By Michael Munger, American Institute for Economic Research
Things are rarely so bad that decisive action by government officials can’t make things worse.
In the current election, the Republicans are trying to outdo each other by proposing larger and more restrictive tariffs. The Democrats have just come out with a remarkably bad plan to outlaw “price gouging,” particularly for groceries.
Such proposals get more attention from politicians at election time, because to get votes you have to show you did something. The fact that the right thing is to do nothing is hard for politicians to accept, because no one can claim credit for the market.
I’m not trying to make a partisan point, because as I noted above there are ill-advised proposals on both sides of the party divide. And I’m not claiming markets are perfect. The problem is that asking voters what they want prices to be is a recipe for becoming…. well, Venezuela.
In 1981, about half of Venezuela’s population was living on the equivalent of $10 per day or less (the number for the US was less than 5 percent). That number was flat until 1992, the year that Hugo Chavez launched his unsuccessful coup attempt against the corrupt regime of President Carlos Andrés Pérez. Pérez was forcibly removed from office in 1993; officially, he was removed for embezzlement — which he did in fact do — but even more for showing a near-total inability to deal with social unrest over the collapse of the economic system, even with substantial oil revenues to fill government coffers.
Chavez was pardoned in 1994, and in 1998 he was elected to the Presidency. He immediately worked to deepen and expand the “Bolivarian Revolution,” focused on social welfare programs, nationalizing key industries, and “democratizing” the market system. As long as oil prices were high, and people were satisfied with essentially free electricity as a handout, the “Chavismo” regime was politically successful.
But Chavez died in 2013. His successors tightened and expanded the grip of their socialist philosophy, and GDP went into free fall. Where GDP per capita had been well over $18,000 US in 2013, today it has fallen to around $5,000, a decline of more than 70 percent for an oil-rich nation.
The situation eroded quickly, reaching...(READ THIS FULL ARTICLE, FREE, HERE).
