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May 19, 2016 - Freedomain Radio - Stefan Molyneux
21:47
3295 The Fall of Venezuela. Prepare Yourself Accordingly.
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Hi everybody, Stefan Molyneux from Free Domain Radio.
I hope you're doing well.
Received a bunch of requests to talk about Venezuela, which is currently having a giant Florida-style economic sinkhole open up under its population, dropping 70% of them into dire poverty.
Now Venezuela, of course, is a middle-income country.
About three hours flight from Miami, a little over 33 million people.
And for the past two, two and a half years, the country has been...
Falling apart at the seams.
It is experiencing the kind of political and social and economic collapse that hardly ever occurs in a relatively developed country outside of direct warfare.
It is in significant danger, in my opinion, of becoming a failed state with all that implies.
Now, President Nicolas Maduro, a former bus driver, is the heir of the extremely popular President Hugo Chavez, who died of cancer in 2013.
Chavez rose to power in 1999 on the back of anti-US sentiment and high oil revenues.
Chavez put in a giant statist economic model which he called 21st century socialism, which as it turns out has pretty much everything in common.
With 19th century socialism, 20th century socialism, and the gates of hell itself.
The president recently declared a state of emergency in order to, quote, tend to our country, and more importantly, to prepare to denounce, neutralize, and overcome the external and foreign aggressions against our country.
He believes that the U.S. is working its way towards supporting a coup.
So what is going on?
Well, It's a nightmare.
Public services are collapsing.
Medical care, which was made free for everyone in 1999.
Electricity, rolling blackouts even in the major cities.
Water is a big problem.
We'll get into that in more detail.
Inflation is topping 700% at the moment and is slated to even rise further next year.
There is an unimaginably huge crime wave that is trapping people indoors at night where, because there's no electricity, they have to try and sleep in 100-degree heat without air conditioning.
It's like an updated swarthy Soviet style of shopping in that shoppers have to stand in blistering heat for hours on end just to try to get food.
The hospitals are full of dying babies, infant mortality is going through the roof, because the socialized Venezuelan healthcare system has, as it is estimated, only 20% of the medicine that it needs to treat basic ailments.
Recently, massive injuries and two deaths were reported when 5,000 looters stripped supermarket shelves of everything they could lay their hands on.
The American response has been that recently Barack Obama extended an executive order that imposed sanctions on top Venezuelan officials and declared the South American country a national security threat to the United States.
How bad is it getting?
Well, recently, Ramon Muchacho, the mayor of the middle class Caracas, borough of Chacao, said on Twitter that people were hunting, quote, dogs and cats in the streets and pigeons in the plazas to eat them because of food scarcities and the high cost of living.
On April 27th, the Venezuelan Chamber of Food reported that the country's food producers only had 15 days left of inventory.
This, of course, is extraordinarily and deeply alarming.
According to the Wall Street Journal, Chavez confiscated the country's most productive farms and turned them over to Chavistas, who didn't know how to farm.
Even on farms that were not seized, planting is diminished.
Most seeds used in Venezuela are imported.
And without dollars, they can't be imported because you can't exchange.
Farmers are reluctant to plant when the costs are high and the harvests are price-controlled.
Dairy farms are also less productive now that daily power outages shut down electricity-powered milking machines.
Trucks carrying food cargo are often hijacked.
Oscar Metzer, director of the Documentation Center for Social Analysis, said that measurements of scarcity and inflation in May are going to be the worst to date.
We are officially declaring May as the month that widespread hunger began in Venezuela, he told Web Noticias Venezuela.
As for March, there was an increase in yearly prices due to inflation, a 582.9% increase for food, while the level of scarcity of basic products remains at 41.37%.
Venezuela has virtually run out of food and water and medical supplies, currency, electricity and toilet paper.
The government has responded by leaping into action and spending the last two years fingerprinting shoppers to prevent hoarding, which has been made illegal.
This is an unbelievably grim and dangerous situation and my heart goes out To the heartbreak and heartache and hunger and heat and frustration and rage of the Venezuelan people.
Have you heard a lot about this from the mainstream media?
A little here and there, although the causes are always obscured.
But no, you basically haven't heard much about this because, you see, what Donald Trump said to some Miss Universe contestant years ago is apparently really, really important.
