Monday, May 20, 2013

Running Out of Other People's Money

“The problem with socialism is that you eventually run out of other people’s money”—Margaret Thatcher

I was thinking about this quote a few days ago while conversing with a friend in Venezuela. Our friend Farida, from Uganda, who is working in Venezuela for another year or so, was in contact on Facebook. I asked her how she was doing, now that she had finished training in Houston and returned there. I was concerned because I’d read this article about shortages there, particularly toilet paper.
The article starts with this:
CARACAS, Venezuela - First milk, butter, coffee and cornmeal ran short. Now Venezuela is running out of the most basic of necessities — toilet paper.
Blaming political opponents for the shortfall, as it does for other shortages, the embattled socialist government says it will import 50 million rolls to boost supplies.
That was little comfort to consumers struggling to find toilet paper on Wednesday.
The conversation between government and economists is almost comical:
"State-controlled prices—prices that are set below market-clearing price—always result in shortages. The shortage problem will only get worse, as it did over the years in the Soviet Union," said Steve Hanke, professor of economics at Johns Hopkins University.
President Nicolas Maduro, who was selected by the dying Hugo Chavez to carry on his "Bolivarian revolution," claims that anti-government forces, including the private sector, are causing the shortages in an effort to destabilize the country.
The government has announced its intention to import 760,000 tons of food, plus 50 million rolls of toilet paper. Commerce Minister Alejandro Fleming said of this amount, "We are going to saturate the market so that our people calm down." I looked up population data, and Venezuela has a total population in 2011 of 27,635,743. We could round either up or down, but we can estimate how long 50 million rolls will last the population.
I’m an extravagant American living in plenty, who likes to be clean. I also happen to use the same bathroom most of the time, so I will do for estimating. With help of Mr. Spherical Model, we go through a roll in about two days. Let’s stretch that out, to double, for people who are trying harder to make things last. Let’s say, generously, that a person can make a roll last for a week. That means that, after a couple of weeks of ordering in 50 million rolls (assuming faster shipping and disbursement than is normal in Venezuela), the country must already have ordered another 50 million, because those are going to be gone before another order can arrive.
So I asked Farida whether she was experiencing these problems. Yes, indeed. She had been living in a hotel before her training in Houston, and now is setting up in her own little house. So she now needs products she didn’t worry about in the hotel. And no toilet paper is available. We discussed options. Amazon doesn’t ship there. Stores are empty. After two weeks of looking, she finally got some TP from “some Chinese guys.” She says, “Fortunately I always have baby wipes somewhere.” But for how long? I told her that my mother, as a young girl on a farm, used to use catalogs and other paper that was going to be thrown out anyway. She laughed, but she may be considering this.
She said, “It’s a roller coaster ride in this country. I feel like I’m doing my time…. The mentalities are worse than the struggles…. If I told you what I have had to go through in this country, you’d be shocked. There is nothing more hard to survive than a fixed state of mind. I haven’t told my family because they would be in a state of panic.”
Mr. Spherical Model has a new boss, who recently transferred from Venezuela. He lived there for some years with his family. Getting the family moved out has taken longer than planned—everything does. (This is the second boss over the years transferring out of Venezuela.) He confirmed the hardships. He met Farida briefly before leaving, and added that where she is located, near the oil fields, is really in the middle of nowhere, so it’s even harder to get needed goods.
Farida avoids bread anyway, but one of the success claims of Venezuela has been that it always provides bread to its people. It’s a kind of white “pita” called arepa, that is cut in half and then filled as a sort of sandwich. It hasn’t exactly caught on worldwide, but the people there are used to it. Except now they can’t even get their entitlement share of arepas.
Venezuelan bread, arepas, stock photo
I did the math on the food being imported by government as well. According to the US Dept. of Agriculture, the average American eats this much:
The US Dept. Of Agriculture estimates that the average person in the United States eats .5 lbs of meat, 1.6 lbs of dairy products, .2 lbs of fats and oils, .8 lbs of fruits, .7 lbs. Of vegetables, .5 lbs of grains, and .4 lbs of sugars per day for a total of 4.7 lbs. of food per day.
Let’s say that people in Venezuela are smaller, or used to less, and get by on 3 pounds of food a day. If I did the math right, the special shipment of 760,000 tons of food will last all of 18 days. By the time they can order more, again, the shipment (if it ever reaches the people) will have run out. In the US, if there’s a shortage, someone in the marketplace opens up a factory, or farm, or supply line, to sell to the waiting buyers. Seems more sensible.
Venezuela hasn’t always been this way. It may never have been as thriving as what we’re used to, but it has abundant natural resources, natural beauty, a good climate. It should be possible for people to thrive there. Socialism, among the population (exempting the elite rulers) has been a leveler. It has taken from producers, to make sure they had no more than non-producers. It has prevented innovation and success, removing incentive to produce. And it has created the mindset that government provides, so everyone will be dependent.
It is an exemplary socialist state: rulers create needs and provide just enough subsistence to maintain power over a helpless but not quite desperate people. If the goal is to provide power to a limited number of power mongers, it has met the goal. If it is, as stated, to build a utopian, perfect, productive equality society—it fails, as they all must.
The reason to bring up Venezuela, and other socialist tyrannies, is as a warning. We have power mongers, using socialist dogma and patterns, in order to remove power from us—We the people—in our Constitutional republic. We know what will happen if they are allowed to take us down that road—economic and social failure.
On the Spherical Model, only tyranny, economic deprivation, and savagery are possible when people are held down in the southern hemisphere. That is the only outcome possible. The only antidote is living the principles of freedom, free enterprise, and civilization. May we find the courage and character within ourselves to move back upward!

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