How Much Ruin, Exactly?

“There is a great deal of ruin in a nation.” It’s a remark Adam Smith made to a young colleague, John Sinclair, who worried that the cost of quelling the American rebels might lead to the downfall of Great Britain. It’s also a remark Liberty’s founder, Bill Bradford, quoted back to me on several occasions, whenever I was doom-and-glooming about how some country or another was on the road to ruin.

It’s a remark that comes to mind often still, whenever I’m agitated about governmental stupidity or malfeasance. Foolish wars in the Middle East have not ruined the US, and neither have decades of profligacy, proliferations of acronymic agencies, or a succession of villains in our highest offices. Communism did not ruin Russia, and has not ruined China; even Nazism could not permanently ruin Germany, though it did succeed in splitting it for a while.

Nonetheless on occasion I read of some insane diktat in one or another corner of the globe and wonder just how far that corner’s leaders are prepared to stretch the maxim. Sovereign debt will likely not ruin Spain, or Portugal, or even Greece, though the EU seems intent on testing that out a while longer yet. Debt (again) and a shrinking population will probably not ruin Japan, but its prime minister Shinzo Abe, with his “Abenomics”—a reheated and desperate Keynesianism—is trying his hardest to make things worse. Unemployment and labor unrest will certainly not ruin France, but French president François Hollande, meanwhile, has yet to pass up a chance to kill off jobs and push companies abroad.

And then there’s Venezuela.

Venezuela, of course, was one of the great experiments: Hugo Chávez’s “Bolivarian Revolution” was supposed to prove the superiority of socialism (economic, of course; its moral superiority was assumed long ago), provided only that said socialism is backed up by seemingly inexhaustible national resources. Chávez, wasting no time after his election in 1998, set about “redistributing income” through land grabs and price fixes, threatening hesitant businesses with expropriation and then often following through on that threat. Under “Chavismo,” Venezuela assumed ownership of much of the nation’s construction, telecommunications, utilities, and food production industries, insisting at each step of the way that the takeovers were necessary to combat the predation of profiteering capitalists.

This sets up a feedback loop familiar to anyone who’s given even the slightest attention to modern government, where every gain (however temporary) is attributed to the extraordinary wisdom and foresight of the government agents, while every loss (all too often permanent) is attributed to the greed of speculators and other enemies of the people. Naturally, the more that’s seized, the worse the economy gets, but on the other hand, the worse the economy gets, the more can be seized. It’s brilliant, really—at least until the shortages of basic goods become too great for anyone but an ideologue to ignore.

Say this in Chávez’s favor: his policies—and those of his successor, Nicolás Maduro—have encouraged innovation in the Venezuelan people; for instance, consider the smartphone app created to help them find toilet paper, in perpetually short supply thanks to price controls. But, as with the more traditional example of broken windows, this innovation isn’t going toward the sorts of things that would convince anyone of Chavismo’s superiority. And as other nations, especially the United States, Canada, and Brazil, have become more energy-independent, Venezuela and President Maduro are finding fewer buyers for their one undoubted asset, while the state-owned oil industry has become ever more wasteful and unprofitable.

With revenues plummeting and prices held artificially low, inflation has, inevitably, kicked in. And here’s where the “ruin” starts coming in: Maduro’s response (other than continuing to threaten or outright seize businesses) was to devalue the currency, and impose controls on currency exchange. As account holders desperately tried to get their money out of the country ahead of impending hyperinflation, Maduro doubled down by devaluing further, attempting to cut off foreign travel. Finally, he enacted a “Law on Fair Prices,” prohibiting profit margins of over 30%—which is to say, no profit, for anyone running an import business—while at the same time enacting long jail terms to punish “hoarders,” or, less insanely, anyone refusing to sell at a loss.

Now, I’m no expert on Venezuela. I’ve never been there, I don’t know anyone from there, and I can’t get more than the barest sense of any articles written in Latin American Spanish. But I can’t imagine any experience of the place that would convince me that those Venezuelans who protest Chavismo are just, in the words of professional useful idiot Oliver Stone, “sore losers”—though they certainly aren’t winners, either, not while they’re getting gunned down for demonstrating against the ongoing depredation and repression. And so long as the government is willing to arrest the opposition leader, or expel consular officials for so much as meeting with protesting students, things don’t seem likely to improve.

It’s impossible to know where it will all end, or whether it could be enough to ruin Venezuela. I suspect not: prior to Chávez, Venezuela was no more or less stable than any other Latin American nation since the time of Bolívar himself. Oddly enough, in this era of globalization, the idea of a nation may be more susceptible to ruin than individual nations themselves. Those that are nearest ruin are those that were highly unstable and unwanted to begin with: Somalia, Iraq, Yugoslavia—lines drawn on a map as a convenience to colonial invaders or international do-gooders (if you can tell those apart). Yet even those fictions hold up longer than one might expect—just look at Zimbabwe.

So yes, there is likely a great deal of ruin still in Venezuela. But it is a shame, and likely will be a tragedy, to see the depths its rulers are willing to plumb before they hit bottom.