Over 33 million people sliding into a socialist Stalinist-style hell of failed statehood, well, How important is that?
How's Megan doing with Donald?
Now, Venezuela has ostensibly had free healthcare for all since 1999, long relied on imported Cuban doctors to make good on that promise to the people.
So they really have very little medicine and the equipment is all old and falling apart.
But hey, at least it's free.
Venezuela's currency is called the Bolivar, and it's worth less than a penny on the black market exchange.
So it's true that they've run out of toilet paper in Venezuela, but on the plus side, at least you can use the Bolivar.
As toilet paper, probably be more effective.
And there's a terrifying story of a guy running a manufacturing plant.
He has a contract with his union to always make sure there's toilet paper on hand in his factory's bathrooms.
But of course, as the price of toilet paper went up, or at least struggled to over the price controls, the employees just pilfered all of the Toilet paper from the manufacturing plant's bathrooms.
So then, in order to fulfill his contract, he had to go to the black market where he was caught by the police, and they initially demanded hundreds of thousands of dollars to let him off the charges.
He's since bargained them down to about $10,000 or $20,000, and this is what it's like to do business in certain areas of Venezuela.
So what the hell is going on in Venezuela?
People, when we read this in the media, they'll say, well, you see, there's a drought, and, well, you see, the price of oil has gone down, and Venezuela's a huge exporter of oil, so therefore, therefore, therefore, but this is nonsense.
This is nonsense for reasons we'll get into in a moment.
First thing you need to know about Venezuela, it's sitting on top of the world's largest reserves of oil, bigger than Saudi Arabia.
Over 300 billion barrels are credibly estimated under the soil of Venezuela.
It has about 50 billion barrels in current assets.
When the price of oil was very high, it was a big oil boom that's just tapering off at the moment, over the past 17 years, first under Hugo Chavez, the government plundered over a trillion dollars in oil revenues.
And did they do smart things like, I don't know, hedge the price of oil, so if the price of oil goes down, you don't end up having to lean too hard on the taxpayers?
So under Hugo Chavez, now under Maduro, trillion dollars, yeah.
Oil prices have fallen, so you hedge, you're short, you manage risks if you have half a brain.
And even in 2014, when oil was over $100 a barrel, there were still acute shortages of bread and toiletries in Venezuela.
So this blaming of external forces is nonsense.
Now, one of the big problems, of course, is that Chavez nationalized the oil industry and, in conflicts with the unions, ended up driving many oil workers north into Canada.
And now because Venezuela, as an oil-rich nation, thought it was very smart to run its electricity off hydroelectric dams and did not build any backup generators, so now that there's been a drought and the 20-year non-investment in a lot of the infrastructure is causing it to fail, so now that there's been a drought and the 20-year non-investment in a lot of the infrastructure is causing it to fail, well, Venezuela lacks the electricity to run a lot of its oil pumps, and the resulting crude is so
Now, in an effort to save power, government workers, at least non-essential government workers, are now down to two days' work a week.
Now, there is a drought in Venezuela, which is stretching across other countries as well.
But it's not that there's a drought.
These are external triggers.
You know, if I don't maintain my car and the brakes fail, I can say, well, I crashed because the brakes failed.
But the reality was that I simply didn't maintain my car, and that's why the brakes ended up failing.
The fundamental problem in Venezuela is that electricity is basically...
Free.
It's massively subsidized for the middle class and the poor illegally jack into the system and are rarely policed.
So what do people do?
Well, when something's free, you don't bother to conserve it.
You leave your TV on, you leave your computer running, you leave your air conditioner running.
Drought is all the way across Latin America, but not every country in Latin America is going through this.
One of the big problems is when Hugo Chavez came in, it developed this kind of cool macho man economic socialism called Chavismo.
This is government management of the economy, general socialist price fixing, price and currency controls, massive corruption, government mismanagement, malinvestment.
The government nationalized a lot of the oil industry and then poured I don't know, untold millions of dollars into a really, really bad Formula One racer called something like El Crasho because he barely makes it through a race without crashing.
And he is the advertising mascot for the government monopoly.
