Tuesday, January 19, 2010

How Socialism Becomes Tyranny

Socialist policies do not conform to economic reality, and thus must be enforced at gunpoint.

Venezuela's socialist President Hugo Chavez on Sunday nationalized a chain of supermarkets controlled by France's Casino (CASP.PA) on charges of price gouging after the government devalued the bolivar currency.

"Because of multiple violations of Venezuelan laws the Exito chain will now belong to the republic, there is no way back," Chavez said on his weekly television show.

In his 11 years in office, Chavez has nationalized large swathes of the economy, including major oil projects along with electricity and telecommunications companies.

The leader who calls Cuba's Fidel Castro a mentor has recently declared himself a Marxist and wants to build a socialist society in one of the world's top oil exporters.

He said the Exito supermarkets had increased prices without justification. Exito has stores in Caracas and several other cities.

Chavez devalued the bolivar on Jan. 8 to boost government finances and revitalize the recession-hit economy, but risks boosting already high inflation.

Aware a price surge could anger his mostly poor supporters, Chavez ordered troops to monitor shopping districts. Authorities had already temporarily closed stores belonging to the supermarket chain on charges of price gouging.

This store is simply trying to stay in the black by adjusting its prices to the new currency value. Chavez believes he can change the exchange rate of the currency and install price controls to make life more affordable for Venezuelans. He is learning, however, that there is no such thing as a free lunch, and the Laws of Supply and Demand apply, whether you like it or not.

Chavez will, of course, blame the market failures he created on greedy speculators, arguing for more power over the nation's resources to "right the wrongs of society." He will, of course, fail, and push his nation to the brink of collapse. But not without consolidating power over nearly every industry in Venezuela.

And that's how socialism becomes tyranny. I should send Chavez a thank you note for making my case for me.

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