Wednesday, March 4, 2009

United States of Venezuela

Reuters ran a story that looked eerily familiar to economic policies within our own borders. Excerpt:

CARACAS, March 4 (Reuters) -
President Hugo Chavez seized a local unit of American food giant Cargill on
Wednesday and threatened to nationalize Venezuela's largest private company,
Polar, as he demanded industry produce cheaper rice.

The clash with the food companies came less than three weeks after Chavez, a Cuba ally who has nationalized swaths of the Venezuelan economy, won a referendum on allowing him to run for reelection.

"I warn you this revolution means business," said Chavez.

The anti-U.S. president is popular among the poor for pressuring companies to produce cheap goods and for government programs that provide subsidized food in city slums.

In recent days Chavez has seized some Polar rice mills after accusing the food industry of skirting his price controls and failing to produce enough cheap rice.

Replace "cheaper rice" with "affordable housing" and it will become self-evident how misguided American policies are. History has demonstrated, repeatedly, that Government run projects are counterproductive and wasteful. Moreover, government manipulation of market prices causes distortions within the market place which create more problems without solving the underlying objective.

This was the case when Nixon implemented price controls on Oil, which invariably led to massive gas shortages. Even today, price fixing exists in various forms, such as minimum wage, which creates a shortage for many jobs.

Venezuela is a good paradigm for what not to do. Instead, it seems, we're following in their footsteps.

No comments:

Post a Comment