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The Circle Bastiat

How can Venezuela be so rich in resources, but so low in supplies?

In the modern world, a country’s natural resources have very little to do whether goods are on the nation’s shelves for people to buy. Venezuela is a prime example.

By Douglas FrenchGuest bloggerr / April 24, 2012

A woman walks past graffiti in Caracas April 23, 2012. Venezuela is rich in natural resources like oil, gold, and crops, yet supplies to its citizens are limited, which French argues is unfair.

Jorge Silva/Reuters/File

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In the modern world, a country’s natural resources have very little to do whether goods are on the nation’s shelves for people to buy.  Singapore isn’t rich in resources, neither is Hong Kong, but both have vibrant market economies and shoppers can find whatever their collective heart’s desire on the shelves of stores in these two cities.

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On the other hand, there is Venezuela, a country rich in resources.  It is one the world’s top oil producers at the same time gas prices are soaring.  The rich soil and temperate climate allow for productive agriculture and the country is rich in gold and other minerals.

One could only imagine that high tides would be lifting all boats, but yet the cupboards are bare.  There are shortages of staples like milk, meat and toilet paper.  In the country’s largest city, Caracas, residents must arrange their calendars around the once-a-week deliveries made to government-subsidized stores.

This is not a matter of rich or poor, the shortages affect everyone.  William Neuman describes for The New York Times:

The shortages affect both the poor and the well-off, in surprising ways. A supermarket in the upscale La Castellana neighborhood recently had plenty of chicken and cheese — even quail eggs — but not a single roll of toilet paper. Only a few bags of coffee remained on a bottom shelf.

Asked where a shopper could get milk on a day when that, too, was out of stock, a manager said with sarcasm, “At Chávez’s house.”

Money printing has created chronic price inflation in Venezuela and last year the office rate was 27.6 percent.  According to Hugo Chávez’s socialist government, these price increases were caused by runaway capitalism.  So in response, Chávez instituted price controls, which like night turns to day, created shortages.

But, of course, goods would appear on the black market at higher prices, so Chávez’s government blames speculators for causing the shortages.

As the Times points out, there is no reason that shoppers shouldn’t be able to buy staples in a city and surrounding area of over four million people.

Venezuela was long one of the most prosperous countries in the region, with sophisticated manufacturing, vibrant agriculture and strong businesses, making it hard for many residents to accept such widespread scarcities.

Mr. Chávez and his ministers say “companies cause shortages on purpose, holding products off the market to push up prices. This month, the government required price cuts on fruit juice, toothpaste, disposable diapers and more than a dozen other products.”

El Presidente must believe that somehow suppliers make money by not supplying.

“We are not asking them to lose money, just that they make money in a rational way, that they don’t rob the people,” Mr. Chávez said recently, presumably with a straight face.

Clearly Chávez’s prices are too low for companies to make money so they either curtail production or stop all together.  And, as the Times mentions, “some of the shortages are in industries, like dairy and coffee, where the government has seized private companies and is now running them, saying it is in the national interest.”

Chávez is up for election in the fall and he is threatening to nationalize companies that stop production.  And the Venezuelan media is also under fire with the government accusing them of frightening the public into hoarding. “Government advertisements urge consumers not to succumb to panic buying, using a proverbial admonition: Bread for today is hunger for tomorrow.”

Only three years ago, the country was a coffee exporter.  Now, Venezuelans can’t find it on the shelves.  The government price is too low, driving planters and roasters to stop production and not invest in new plantings or fertilizer.

It is incredible that in this day and age, a government could be so blind, stupid, and cruel toward its own people.  It’s one thing to teach this sort of nonsense at expensive universities, but another to put it in practice and ruin people’s lives.

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