Socialism’s Secret Weapon in Venezuela

The Venezuelan Central Bank stopped publishing official inflation figures in 2014, furthering socialism's grip on the country.
The Venezuelan Central Bank stopped publishing official inflation figures in 2014. (La Patilla)

The government never lends or gives anything to business that it does not take away from business.” — Henry Hazlitt.

EspañolAnalysts usually look at how inflation affects the economy, which is an important measure. But inflation also has broader consequences on individuals, and society as a whole, that go beyond monetary considerations.

The German-born anarcho-capitalist economist and political theorist Hans-Hermann Hoppe points out that inflation is a powerful, yet subtle tool for the state to quietly gain control of our resources. Sadly, since citizens don’t immediately notice it, there is no backlash.

One could argue that inflation is just another way that socialism controls the population.

First, consider the nature of this phenomenon. There is inflation when the money supply grows faster than the production of goods and services in a country. Prices rise. In other words, more money is in circulation, but it does not reflect an increase in the demand for money.

Thus understood, inflation can be curbed by enforcing property rights. Companies under private management are more efficient than government-run businesses, and if allowed to operate freely, they can provide plenty of goods and services to offset the increase in the money supply.

As the Austrian economist Ludwig von Mises put it:

Inflationism, however, is not an isolated phenomenon. It is only one piece in the total framework of politico-economic and socio-philosophical ideas of our time. Just as the sound money policy of gold-standard advocates went hand in hand with liberalism, free trade, capitalism, and peace, so is inflationism part and parcel of imperialism, militarism, protectionism, statism, and socialism.

I have previously argued that property and economic freedom are basic rights needed to impose checks and balances on the state, but we must also protect them due to their role in curbing inflation.

Inflation weakens our wages, crippling not only the ability to make ends meet, but also to afford and finance our long-term life goals.

In Venezuela, all branches of the national government have been pursuing a deliberate policy of undermining property rights since 2007.

Country of Owners, a project by Cedice and Liderazgo y Visión (Leadership and Vision) to monitor property-rights violations in the country, shows that the troubling trend continued in 2015:

Property rights violations in Venezuela. (CEDICE)
There is a troubling trend of property-rights violations in Venezuela. (CEDICE)

Inflation has hit the country hard, and the government no longer releases official figures. However, according to Bank of America, annual inflation, as of June 2015, stood at 113.2 percent.

Tumbling Purchasing Power

Venezuelan economist Henkel García, head of the Venezuela-based Econométrica consultancy firm, notes that “compensation in the private sector has ‘brutally’ decreased.… In 1998, a university graduate earned the equivalent of at least 10 minimum-wage salaries, while nowadays, in the best case scenario, he gets three times the minimum wage.”

“Today, the perception is that the bolívar is at its lowest point. A Venezuelan with a professional degree earns 30 percent less than what he could earn in 2005,” he explains.

Everything suggests that the government will continue destroying the country’s productive capacity and ignore property rights. There will be less and less goods and services; demand will increase as supply retreats, bringing about inflation and decreasing the purchasing power of Venezuelans.

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The state will continue replacing private businesses in the provision of goods and services, but not with the same efficiency, of course. As a result, we will end up more dependent on the government.

Venezuela’s situation is serious. Let’s not forget what Henry Hazlitt warned us about: “The government never lends or gives anything to business that it does not take away from business.”

Inflation, just like violence and the prevailing ignorance in Venezuela, is indeed another way that socialism controls society. The long-term effects are there for all to see.

The painful result falls on the backs of all the people who, deprived of their dignity, can’t even buy the most basic goods.

Translated by Adam Dubove.

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