Thread by @asymmetricinfo

It's Saturday. Shall we tweetstorm? Oh, yes, we shall. Let's talk Venezuelan hyperinflation, and socialism.

washingtonpost.com/opinions/venez…

As always, I'm not going to restate the thesis of the column here. I'm going to answer objections and questions. Which case came in a few basic flavors:

1) What about all the non-socialist countries that had hyperinflations?
2) Venezuela isn't socialist. It's populist authoritarian.
3) Venezuela's main problem is corruption and bad goernance
4) You're cherry picking with Venezuela and the Soviet Union. What about Scandinavia?

Answering the first: My argument is not that only socialist countries have hyperinflations. As I noted in the column, any country that tries to spend beyond its willingness or ability to tax, and turns to the central bank to finance those deficits, will end up in the same place

2) Well, Chavez called himself socialist. And the things he did that really wrecked the economy were things like nationalizations, and massive social spending well beyond the budget's carrying capacity, which are the socialist parts of his agenda.

3) Venezuela has always had corruption. What it hasn't had is people unable to procure basic foodstuffs.

Corruption isn't what's caused oil production to fall--that was diverting 10% of PDVSA's investment budget into social spending.

Corruption isn't what caused all the people who knew how to run an oil company to flee--that was his purges of PDVSA engineers over political differences, and his expropriation of foreign oilfield operators in the Orinoco belt. Both of which were about socialism.

Now, in fairness, PDVSA was a rallying point for an early coup attempt against his regime. Also in fairness, it became a rallying point because they opposed his attempt to use the company as a piggy bank for rewarding supporters and financing social spending.

Mismanagement? Yes. Have rulers in other, non-socialist regimes drained needed resources from their state-owned firms? Yes. But this was specifically to service a socialist agenda.

But there's a striking pattern to socialist countries--real socialist countries, not social democracies--they run out of money, and get desperate, and do stuff like this. Because socialism distorts production.

Which brings us to our next objection: "Venezuela isn't real socialism. Real socialism is Scandinavian social democracy".

There are some problems with this.

The first problem is that this is redefining "social democracy"--capitalist free markets financing redistribution--as "socialism". And hey, usages change; words aren't set in stone. But we already had a perfectly useful term.

If you have a fundamental critique of capitalism, rather than a desire to somewhat moderate its harder edges, you're not looking to the Swedish model. Sweden is closer to the US than to historical socialism; indeed, their markets are freer than ours.

However, these governments were more socialist in the past. They had to stop. Because it led to massive fiscal crises.

To their credit, they turned it around. But Scandinavia really is special: they have a level of social cohesion that lets them get away with bad experiments, because when the experiments go bad, they can agree relatively quickly to stop and do something else.

They probably have a larger carrying capacity for social democratic programs than anywhere else, because of that social cohesion. People are willing to pay the 50+% taxes on very ordinary middle class incomes to support the programs, and the taxation is very efficient.

But even in Scandinavia, you do see the same pattern--try to go towards full socialism, and you end up with a fiscal crisis. The difference is, in Scandinavia, when you end up with a fiscal crisis, the government says "Oops, we're going to have to pull back on the socialism!"

So yeah, you can redefine "socialism" as "social democracy". But then you're just arguing about the level of America's welfare state and somewhat more union-friendly labor law. That's not really a bold radical agenda. It's "a little more of the same, please".

And "Chavez isn't socialism, it's populism" is just the "No True Scotsman" fallacy.

A government that wants to nationalize the means of production and redistribute the proceeds is pretty much the epitome of socialism. And again, this--not Venezuela's endemic corruption--is why Venezuelans are starving.

To close, simply redefining "socialism" to exclude any government that wrecks its economy is politically convenient, but since all the socialist governments wrecked their economies, you end up with no examples of what you're trying to do.

And if you have a set of policies that, whenever anyone tries to move very far in that direction, wrecks the economy (pushing the gov't towards autocratic control to keep the system together), you should at least be worried that that your reforms will end up in the same place.

So yes, you can have socialism without ending up at hyperinflation--and you can have hyperinflation without socialism. But if you try to build a socialist economy, you seem quite likely to eventually face a choice between stopping the socialist policies, or hyperinflating.

And with that, I'll remind you to read the column, and wish you a happy Saturday.

washingtonpost.com/opinions/venez…