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The Difference Between Socialist Venezuela and Socialist Bolivia

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Venezuela is a disaster; this is an indisputable fact. When people are eating their pets to avoid starvation, something has gone horribly wrong. And while this type of horror is typical of socialist regimes that deny the sanctity of the individual, there are still many defenders of socialism who pretend that Venezuela is an outlier instead of a prime example.

And in order to brush off the overwhelming evidence that socialism ultimately leads to catastrophe, apologists also grasp for seemingly “successful” socialist regimes to cite.

The most recent example of this comes from Bolivia, which has enjoyed economic growth over the past several years. The country is run by the self-proclaimed socialist president, Evo Morales. So dedicated is Morales to this philosophy, that upon meeting the Pope a few years ago, he presented him with a “communist crucifix,” where Christ is depicted on a cross embellished with a hammer and sickle.

But since Bolivia’s economy has experienced a 3.8 percent growth rate over the last year, many socialists see this as airtight proof that socialism can work and that Venezuela is merely a result of mismanagement and fiscal irresponsibility on Maduro’s behalf.

However, there is much more to this story than meets the eye. When we take a closer look at this supposed beacon of socialism, we find that much of the reason it has been able to succeed is because President Morales has allowed varying degrees of capitalism to exist in the Bolivian economy. And because of these market elements, Bolivia finds itself faring far better than Maduro’s Venezuela.

The Bolivia Example

When we look at Bolivia’s economy, it is very important to first understand the factors that are causing its economic boom. First, natural gas plays a huge role in its economy, accounting for 45 percent of its exports. And while this resource is nationalized, it does not mean that the state is in complete control. In Bolivia’s case, the state gets to share in the profits of private companies rather than controlling the means of production outright. And while this is in no regards a free market policy, it is less socialist than the practices of the Venezuelan economy, a distinction that matters greatly.

To be sure, Bolivia has been better at managing its resources than Venezuela has. While the latter has served as a cautionary tale about what can happen if natural resources are mismanaged when resource prices drop, Bolivia’s government has seemed to be more fiscally responsible than Maduro’s. In fact, Bolivia has dramatically decreased its debt over the last several years and has kept inflation rates low, putting it in a better spot than Venezuela. But again, there is more to the story.  

In a recent article called, “As socialist Venezuela collapses, socialist Bolivia thrives. Here’s why,” the author states:

“Since 2006, Bolivia has been run by socialists every bit as militant as Venezuela’s. But as economist Omar Zambrano has argued, the country has experienced a spectacular run of economic growth and poverty reduction with no hint of the chaos that has plagued Venezuela.”

But to be sure, this statement is simply untrue. Bolivia is nowhere near as “militant” as Venezuela when it comes to enforcing socialist policies. On the contrary, the only reason Bolivia has been able to thrive in recent years is because it has incorporated elements of a free market economy. This, in effect, puts the degree of socialism actually practiced in Bolivia far lower than that of Venezuela.

By definition, socialism is state control of the means of production. In Venezuela, between 2002 and 2012, 1,168 private companies were expropriated or taken over by the state. In Bolivia, between 2005 and 2015, only 20 private companies had been commandeered by the government. Sure, neither of these numbers are admirable, but a lot less damage can be done to a country when it chooses socialism-lite over the full-blown variety.

True, Bolivia does have a generous welfare state, but while this may be an aspect that comes with socialism, the redistribution of wealth is only a supporting feature and not a defining characteristic of this economic philosophy. This puts Bolivia in the same camp as Nordic countries, that, while praised for being examples socialist success stories, are actually using the fruits of basically capitalist economies to fund their welfare states.

The “Informal” Market

The entrepreneur is one of the most important elements of a free market economy. And if you want to know just how tyrannical a government is, see how it treats its entrepreneurial citizens. In the case of Bolivia, President Morales has allowed the entrepreneur to create value, or rather, he has looked the other way as informal markets have sprung up—something that Venezuela’s Maduro has not done.

When consumer goods are in short supply because of state mandates, black markets always pop up to offer these items at a higher cost. This is often how starvation is avoided in the extreme cases, Lenin’s Soviet Union being a prime example. But President Maduro has done all he can to ensure that these markets are squashed.

The UK outlet The Times  recently said of Maduro:

“In response to the crisis, he said he was ordering price controls be imposed on 50 items deemed “essential”, such as butter, flour and ham. Those who attempt to sell the goods above government demarcated limits will face prosecution and jail, he promised. Previous attempts by Venezuela’s socialist government to impose price controls have led to scarcities and helped fuel a rampant black market.”

Of course, as history has shown us, this just leads to more shortages, fewer options for consumers, and in some cases, starvation. But Maduro is not the first Venezuelan leader to crack down on the business sector. In 2010, Hugo Chavez declared that a small town butcher was a “class traitor” for selling meat at higher prices than the government had mandated.