Why you need an advertising mascot for a monopoly is beyond me, but this is the kind of nonsense that's going on.
So it's just the usual socialist nightmare.
And the US leftists, by which in general it's the mainstream media, you know, they refer to people like Nicolas Maduro and Raul Castro of Cuba as presidents.
Whereas people like Alfredo Stroessner of Paraguay and Augusto Pinochet of Chile are referred to as dictators, although none of them were elected in free and fair elections.
And, you know, if the left likes your dictatorship, in other words, if it's a left-wing dictatorship, you're called a president.
If it's a more military or right-wing dictatorship, regardless of how it positively affects the population, well, you're just called a dictator because, yay, objective mainstream media.
Now, government price controls are a disaster everywhere they're tried.
Every economist worth his or her salt clearly states this.
It is beyond the realm of theory into grim, repetitive actual practice.
The price controls in Venezuela apply to goods, vital medicines, car batteries, medical services, deodorant, diapers, and...
Of course, toilet paper.
Venezuela doesn't even have enough money or energy to produce more of the currency that it pretends has value.
So price controls, just very briefly, when you set price controls, that is usually a response to massive printing of money.
Inflation is an inflation of the money supply.
It only later ends up as inflation, which is generally understood as an increase in prices.
You know, if you have 10 apples and $10, then each apple is going to be worth $1.
If you have 10 apples and $20, then each apple is going to be worth $2.
So it's going to require $2 to buy.
So when you have price controls, you are setting the price that a good can be sold at below what it costs to produce and transport it along with some profit.
And all that means is that the goods vanish.
They vanish from circulation, and this, of course, is what is happening to food.
When you socialize things, when you take things over, people lose the incentive to produce, and therefore you get all of this mess.
And the usual hell has erupted in terms of a black market and a gray market that is attempting To provide goods while dodging the state, guns and policemen provide goods and services to people as a whole.
So price controls are always a complete disaster.
So the IMF reports that prices will rise by 720% in 2016 and a jaw-dropping 2,200% in 2017.
And these prices are going up, this inflation is going up, despite the fact that not only is electricity virtually free, but gasoline is virtually free in Venezuela.
It costs about five cents a liter, which is such a nominal fee that few people even bother to collect it.
In the medical field, it's a complete disaster.
AIDS patients can't get medicines.
Cancer patients can't even find chemotherapy drugs.
Even malaria, which was eliminated from Venezuela a generation ago, is making a horrifying comeback.
Law and order have collapsed.
Caracas, the capital, has been recently calculated as one of the most murderous cities in the world.
There are repetitive grenade attacks and anti-tank rocket launchers are making an appearance.
It's basically not a city, it's a first-person shooter where you're either targeted or you're trying to target a pigeon for dinner.
Now, the water infrastructure in Venezuela and other cities is falling apart after nearly 20 years of socialist neglect.
Water utilities, of course, are not able to raise prices, so what have they done?
Well, they can't raise prices to control the use of water, so you impose harsh rationing.
So people in Venezuela are going for days or even weeks with no piped water, so what do they do?
They fill up buckets and tubs and whatever they can.
Barrels?
Which, you know, provides the exact stagnant water that is a giant breeding vat for endless mosquitoes.
And this adds to outbreaks of chikungunya, dengue fever, malaria, and the new fresh hell off the block, Zika.
So it is a complete disaster.
Now...
The president is saying, well, you know, the U.S. is trying to take us over.
And there are reports that the U.S. supported a military coup in Venezuela in 2002.
And the reason that the Venezuelans believe when Maduro and Chavez say that the U.S. is trying to oust them, well, there was a Guatemalan coup supported by the U.S. government in 1954, the invasion of Panama, whatever the hell happened in Haiti in 2004.
And this is basically because of the Roosevelt colliery to the Monroe Doctrine.
And this is the price that is paid for U.S. involvement in foreign conflicts, which hopefully is going to come to a gradual halt relatively soon.
But this is what is going on.
The fact that the U.S. gets involved in these rebellions and funding these coups and arming rebels and so on means that the current dictators can blame outside forces for problems and have some credibility with the people.
Now, let's just take a moment here.
I talked about this in a recent call-in show.
Let's vault over Sting's sycophantic squealing to socialism.
