Venezuela’s Economic Calamity Caused No Surprise At Cafe Hayek

Venezuela’s Economic Calamity Caused No Surprise At Cafe Hayek

by DON BOUDREAUX on MAY 21, 2016

in GOVERNMENT INTERVENTION, REALITY IS NOT OPTIONAL, SEEN AND UNSEEN

Rita Varela does not like my criticism of Joseph Stiglitz’s generally happy assessment, in the Fall of 2007, of Hugo Chavez’s economic policies imposed on Venezuelans.  Ms. Varela scolds, by e-mail:

You [Boudreaux] find it simple to look out your rear view window to see what happened. It was not so simple to see nine years [ago] that the oil price would fall so far.

Ms. Varela:

No sensible economist could have looked at Venezuela in 2007 – or in whatever year the price of oil recently peaked – and predicted anything but the general state of economic calamity that reigns there today.  Stiglitz’s 2007 assessment of Chavez’s policies wasn’t wrong because Stiglitz failed to account for falling oil prices.  His assessment was wrong because every good economist understands that making property rights more insecure, centralizing more and more economic decisions in a government bureaucracy, and preventing market prices from rising and falling as the forces of supply and demand would push those prices unavoidably cause economic damage – and that the greater these interventions the greater the extent and depth of the resulting damage.

But lest you or anyone else suppose that good economists have only after the fact concluded that Chavez’s (and Maduro’s) economic policies spell doom for the Venezuelan economy – and greater tyranny for Venezuelan society – here are a few Cafe Hayek blog posts from years ago: February 7, 2007;  February 8, 2007;  also February 8, 2007;  December 26, 2009;   September 26, 2010;  and  April 22, 2012.

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ORIGINAL:

Joseph Stiglitz Praised Hugo Chavez’s Economic Policies

by DON BOUDREAUX on MAY 21, 2016

in CRONY CAPITALISM, ECONOMICS, MAN OF SYSTEM

I either had never learned, or I have completely forgotten, that in 2007 Nobel laureate economist Joseph Stiglitz predicted that Hugo Chavez’s brand of socialism in Venezuela would succeed.

Bad call.

(I thank the indispensable Yevdokiya Zagumenova for alerting me to Stiglitz’s 2007 positive assessment of Chavez’s economic policies.)

That Stiglitz said (quoting the above-report’s summary of his opinion) that “relatively high inflation isn’t necessarily harmful to the economy” is bad enough.  What’s worse is Stiglitz’s obliviousness to the inevitable ill-effects of the centralization of economic decision-making authority in state officials and its resulting insecurity of property rights.

F.A. Hayek or Milton Friedman or Ludwig von Mises or Adam Smith or Edwin Cannan or Deirdre McCloskey or Armen Alchian or Bill Allen or Elinor Ostrom or Harold Demsetz or Israel Kirzner or Bob Higgs or Russ Roberts or Steve Landsburg or Don Lavoie or Julian Simon or Warren Nutter or George Stigler or Gary Becker or Ronald Coase or Bruce Yandle or Roger Meiners or Andy Morriss or Hugh Macaulay or Randy Holcombe or Steve Pejovich or Dwight Lee or Vernon Smith or Larry White or James Buchanan or Gordon Tullock or Walter Williams or Thomas Sowell or Leland Yeager or Roger Garrison or Bob Tollison or Bob Ekelund or Mario Rizzo or Dan Klein or Roger Koppl or George Selgin or Sandy Ikeda or Steve Horwitz or Pete Boettke or Jim Gwartney or Dick Wagner or Bill Easterly or Ken Elzinga or Chris Coyne or Bryan Caplan or David Henderson or Arnold Kling or John Cochrane or John Taylor or Alex Tabarrok or David Friedman or Bob Murphy or Liya Palagashvili or Abby Hall Blanco or… (wow, the list can be extended much longer) would have predicted without hesitation in 2007 that Chavez’s highly interventionist policies would impoverish Venezuela’s masses regardless of how many goodies the Venezuelan state managed at first to bestow upon those masses

Indeed, a GMU economics major with a GPA higher than 1.9 would have predicted the same.

Good economists understand that while a wealthy, market-oriented society such as the United States can tolerate a bit of forced ‘redistribution’ and can mask the relatively small amounts of wealth and opportunities that are destroyed by the likes of a bit of occupational licensing, some government wage-setting, a dash of export subsidies, and comparatively modest tariffs, these policies over time nevertheless make most people poorer, not richer, than they would be in the absence of these policies.

Good economists are ever-attentive to unintended consequences as well as to the sound incentives generated by private-property-based free markets and the unsound incentives created by the ability to impose decisions by force.  Good economists understand the prudential case for not only having good rules (such as those of a system of private property rights) but also that rules become meaningless – they cease to exist – when they can be easily violated.  Good economists understand that the expression of excellent intentions is not remotely sufficient to achieve excellent results.  Good economists understand that sustainable economic prosperity can only emerge through the spontaneous-ordering forces of the market; there is no way that attempts to create prosperity by any different means will result in any outcome other than impoverishment of the masses and tyranny by government officials.  Joseph Stiglitz seems to be oblivious to these realities.