Why does socialism not create prosperity?

Venezuela is a live experiment that shows that socialism produces poverty. Still, Western intellectuals pay homage to the country

Wouldn't a world without egoism and private property be a fairer, that is, a better world? This is how many intellectuals in the West think. Most of them only know socialism from hearsay. However, those who really live in socialistically managed poverty want one thing above all: more freedom and prosperity, that is, more capitalism.

Many a politician has made poverty reduction the highest goal of his endeavors. They also include Venezuela's former President Hugo Chávez and his successor Nicolás Maduro. Their recipe was called: socialism. But today we know that the total nationalization of the economy has massively increased poverty in Venezuela. Misery is spreading, hundreds of thousands are fleeing abroad, people are starving, the currency is falling apart, production is falling dramatically. In order to stay in power, the government holds the people hostage and suppresses any opposition.

Venezuela is an example of why socialism, regardless of the best intentions, cannot overcome poverty, but can only increase it. The politics of Chavez and Maduro are based on the struggle against property and private control over the means of production. It switches off the price mechanism of the market, regulates, commands and paralyzes the production process. Shackles are put on the labor market, all initiative is destroyed. Socialist overcoming of poverty does not aim to increase productivity through voluntary economic activity, but seeks to achieve the goal through the forcible distribution of social benefits. Poverty is only whitewashed by making people increasingly dependent on the state.

The failure of the intellectuals

Not only did economic output fall dramatically, but a corrupt bureaucratic distribution elite also emerged that benefited from the system and enriched itself with it. In real existing socialism, it is not, as in capitalism, who gets rich who operates profitably and innovatively, but who sits at the levers of power and distributes resources that the state withdraws from the productive sectors of society. Over a million highly qualified specialists have now emigrated.

Venezuela's economic problems existed long before Chávez ’" Revolution ". The struggle against capitalism and the market economy had ushered in the country's economic decline since the 1970s. Chavez posed as a savior - and the initial “success” seemed to prove him right. That was only possible because the oil was bubbling up and so did government revenues during the years of high oil prices. Left-wing intellectuals in Europe and the United States praised Chávez's poverty reduction policy as exemplary, indeed as a model for the whole world.

But then the price of oil fell. Instead of building up reserves in the fat years, Chavismus had always only distributed with full hands. He now had to keep doing that, the national debt grew, the printing press ran at full speed. Inflation is rampant today and people can barely buy anything with their money.

What is unique about the development of Venezuela: The process of socialist destruction of values ​​could take place under laboratory conditions, so to speak. The high oil revenues enabled the work of economic destruction to remain invisible for a long time. But now it is all the more clear what socialism actually is: a machine of the destruction of value and the creation of poverty, which also leads people into political bondage and a democratic country into dictatorship.

More capitalism

Poverty cannot be combated through a “fairer” distribution of resources, but only through economic growth and value creation. The economic system that creates work, productivity growth and thus prosperity is called capitalism - in Ludwig von Mises ’words: private ownership of means of production, entrepreneurship and voluntary exchange.

Only when we have understood how value is created and prosperity is created and that this requires not only political but also economic freedom - only then have we understood why Venezuela failed. Then we will also understand why other countries in Latin America such as Chile, Peru and Colombia, and perhaps soon Argentina too, are on the path of increasing prosperity: because, unlike Venezuela, they have become more capitalist.

The poor need capitalism, meanwhile economically unenlightened western prosperous citizens and intellectuals who can afford it demonize it. But even in the West we owe our historically unprecedented prosperity to capitalism, more precisely: to what is left of it. Hardly anyone dares to ask the question: What if we had a government quota of - let's say - 25 percent rather than 50 percent, if we also had more economic freedom, initiative and entrepreneurial freedom? This takes a little imagination. But surely that would be a question a few bright intellectuals could take up to answer.

Martin Rhonheimer is Professor of Ethics and Political Philosophy at the Pontifical University of Santa Croce, Rome, and Founding President of the Austrian Institute of Economics and Social Philosophy, Vienna.