---
title: "A beautiful photo of socialism's collapse in Venezuela.  Via…"
date: 2017-05-30
source: facebook
type: Archer T. Ships shared a post.
---

# A beautiful photo of socialism's collapse in Venezuela.  Via…

*May 30, 2017 · Facebook*

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A beautiful photo of socialism\'s collapse in Venezuela. Via @\[544700762:2048:Judd Weiss\].\
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\"But not all socialist countries collapse like Venezuela. Surely, you can have a mixed economy that is partly capitalist, but with a healthy socialist safety net?\"\
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Obviously, you can have mixed economies, as least for a while. And the more productive the market side of the economy, the heavier a socialist burden it can bear before the economy collapses.\
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However, over time, the citizenry tends to vote for expanding the size and scope of the welfare state. Most voters are deeply ignorant and irrational (at least in the voting booth), and think that the government can endlessly tax \"the wealthy\". Also, once in place, the public becomes dependent on the subsidies and desire for more. Therefore, the tendency is always to expand\--never contract\--the welfare state.\
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Meanwhile, as the tax burden increases to pay for these schemes, the productive citizens paying the tax immigrate, retire, and cut back on their effort. After all, if most of what they earn will be soaked up in higher taxes, why bother?\
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Or else they become cronies of the politicians, and push for subsidies and privilege-seeking regulations for their own business or industry. That way, they can siphon off some of the tax revenues for themselves.\
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Even if they\'re a business that doesn\'t want to engage in political cronyism, they\'re strongly incentivized to do so. That\'s because if they don\'t, they\'ll be forced to pay their competitor\'s subsidies (via taxes), yet receive no subsidies for themselves.\
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As the parasitic percentage of the population increases, and the taxpaying proportion declines, the government\'s tax revenues won\'t be sufficient to pay for its expenditures.\
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At that point, the sensible thing to do would be to scale back welfare until tax revenues can cover the costs.\
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But often by then, the majority of the population is on the dole. Cutting benefits then becomes almost impossible, as the majority of voters depend on subsidies in one form or another.\
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Increasing the tax rate can\'t cover the gap either because the higher the tax rate, the more effort people put into avoiding tax. Above a certain tax rate, the amount collected actually starts declining.\
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So the government starts borrowing.\
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Borrowing works for a while, as long as interest rates are low. And interest rates \_are\_ low at first. After all, the government can kill or cage citizens who refuse to pay. Investors aren\'t worried about the government defaulting on its debts.\
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But eventually, the debt rises to the point that investors start worrying that even the government won\'t be able to make its debt payments. So they start charging the government more to borrow money.\
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However, by that point, it\'s often the case that spending has so far outstripped tax revenues that even a slight increase in interest rates means that the government can\'t even pay the interest on the debt it owes, let alone the principal.\
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So the only way to continue to meet its debt obligations is to inflate the currency. By inflating the currency, the government can pay off its debts with cheaper money, and the socialist gravy train can continue for a little while longer.\
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However, investors aren\'t stupid\--they don\'t like getting paid back in increasingly worthless currency. So, they start charging even more interest to make up for the inflation, which in turn inspires the next round of inflation.\
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Meanwhile, as the government inflates the currency, the prices of everything increase. But because the inflated currency is simply being spent on debt repayment and current consumption\--rather than invested in wealth-creating businesses\--the average level of real wages doesn\'t increase.\
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High prices and stagnant wages/employment then lead to civil unrest. Panicky politicians blame the stagnation and high prices on businesses, accusing them of price gouging and exploiting the workers. In order to combat these alleged sins, the politicians impose wage and price controls on the remaining businesses.\
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Of course, wage and price controls cause shortages and unemployment, which only further fuels civil unrest.\
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Fearful that the civil unrest will lead to a coup or revolution, the government starts imposing a series of even more draconian measures\--capital controls, nationalization, suppression of opposition parties, and martial law.\
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International businesses, stung by high tax rates, wage and price controls, and fearful of nationalization, start to pull out. International suppliers, burnt by increasingly rapid inflation, refuse to sell into the country unless paid in hard currency, up front.\
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Shortages worsen. Even staples like bread, toilet paper and milk become hard to find. The government is now printing money so rapidly that people need suitcases to carry enough to buy groceries. (1)\
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Schools and hospitals shut down, as the government can no longer pay their salary. People start rioting in the street.\
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And that\'s where Venezuela is now.\
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How will it end? Maduro\'s government will eventually be driven from power. An opposition party will take power, and institute reforms. The economy will recover, at least for a while. People will become prosperous again.\
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But for how long?\
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In my opinion, all countries are doomed to repeat the same cycle over and over again. Socialism seems to appeal to deep-seated biases within the human psyche. Unless held in check by people who personally lived through the last crisis, socialists eventually win power. But eventually those people age and die.\
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So until we figure out how to a) cure people\'s bias toward socialism, or b) cure aging, so that people can remember the mistakes of the past, a new generation of ignorant, irrational rubes will fall prey to the same socialist fallacies, and the same cycle will begin anew.\
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1) [http://www.zerohedge.com/news/2016-02-04/hyperinflating-venezuela-used-36-boeing-747-cargo-planes-deliver-its-worthless-bank-](http://www.zerohedge.com/news/2016-02-04/hyperinflating-venezuela-used-36-boeing-747-cargo-planes-deliver-its-worthless-bank-){target="_blank"}
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