Saturday, November 18, 2006

Hugo Chavez's Bridge to the 12th Century

The blog reports Venezuelan President Hugo Chavez proposed in his talk show that this already benighted country basically be reduced to a localized, barter economy.

If I understand Daniel’s description, the maximum leader is proposing that a percentage of all physical production be submitted to state community centers, and that the rest of it be taken to markets that which is exchanged for a substitute for currency. This substitute is valid only in the local geographic area, and loses value over time, in a process, the leader apparently calls “oxidation,” or rust.

Now never mind the obvious economic inefficiency of this – the penalty imposed on saving as opposed to immediate consumption, the closing of trading opportunities with people on the other side of the country, let alone in the rest of the world. Nevermind, in other words, that President Chavez is proposing to forgo the benefits of money as a universally accepted medium of exchange by returning Venezuela to a world before its invention. The most sinister effect of the proposal is the enhanced power it gives the government – and Hugo Chavez of course is the government – to control people's options, and therefore to control everything about them. The government would presumably decide the boundaries of the jurisdictions, the rate of depreciation, and so on. Like every government that ever existed, it would use its power over exchange, which is in this case almost totalitarian, to reward its supporters and punished its opponents. It is government price controls taken to an almost unimaginably frightening extreme. It is exactly the sort of thing Friedrich Hayek warned us about.

It was sometimes said about the deposed Chilean President Salvador Allende that the residents of his country knew that they were headed for the dungeon when he introduced rationing of food. The rationing was nominally motivated by shortages (shortages generated by his policies of course), but in judging government policy, especially economic policy, it is far more important to be able to predict the effects rather than argue over the motivations. And the effect of such food rationing was it that it gave the Allende government power over who ate and who didn't. It was, in other words, the final mile marker on the highway toward totalitarianism. Chavez’s proposal, while not even a formal legislative proposal yet, let alone a law, would be much the same. If it becomes law, either he will be gone within weeks or his country will become the largest slave-labor camp in the world. Ignorance is a shame; ignorance by politicians is a crime; ignorance by dictators is a crime against humanity.


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