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How Venezuela went from a rich democracy to a collapsing dictatorship

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Re: How Venezuela went from a rich democracy to a collapsing dictatorship

#61

Post by dingo_bat »

Venezuela failed because of the lack of a free market. Almost all economic activity was by the government, there were price controls on everything. It turns out the market is much more efficient in managing resources than any one organisation.

IOW, in case it's not clear, Venezuela failed because of socialism. It's hilarious to see all these long winded explanations that refuse to name the well known philosophy that has repeatedly led countries to the same place. There is no analysis needed. It has been analysed a hundred times already in history.

Suppose I fell off from a hundred story building and died. Now imagine newspaper articles going into gravitational theory and saying that the cause of death was a high speed impact with the ground, which was worsened because it was concrete. That would be stupid. The well known fact is that I died because I fell from a high place. You don't need an analysis for that. It's obvious. Once a phenomenon has been explained and analysed well enough, it can just be named and you need not go into a lot of details and develop your own theory. You can just reuse the name and everybody understands.

Re: How Venezuela went from a rich democracy to a collapsing dictatorship

#63

Post by guelo »

whb07 wrote: post #50
guelo wrote: post #27

Earlier quoted context omitted.

And America is showing that if you don't tax wealth enough the inequality causes instability.

Well Venezuela has an income inequality of almost 0. I can’t look up the Gini coefficient but I can guarantee you that they are all equal save for the government cronies. Income inequality is always parroted as the measurement for a healthy economy, but as my previous point suggests it’s not the end be all.

The point is that there is a balance somewhere between too much free market and too much inequality.

Re: How Venezuela went from a rich democracy to a collapsing dictatorship

#64

Post by caseysoftware »

Iv wrote: post #46
hueving wrote: post #23

Earlier quoted context omitted.

There has never been a successful centrally planned economy. Perhaps with the assistance of massive computation and information spread via the Internet it could be conceivable. But without that it seems like every toy model a central planner uses is going to fail miserably.

To be more precise, there were successes of centrally planned economies, but all in the same circumstances: under-developed countries trying to modernize themselves. It is hard for a central planner to be an innovator, but it is easy to be a follower. USSR industrialized itself very quickly. China had some success and did not shut down its central planning but hybridized it. South-Korea's steel production is an examp…

Yes, "central planning" works for large projects. But running a large project is nothing like running an economy.

In large projects, you generally have a major single, measurable goal (interstate highways, a man on the moon, a nuclear weapon) and may have lots of little milestones and spinoffs along the way.

An economy is millions of little goals - some complementary, some competitive - that might add up to something larger but no one knows. But most of are okay with it because some portion of those people will be able to meet their goals and strive for bigger ones.

Re: How Venezuela went from a rich democracy to a collapsing dictatorship

#65

Post by whb07 »

guelo wrote: post #63
whb07 wrote: post #50

Earlier quoted context omitted.

Well Venezuela has an income inequality of almost 0. I can’t look up the Gini coefficient but I can guarantee you that they are all equal save for the government cronies. Income inequality is always parroted as the measurement for a healthy economy, but as my previous point suggests it’s not the end be all.

The point is that there is a balance somewhere between too much free market and too much inequality.

Surely, I agree with you but in the same manner you have freak athletes at what point do you tell Lebron James, Ronaldo, etc that they are “much too skilled and talented” compared to others?

America’s poor are rich in comparison to other countries’ poor. It’s a perception problem, even for the citizens of UAE (forgetting the second class workers for a minute). There’s going to be the random citizen who only owns 3 Ferraris and a small penthouse in London, while some others have 20 cars and two mansions in London and NYC.

There will always be those with less.

Re: How Venezuela went from a rich democracy to a collapsing dictatorship

#66

Post by Iv »

caseysoftware wrote: post #64
Iv wrote: post #46

Earlier quoted context omitted.

To be more precise, there were successes of centrally planned economies, but all in the same circumstances: under-developed countries trying to modernize themselves. It is hard for a central planner to be an innovator, but it is easy to be a follower. USSR industrialized itself very quickly. China had some success and did not shut down its central planning but hybridized it. South-Korea's steel production is an examp…

Yes, "central planning" works for large projects. But running a large project is nothing like running an economy. In large projects, you generally have a major single, measurable goal (interstate highways, a man on the moon, a nuclear weapon) and may have lots of little milestones and spinoffs along the way. An economy is millions of little goals - some complementary, some competitive - that might add up to something…

Yep.

Re: How Venezuela went from a rich democracy to a collapsing dictatorship

#67

Post by Iv »

padobson wrote: post #59
Iv wrote: post #46

Earlier quoted context omitted.