They dance alone.
Let's talk about Chile.
So remember, evil.
Pinochet, evil dictator, all those free market Chicago boys under Milton Friedman.
They went to Chile to help it become a free market economy and it was just, it was terrible and they...
Tortured Ripley, and it was just a complete evil, evil, evil, evil.
You know, socialism in Venezuela was perfectly wonderful, but the free market in Chile was absolutely, completely, and totally wrong.
My God, do you know in Chile, they even have a voucher system and have choice over the education of their children?
That voucher system was actually designed by Milton Friedman, one of the greatest free market economists of all time.
So, Chile went free market.
Venezuela went socialist.
And this, my friends, this is why you're not hearing about the successes in Chile and you're not being told the root causes of the untold disasters in Venezuela.
Because the media is a leftist monstrosity in general.
The mainstream media is a leftist monstrosity.
This goes against the narrative.
The fact that Chile is vastly succeeding and the fact that Venezuela is falling into a giant sinkhole of socialists straight to the bottom hell doesn't fit the narrative of free market bad, socialism good, free market unkind, socialism just a loving hug from a soft heroin dealer.
So for 30 years, Chile has been a laboratory for free market Economics, right?
Privatized pensions, the school voucher system designed by Milton Friedman, as I mentioned.
It is a very powerful laboratory for what is possible.
So, since 1950, GDP per person in capitalist Chile grew 350%.
In socialist Venezuela, 23%.
And I would argue that it's probably going to slip closer into negative territory.
GDP per person in capitalist Chile grew 350%.
In socialist Venezuela, 23% or less.
So, this is from a few years ago, some facts about Chile, the 10th freest economy in the world.
It's the most free economy in Latin America.
It has the highest quality of life indices in Latin America.
The third highest in all of America, only after America and Canada.
America, Canada, Chile.
GDP per capita is over 17,000 US and growing rapidly, and only 11% of the population in Chile live below the poverty line.
Only 11% of the population in Chile live below the poverty line and that is 70% now in Venezuela.
Do you see why I am constantly and constantly and constantly pushing and prompting and passionately catawalling for the virtues of the free market?
It saves lives.
It stabilizes societies.
It heals children of illness.
It keeps babies alive.
It keeps the elderly alive.
That's what the free market does and socialism It's a giant hobnailed boot on the face, hearts, hopes and balls of humanity from here to eternity.
Now, Chile, is it not subject to oil price fluctuations?
Is it not subject to droughts?
Well, of course it is.
Now, Chile doesn't even have any significant reserves of fossil fuels.
It's got some copper.
Which is not unimportant, particularly in the growth economies of India and China.
But no significant fossil fuels, so it's not sitting on the staggering world's biggest ever lottery winner of Western fuel demand for oil that Venezuela is sitting on.
So that's Chile.
That's Chile.
Okay, Venezuela.
Chile, 10th freest economy in the world.
Venezuela, 144th most free economy in the world.
Basically, least free.
It's the least free economy in Latin America.
It has the third worst quality of life indices in Latin America.
It has one of the highest murder rates in the world.
And it has the largest proven oil reserves in the world.
Chile 11%, below poverty line, Venezuela 70%.
Since 1970, real incomes in Venezuela have shrunk by 14% while increasing by 216% in Chile.
I'm going to say that again.
You need to get this.
This is what the free market does.
Real incomes in Venezuela since 1970 shrunk by 14%, increased by 216% in Chile.
By the way, they're mostly stagnant in the Western world because the government keeps growing and growing and growing.
Now, This is another reason why Donald Trump is gaining some traction, to put it mildly, in American politics.
Leftists promote policies that triple and destroy countries.
And then they cripple America's ability to control its borders.
So leftist socialist policies...
You can read Naomi Klein for more of this.
The shock doctrine!
Yeah, the shock doctrine called We're Bringing You Back to Life.
But leftists promote these policies that completely destroy economies and then cripple America's ability to control its borders.
And, you know, if free market policies were being pursued in Mexico, in Guatemala, in Argentina, in Brazil, as they are being in Chile, well, then you wouldn't need to worry so much about border controls because...
Here's a statement.
Here's a statement.
It's all you need to know about the border and the economy.
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