The butcher, Omar Cedeno, was then arrested, stripped naked, and interrogated after being charged with speculation. But his only real crime was entrepreneurship.

Cedeno commented:

“I’m not a capitalist or a socialist, I’m just a worker. People are being arrested for doing their job….I’ve got to cover my costs. What business doesn’t? Yet eight officials came here to arrest me. It’s an abuse of power.”

Cedeno was allowed to go back to his shop, but had to report to a tribunal every two weeks before his trial.

But the opposite is happening in Bolivia.

Speaking to this effect, Simon Wilson of Mises Wire writes:

“In Bolivia, like neighboring Peru, even the poorest of the poor have the means to turn a stall into a small business and a small business into something larger. Where once his ancestors were turfed off their land and forced to work it for their colonial masters, an indigenous Indian can now open a textile factory and attain a level of wealth that surpasses that of the descendants of those who expropriated his forefathers.”

Wilson continues:

“A great leveling of the playing field has occurred under Evo, not through forceful redistribution of wealth, but rather through standing back and letting freedom and entrepreneurialism of the people run unchecked.”

Not a Beacon of Capitalism, but Not a Bastion of Socialism, Either

To be sure, Morales is no hero of free market capitalism. But allowing elements of the free market to “breathe through loopholes,” as Ludwig von Mises put it, has allowed the country to flourish. This, of course, is coupled with the fact that Bolivia has been fortunate enough to live on land rich with natural gas, an element that should not be ignored.

But all throughout history we see that countries prosper as they move further away from socialism, and closer to a laissez-faire economy. Bolivia is no exception to this.

As Ryan McMaken writes:

“As always occurs when socialism recedes, wealth increases. In the case of the Soviet Union, Lenin’s limited markets never progressed beyond a very limited realm—thanks to Stalin’s reassertion of centrally-planned economies. In post-Mao China, where markets were allowed to become widespread (although always heavily regulated) the Chinese economy flourished (relatively speaking) as farmers, merchants, and countless other small and medium-sized enterprises were allowed to function with relative freedom.”

Bolivia is no standard of socialist success. Indeed, any prosperity enjoyed by the country is simply because degrees of free-market capitalism have survived in spite of socialism, which in Bolivia, is more rhetorical than real.

There is No Political Freedom Without Economic Freedom

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Hayek is truly at his best in the seventh chapter of The Road to Serfdom, “Economic Control and Totalitarianism.” In past chapters, he has rationalized moderate state intervention in the economy. But here, we see him destroy the notion that economic control is not directly linked to the rise of tyranny and the loss of individual liberty.

His arguments are so convincing, in part, because he highlights the indisputable fact that everything in our lives is tied to economics.

Rule of Experts

The impact that the field of economics has on our daily lives is not easily recognized by the majority of people. Preoccupied with our immediate needs and daily tasks, the state of the economy not only seems disconnected from our lives, it feels almost completely irrelevant.

And since something as complex as the national economy is usually left to the great “experts” to decide, many also assume that it is an issue completely out of their control. This presumption is something economic planners rely on to maintain their authority.

But economics is intrinsically connected to almost every single aspect of our lives. From the clothes we wear to the food we eat, to our jobs and our education: economics is in all things. And without economic freedom, there can be no liberty. Period.

Anyone having any doubts that economic control will necessarily lead to tyranny and oppression need only look to Venezuela.

Why Detest Commercial Freedom?

It has always been peculiar to me that socialists believe so fervently in social freedom and yet detest economic liberty. This is why many proponents of socialism and other forms of state control will advocate for economic restrictions, without a concern for civil liberties. They believe them to be separate entities, each existing without impacting the other.

But once economic control has been seized by the government, the stripping of our individual rights will soon follow. And today, we have the unfortunate opportunity of witnessing a once prosperous country completely succumb to the tragedy of a controlled economy.

The situation in Venezuela has become so dire, it would fit perfectly into the plot of any dystopian novel. What started as an economic crisis has now escalated to a humanitarian nightmare of which there appears to be no end in sight.

Venezuela once housed the world’s most abundant oil reserves, which its national economy relied on heavily. In fact, these reserves were responsible for 95 percent of all export earnings. At its height, the country was capable of producing 3.5 million barrels of oil per day. But after Chavez came to power and an oil worker strike ensued, the leader decided to fire those on strike and instead, bring in workers who were loyal to his government.

Unfortunately, this takeover of the country’s primary source of wealth meant that those experienced in the field were now pushed out, and replaced with inexperienced workers. And after years of continued mismanagement and poor decision-making at the hand of the state, the oil output began declining significantly.

As of earlier this year, the country was down to producing around 1.7 barrels of oil each day, but its continued decline is inevitable.

According to the logic held by those who refuse to acknowledge the connection between economic liberties and civil liberties, this situation should not have had an effect on the day to day lives of Venezuelans. But this is simply not the case.

