Socialist Destruction: Venezuela Hyperinflation Spirals Out Of Control
Venezuela dictator Nicolás Maduro has announced economic reforms that include removing five zeroes off the value of the Bolivar currency and increasing the country’s minimum wage by 3,500% this weekend.
Maduro has created what is known as the “sovereign Bolívar,” a parallel currency to the main Bolívar, that slashes five zeroes off the country’s currency.
The official exchange rate for the Bolívar will rise from about 285,000 per dollar to 6 million per U.S. dollar, roughly in line with its true market value.
Venezuela has also raised the monthly minimum wage by 3,500% to the equivalent of $30 a month.
Prior to this change, hyperinflation drove people’s wages down to as little as one dollar a month.
Maduro said that the government would cover minimum wage increases for businesses for up to 90 days as they adjust to inflation.
“We have the necessary resources. I have ordered my finance minister, Simon Zerpa, to start receiving tomorrow’s payrolls from all sector,” he said. “We are covering you for 90 days so you have no excuse for increasing prices.”
The move is expected to spiral inflation further out of control.
Economists from the International Monetary Fund warned that inflation could surpass one million percent this year, meaning the highest denomination note currently worth $6 could be worth just $0.20 by the end of the year.
Many business owners are now fearful of not being able to pay their employees without steep price hikes that will prove unaffordable for the majority of people.
“You’re going to buy products, and they’re more expensive,” butcher Jesus Pacheco, who employs six people at his store in Caracas, told the Associated Press. “We are going to have to fire employees. What else can you do?”
Moises Naim, a fellow at the Carnegie Endowment and a former minister in Venezuela, told Bloomberg: “Clearly this will hit Maduro’s popularity, but power is being sustained with bullets and not with votes…As long as the military continues to have access to lucrative businesses it will continue to grant support to the government.”
Venezuela is just the most current example of how socialism always fails miserably. In the same way a Ponzi or pyramid scheme initially shows signs of success, it ultimately will collapse once the fundamental deficiencies of central planning rear its head.
Proponents of socialism turn a blind idea to its past failures by arguing “that wasn’t real socialism,” or “this time it will be different.”
The problem with these arguments is that the socialists never state their case of how it would be done differently. They simply point to the past as an inaccurate portrayal of their utopia vision and promise to provide all with their adult Christmas wish list such as “free college, healthcare, jobs, housing”.
Very key details must be answered. How would this be done democratically? Would we have to have an election or vote on every item that is produced and how it is redistributed? Will all private businesses be nationalized?
There are approximately 320 million people in the U.S. … will this be done by electoral college or popular vote? Will there be an election every other day on each issue? What if circumstances change…is there another vote? What if there is no majority? These are not questions that we can just figure out later, these are fundamental building blocks that have to be answered before the economic system can even get off the ground.
Further, the socialists will argue that the idea is to give the workers the control this time … however this was always the idea of socialism. Nothing has changed. Socialism never starts out with a declaration that “only an elite group of people will ultimately decide everything” but yet that is what happens each time.
Eventually, the socialists will believe that some “experts” could manage an economy better than spontaneous market forces.
It was the Austrian economists F. A. Hayek and Ludwig von Mises who resisted this idea most forcefully when they concluded that socialism must fail. In modern economies, hundreds of thousands of enterprises produce millions of products. Who will be responsible for allocating all of those resources? Without markets and prices, decision-makers will not know what is scarce and what is abundant. If property belongs to all, what rules should those who manage assets for society follow?
Socialism promises equality, but instead only leads to equal poverty, misery and tyranny. Socialism fails to realize human behavior and ignores the power of incentive. Socialism kills innovation and the human spirit. Capitalism is the only compassionate system that has played a major role in global prosperity. While the United States needs to start electing politicians who will end crony capitalism for a true free market, we must be vigilant to fight against any calls for socialism to make its way to the United States.
