Monday, November 18, 2013

Chaos Blues

I’ve been worried lately about our friend Farida, who is working in Venezuela. Things have been rough there lately. It hasn’t shown up a lot in our news, but things are pretty chaotic. The root of the economic issues seems to be the government being low on cash (despite taking in $750 billion in oil revenue since taking over that segment of the economy in 1999).  So the government has been taking on debt, mostly from China. Inflation rates are around 54%.

When inflation is high, prices are high—or, rather, the money buys less. President Nicolas Maduro (successor to Chavez) doesn’t like the high prices. So he has declared that certain items—such as appliances—must cut their prices in half.
Venezuelan President Nicolas Maduro
photo from here
Some of the chaos is from crowds forming outside appliance stores, waiting to get in to make the lower cost purchases. But in addition, there has been a fair amount of looting. Crowds think, “The pries are too high; that means the store owner is trying to gouge us; since the store owner is evil, we have a right to take from him.” So they break in and walk off with flat screen TVs—in a country where toilet paper and one in four food items are considered scarce.
The thought of the chaotic mobs is not a far stretch from what government thinks—what we want, we take. These store owners had to purchase the goods ahead, with pre-inflated Bolivars (the currency). If they sell at pre-inflated prices, they cannot replace their costs, let alone purchase more goods for future sale.
Is it possible that some store owners are price gouging? Possibly. But in a free market, if a seller asks a price too high, demand drops, so he has to lower prices in order to make sales. It’s not a problem requiring the incarceration of the “bourgeois” businessmen.
Let’s put it in simple numbers, as an example. Suppose it costs the store owner $100 to purchase a TV wholesale. Between the time of his order and the time he puts it out for sale in his store, inflation has kicked in. The $100 he spent is now equivalent to $154. He has to take in at least $154 to cover his wholesale purchase, to be able to buy another TV to sell in the future. That’s without profit. He also needs enough to cover overhead: cost of his building, cost of his employees, cost of transportation of the goods, and other basics business costs (including taxes on everything sold). But when he puts $154 on the price tag, that looks so high. The president doesn’t like the look of high prices—caused by his inflation-inducing monetary policies—so he blames the store owner and mandates a 50% price cut. That means the price is $77. That’s only going to cover half the cost of the item to the store owner. The government has just taken $77 from the store owner, and demonized him, adding insult to injury.
The store owner has just had his business destroyed, permanently. And crowds are suspicious that the evil store owner might be holding back goods in some back room, so they’re prowling to make sure that can’t happen.
Farida sent me links to videos of the looting. Here’s one, and here’s another. (One more was immediately deleted; I don’t know how paranoid to be about that.) She also said she had been essentially under house arrest for a week (that was her term, but I think she meant the company she works for was insisting she stay inside her home for her safety). She’s trying to get a Christmas break trip to meet family in Europe, but she keeps getting told there are no airline tickets available. However, she was able to spend a recent weekend in the nearby Caribbean, which is better than house arrest with no toilet paper or food. She was scheduled to work in Venezuela for 18 months; this coming February will be the one-year mark. But she says conditions are so bad, she’s going to be relieved from that contract and will be transferred in January. Living in socialist Venezuela has been rough for a young single female engineer; I hope the next opportunity is opposite of tyranny. Farida is a person made for living in civilization.
I am looking at the connection between respecting property rights and civilization. Does government’s disrespect of property lead to the people’s disrespect of property—the looting? Or does a people who fail to live the rules of civilization naturally end up with a life-controlling government? It may be a chicken/egg question. But my guess is that imposition of tyranny—taking away God-given rights—demoralizes a people, quite literally.
On the other hand, the way out of tyranny, and the accompanying savagery and economic desperation, is people choosing to live the laws of civilization, which include respect for property, life, and truth. It’s one of those life problems with a simple but not easy solution.

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