As Hayek warned:

Economic planning would not affect merely those of our marginal needs that we have in mind when we speak contemptuously about the merely economic. It would, in effect, mean that we as individuals should no longer be allowed to decide what we regard as marginal.

The authority directing all economic activity would control not merely the part of our lives which is concerned with inferior things; it would control the allocation of the limited means for all our ends. And whoever controls all economic activity controls the means for all our ends and must, therefore, decide which are to be satisfied and which not. This is really the crux of the matter.

And this is exactly what has happened in Venezuela.

As the economic situation worsened, the residents lost control over their own lives. Since electricity is now scarce, the government is in control of determining where its use is directed. But this doesn’t merely mean residents will be left sitting at home in the dark. It meant that places of business would also have to close, sometimes without notice.

One vendor told of his frustration when he was trying to run a consumer’s debit card as payment. Since the entire country is subject to a loss of power when the state deems it necessary, the electricity went out right as he tried to process the payment. Of course, he was unable to make that transaction which resulted in a loss of money and the consumer was unable to obtain what they needed.

Without the freedom to work, there is no money to be made and no economic prosperity to be had.

But that is not where the chaos ends.

Controlling Economic Lives

Food and necessities, like toilet paper, are not only in short supply; they are also completely under state control. Those wanting to acquire these items must wake up long before the sun has risen and stand in long lines. While waiting in these lines, these “consumers,” if you can even still call them that, are sitting ducks for thieves.

It has become common for thugs and others with malicious intent to hold people at gunpoint and rob them of whatever wealth they have left. Last year, one man was killed in line in an attempt to guard his cellphone.

Meanwhile, as he lay dying, the line did not break, because to lose your place in line, even to attend to the wounded, meant that you may not get to feed your family. But waiting in these lines does not mean you will receive what you need, or what the state thinks you need. Many times Venezuelans will spend their whole day in line only to discover that the store is completely out of supplies.

For frustrated citizens who want to change things or at least let their opinion be heard, free speech has been all but decimated. Any vocal opposition against the state and you might find yourself in a jail cell, where you are unable to help anyone.

This catastrophe has even spread to hospitals. Since water and electricity are scarce, hospitals have been unable to sterilize equipment or even wash the bloody sheets from surgical beds. Infant mortality rates have skyrocketed, because children being born under these unsanitary conditions, and with no access to food have such a low chance of survival.

And as horrific as each of these examples are, the situation grows worse by the day as individuals continue to be stripped both of their rights and their ability to choose.

Meanwhile, President Maduro continues to praise socialism and demonize free market capitalism. He has even said that “Venezuela must deepen socialism to improve the economy.” He has even denied foreign aid from humanitarians aligned with capitalist countries.

But of course, Maduro himself is not suffering as his people are. Prior to Castro’s death, he even spent hundreds of thousands of dollars on an extravagant birthday party in celebration of one of the cruelest dictators in modern history.

As Hayek says, “And whoever has sole control of the means must also determine which ends are to be served,” And Maduro is serving no ends save his own.

Free Markets are Liberation

So many who fall prey to the concept of a planned economy believe that it will liberate individuals from the mundane task of having to choose. Forgetting, that it is our right to choose that makes us free in the first place.

“Our freedom of choice in a competitive society rests on the fact that, if one person refuses to satisfy our wishes, we can turn to another…And if one way of achieving our ends proves too expensive for us, we are free to try other ways.” Hayek aptly says. And he is correct. In Venezuela, citizens cannot simply choose to buy toilet paper from a different vendor instead of having to wait in a line.

When the government took control in the wake of economic tragedy, the power to choose was given to the state. And the state does not care which brand of toilet paper you use or what price point you are comfortable paying. It does not care what medicine is vital in order for you to function. It chooses based on its own set of blanket value scales in which everyone is equal simply because everyone is equally let unsatisfied.  

And there is almost nothing the people can do about it, making the situation far worse because as Hayek also states, “Nothing makes conditions more unbearable than the knowledge that no effort of ours can change them.”

What is worse, is that proponents of socialism praise this lack of choice as liberating. Now that the state has decided when, where, and at what cost something can be purchased, individuals have been relieved of this heavy burden. Hayek describes these types of people by saying:

But few want to be relieved through having the choice made for them by others. People just wish that the choice should not be necessary at all. And they are only too ready to believe that the choice is not really necessary, that it is imposed upon them merely by the particular economic system under which we live. What they resent is, in truth, that there is an economic problem.

And that is exactly what befell Venezuela: a devastating economic problem. And this problem was used as a vessel to suppress the freedom and choice of the individual in the name of a planned economy.

So for those who would still like to believe that economic factors are separate from individual liberty, Hayek says:

Economic values are less important to us than many things precisely because in economic matters we are free to decide what to us is more, and what less, important.

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