To be more precise, there were successes of centrally planned economies, but all in the same circumstances: under-developed countries trying to modernize themselves. It is hard for a central planner to be an innovator, but it is easy to be a follower. USSR industrialized itself very quickly. China had some success and did not shut down its central planning but hybridized it. South-Korea's steel production is an examp…

I don't know where the dividing line is between "regulated markets" and "central planning", but I think you raise the need for some distinctions. The space program is a great example. Could the US have beaten the USSR to the moon without private suppliers like IBM? IBM couldn't exist in a centrally planned economy, and the Apollo missions wouldn't have been successful without private suppliers like IBM. Apollo, Manha…

Yes, it is less about "central planification" than "total planification". The former can and did work in many instances, the latter never succeeded or at least never out-performed free markets (still I would have loved to see how Cuba would have fared without the embargo)

Intelligence is scarce, honesty too and information is often only partial. Some decisions are better done at a local scale.

I believe that NASA would have designed computers even without IBM. Possibly even faster but it would have been a tailored computer that would have been very expensive and of little civilian application.

We see it now with SpaceX: NASA sucked at cutting costs. But it excelled at skipping steps and it put a man on the moon in 1969, a goal that vastly outpaced the private space industry, that did not even exist at the time. The whole space industry was quickstarted by this centrally planned effort.

My personal opinion is that the red line that a state should not cross lest it has a complete information and huge stash of intelligence to process it, is price setting. It can have, for many things, a target and try to enforce it (in the case of oil, through some sales quota for instance) but it should use failure to achieve these targets as an indication that it misses some information about the economy or that its incentives are insufficient.

Re: How Venezuela went from a rich democracy to a collapsing dictatorship

#68

Post by padobson »

Iv wrote: post #67
padobson wrote: post #59

Earlier quoted context omitted.

I don't know where the dividing line is between "regulated markets" and "central planning", but I think you raise the need for some distinctions. The space program is a great example. Could the US have beaten the USSR to the moon without private suppliers like IBM? IBM couldn't exist in a centrally planned economy, and the Apollo missions wouldn't have been successful without private suppliers like IBM. Apollo, Manha…

Yes, it is less about "central planification" than "total planification". The former can and did work in many instances, the latter never succeeded or at least never out-performed free markets (still I would have loved to see how Cuba would have fared without the embargo) Intelligence is scarce, honesty too and information is often only partial. Some decisions are better done at a local scale. I believe that NASA wou…

I believe that NASA would have designed computers even without IBM. Possibly even faster but it would have been a tailored computer that would have been very expensive and of little civilian application.

You don't have to guess at this - just look at the Soviet space program.

Re: How Venezuela went from a rich democracy to a collapsing dictatorship

#69

Post by dagw »

whb07 wrote: post #50
guelo wrote: post #27

Earlier quoted context omitted.

And America is showing that if you don't tax wealth enough the inequality causes instability.

Well Venezuela has an income inequality of almost 0. I can’t look up the Gini coefficient but I can guarantee you that they are all equal save for the government cronies. Income inequality is always parroted as the measurement for a healthy economy, but as my previous point suggests it’s not the end be all.

Well Venezuela has an income inequality of almost 0.

Not according to the World Bank or the CIA. At least not 5-6 years ago.

The World Bank had Venezuela's Gini coefficient at 44.8% in 2014 vs %40.8 in the US. The CIA has the number at 39.0% (2011) vs 47% in the US.

Re: How Venezuela went from a rich democracy to a collapsing dictatorship

#70

Post by etplayer »

CryptoPunk wrote: post #42
ue_ wrote: post #24

Earlier quoted context omitted.

In my view it is a sign more of the fact that Venezuela thought it could depend so much on oil that it failed to diversify rather than a failure of its mode of planning, though that's not without criticism, one would have hoped they learned from the disaster of the USSR's Five Year Plan. Price controls aren't really a Socialist policy - the Socialist policy in this case would be the gradual change from the production…

Venezuela's socialist policies made the entire economy dependent on the wisdom of the state. When the state erred, it meant a much more systemic collapse than would otherwise have happened. If the private sector had been allowed to retain a significant role in the economy, the economy would have had more decorrelated economic forces, which would have made a systemic collapse less likely. >>I'm not sure where you're g…

>When Venezuela's economic ministers say things like "the law of supply and demand is a lie" to justify price controls

They can't be very good Socialists then; Marx was a supporter of the law of supply and demand, and its functioning is extremely obvious to anyone familiar with the idea of markets, even without training. Marx didn't deny it nor did his contemporaries or predecessors.

>I assume it's motivated by their socialist ideology, and blame the policy on that ideology.

The North Korean statesmen have made disparaging remarks about democracy, but they claim to be democratic. Yet we would both agree not to blame democracy for what is happening in North Korea. Is there any evidence that Venezuela is actually implementing Socialist policy any more than the DPRK is implementing democratic policy?

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