck with those prices. In Japan for example they have a large book that lists how much you get reimbursed for each medical procedure. If you are a doctor, they give you a book saying for example they will reimburse you a certain amount for a certain procedure.
I still do not see how this is different. The medical providers are not really involved in the negotiations, although I think they do have representation when the prices are set. the only real difference I can see is that when western nations do it, they still allow enough income for medical producers to meet the cost of their efforts plus make a profit. The government in Venezuela is setting prices so low that they are below the costs of production, which means there is 0 incentive to sell on the legal market. If the government of Japan said they would only pay $5 for open heart surgery, there would be 0 incentive to provide this service because providers would lose money each time they did it. But the government does set prices, and the providers seem to have no choice in it, but the government sets prices at such a level that providers can still earn a living providing those services.
On another note, the major items lacking in Venezuela are basic food goods. These are not automobiles, which require massive investment capital, lots of workers, a large distribution chain, etc. Venezuela is running low on basic food stuffs, which in theory a person can grow in their backyard.
Also even if the state sets prices below the cost of production (if butter costs $1/lb to produce but the state will not let you sell it for more than $0.50/lb) there is always the black market to sell it.
Granted a lack of security combined with a hostile state would put the kibosh on this. Who would want to plant a wheat field and start growing cattle if they worried that they would get robbed by thieves or the government would shut down their farm. But what Venezuelans lack seem like things that a person could grow in the backyard.
But private markets are alive and thriving in North Korea. North Korea has a much more draconian state, and black markets are essentially keeping people from starving there. Why are they not thriving in Venezuela, which has a less draconian government? Is it because North Korea is next to China, which has a massive amount of things it can pass over the border whereas Venezuela does not?
That isn’t really a good answer, since Venezuela is vastly underperforming many of the old command economies (and the modern day semi-command economies like Belarus, Vietnam, etc.). Whatever the problems of, say, Communist East Germany or Communist Hungary in the 1980s (both of which were command economies to a much greater degree than Venezuela), they were also competent industrialized economies which were doing reasonably well. Germans and Hungarians ditched them because they wanted to do even better, and the results were…mixed…but in any case that’s a separate issue: no one thought Germany or Hungary at the time were on the verge of collapsing as Venezuela is doing right now, or as Zimbabwe did a decade ago. Cuba took a huge hit when their Soviet trade partner collapsed in the 1990s, and their economy shrank by about 40-50%, but they didn’t have Venezuela’s problems either.
This is mostly because they didn’t waste their entire GDP on imported consumer goods, they didn’t fix prices as uneconomically low as Venezuela did, and possibly other reasons too, maybe some of them geographical and some of them cultural, but the first two are the big ones. This probably wouldn’t have happened in a non-socialist economy, but it has at least as much to do with populism as with socialism per se.
Peron was not a socialist, communist, or any other sort of leftist, although he pretended to be one for a while and successfully fooled a lot of Argentinians.
And yet socialism works or has worked in other countries…or at least has caused less of an economic disaster. The US itself has many aspects of socialism, for instance, and we aren’t falling apart in the same way.
Only the most deluded would think that nothing is wrong in Venezuela…and the guy who was always the biggest cheerleader for Chavez et al is no longer a poster here, so I don’t see this getting much traction.
Closest I see to this is one or two posters eluding to it being all the US’s fault that Venezuela is in the straights they are in.
Socialism itself isn’t the root cause, but a particular socialist government and its successors are.
Right. All that oil means nothing if they can’t dig it out of the ground and sell it. And it’s my understanding that Venezuela has nationalized their oil industry, essentially firing most of the people who actually knew how to run it. On top of that, foreign oil companies Venezuela has subcontracted out to have reduced production because they aren’t getting paid.
Similarly with price controls. Venezuela imports most of their goods and if importers can make a profit selling in Venezuelan supermarkets, they won’t sell them.
I stated that “Dutch disease” is only part of the explanation.
But it is nonsense to call it nonsensical to regard the huge increase of oil prices in the 1970’s as new wealth for oil producers!
The difference is negotiation. When the government of Canada engages in negotiations with Merck on the price of a new drug* it’s a negotiation. (Officially,it’s set by a quasi-independent board, but of course they consult with the manufacturer.) Both sides come in wanting to get the best deal possible, but they’re working to get a deal. Canada wants the drug available at a good price, and Merck wants to sell the drug as close to the market-clearing price as possible. If the break even price is $10 per does and the market clearing price is $20 per dose, maybe they agree on $17 per dose. Merck makes a tidy profit and Canadian consumers save a few bucks. The government wants the drugs cheaper to make people happy, but they want them available, so they’re not stupid about it.
If you just arbitrarily say “This drug should be cheap for everyone! A buck a dose!” it will swiftly vanish.
In the case of Canada, the responsible body only sets prices for newly patented prescription drugs; it doesn’t apply to generics or OTC stuff. The price is only set for the price paid by wholesalers, hospitals, etc.; there is no regulation on the price they charge the consumer.
In the case of drugs in particular, American consumers are subsidizing a lot of the R&D costs for the rest of the world. That doesn’t work for a lot of other fields where R&D is not as big a part of the costs.
While I do think the pejorative way the OP asked the question merited your response, I have to ask which countries and what aspects of the US are socialist?
A welfare state is not socialist. Universal health care is not socialist. Socialism is the philosophy that the means of production and exchange are controlled by the government or community as a whole. The social democracies of Scandinavia are not socialist though conservatives like to claim they are. They have market controlled economies with strong social safety nets; the government does not control the production of goods, the distribution of goods, or the price of goods and who they are sold to.
I am not sure that I agree. I think that Socialism is the cause, especially the particularly incompetent form of socialism that the Chavez regime founded.
[QUOTE=Happy Fun Ball]
While I do think the pejorative way the OP asked the question merited your response, I have to ask which countries and what aspects of the US are socialist?
A welfare state is not socialist. Universal health care is not socialist. Socialism is the philosophy that the means of production and exchange are controlled by the government or community as a whole. The social democracies of Scandinavia are not socialist though conservatives like to claim they are. They have market controlled economies with strong social safety nets; the government does not control the production of goods, the distribution of goods, or the price of goods and who they are sold to.
[/QUOTE]
It’s a fair question. By a narrow definition of socialism, you are correct. But other aspects of socialism are that markets don’t operate completely in a free market manner, but are regulated by the government for the greater good of society, and that wealth is redistributed by the government to those less fortunate. I did say that the US has ‘many aspects of socialism’, not that we were socialist. We are a mixed capitalist economy, without central planning or government ownership of the ‘means of production’ but with some socialist aspects wrt things like the various social programs and government regulations.
I think Chavez was the cause and whatever system he’d have used would have had the same results in the end. I agree that pure socialism is, at it’s base a poor economic performer based on history, but Chavez did poorly even from that baseline and his successors have just managed to drive things even further underwater.
There are also the various stupidities: Putting idiotic controls on the currency, price controls, wage control, and then instead of trying to fix things, blaming the USA.
Chavez and everyone since him has had no grasp of economics other than “blame it on the USA”. Then pocket the loot.
Well, it’s hard to call what Chavez did “socialism”. Blaming the mess Venezuela is on “socialism” is wrong. The blame needs to go on the leadership, who just need to accept the fact that a free market is not evil and will in fact fix most of the problems. And what it doesnt fix at least is then not the fault of Government meddling.
